Sentient Brands Holdings Inc 8-K, filed Feb 14, 2020
Sentient Brands Holdings Inc. (SNBH)
About this 8-K
Sentient Brands Holdings Inc filed this 8-K on February 14, 2020, reporting on events of February 12, 2020.
Items reported
- Item 1.01: Entered into a material agreement
- Item 1.02: Ended a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 3.02: Unregistered sale of equity
- Item 4.01: Change of auditor
- Item 5.01: Change in control
- Item 5.02: Director or officer change, or executive pay
- Item 5.06: Change in shell company status
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 12, 2020
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INTELLIGENT BUYING, INC.
(Exact name of registrant as specified in its charter)
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California | 001-34861 | 20-0956471 |
(State or Other Jurisdiction | (Commission | (I.R.S. Employer |
of Incorporation) | File Number) | Identification No.) |
300 Park Avenue
12th Floor
New York, NY 10022
(Address of Principal Executive Offices) (Zip Code)
646-202-2897
(Registrant’s telephone number, including area code)
400 Seventh Avenue, Brooklyn, NY 11215
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of exchange on which registered |
N/A |
| N/A |
| N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨ |
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If an emerging growth company, indicate by checkmark 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. ¨
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K, including the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Current Report on Form 8-K include, but are not limited to, statements about:
| · | the implementation of our strategic plans for our business; |
| · | our financial performance; |
| · | developments relating to our competitors and our industry, including the impact of government regulation; |
| · | estimates of our expenses, future revenues, capital requirements and our needs for additional financing; and |
| · | other risks and uncertainties, including those listed under the captions “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” |
In some cases, forward-looking statements can be identified by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “could,” “project,” “intend,” “will,” “will be,” “would,” or the negative of these terms or other comparable terminology and expressions. However, this is not an exclusive way of identifying such statements. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this Current Report on Form 8-K. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Current Report on Form 8-K and the documents that we reference in this Current Report on Form 8-K and have filed with the Securities and Exchange Commission (“SEC”) as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
The forward-looking statements in this Current Report on Form 8-K represent our views as of the date of this Current Report on Form 8-K. We anticipate that subsequent events and developments will cause our views to change. Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not undertake any obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this Current Report on Form 8-K, whether as a result of new information or future events or otherwise. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Current Report on Form 8-K. You should not place undue reliance on the forward-looking statements included in this Current Report on Form 8-K. All forward-looking statements attributable to use are expressly qualified by these cautionary statements.
Industry Data
This Current Report on Form 8-K includes industry and market data and other information, which we have obtained from, or is based upon, market research, independent industry publications, surveys and studies conducted by third parties or other publicly available information. Although we believe each such source to have been reliable as of its respective date, none guarantees the accuracy or completeness of such information. We have not independently verified the information contained in such sources. Any such data and other information are subject to change based on various factors, including those described below under the heading “Risk Factors” and elsewhere in this Current Report on Form 8-K.
TABLE OF CONTENTS
Item No. |
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| Entry Into a Material Definitive Agreement |
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| Termination of a Material Definitive Agreement |
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| Completion of Acquisition or Disposition of Assets |
| 1 | |
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| Unregistered Sales of Equity Securities |
| 36 | |
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| Changes in Registrant’s Certifying Accountant |
| 36 | |
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| Change in Control of Registrant |
| 37 | |
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| Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
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| Change in Shell Company Status |
| 38 | |
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| Financial Statements and Exhibits |
| 38 |
Item 1.01 Entry Into A Material Definitive Agreement
Agreement and Plan of Reorganization
The disclosure set forth below under Item 2.01 (Completion of Acquisition of Disposition of Assets) is incorporated by reference into this Item 1.01.
Item 1.02. Termination of a Material Definitive Agreement
As previously disclosed, on March 13, 2019, Intelligent Buying, Inc. ( “INTB,” “we,” “us” or the “Company”) entered into a Reorganization Agreement by and among Jaguaring Company d/b/a Cannavolve (“Cannavolve”), a Washington corporation and the shareholders of Cannavolve listed in the Reorganization Agreement pursuant to which the Company agreed to acquire 100% of the issued and outstanding common stock of Cannavolve from the those Cannavolve shareholders in exchange for up to 861,738 shares of common stock of the Company. On April 27, 2019 and again on January 2, 2020, the Reorganization Agreement was amended. The Reorganization Agreement and its subsequent amendments are referred to herein collectively as the “Reorganization Agreement.”
On February 12, 2020, the parties to the Reorganization Agreement entered into a termination agreement (the “Termination Agreement”) pursuant to which the Reorganization Agreement was terminated by mutual consent of the parties in accordance with the terms of the Reorganization Agreement. The parties decided to terminate the Reorganization Agreement in order to restructure the planned acquisition by the Company of Cannavolve.
The foregoing description of the Termination Agreement does not purport to be complete and is qualified in its entirety by reference to the Termination Agreement, a copy of which is filed as Exhibit 2.5 to this Current Report on Form 8-K (this “Report”) and which is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets
On February 14, 2020, we entered into an Agreement and Plan of Reorganization (the “Agreement”) with Cannavolve and each of the 37 shareholders of Cannavolve who executed a counterpart signature to the Agreement (the “Cannavolve Shareholders”). Pursuant to the Agreement, the Company agreed to acquire an aggregate of up to 33,674,262 shares of Cannavolve constituting up to 81.5% of the issued and outstanding shares of Cannavolve from the Cannavolve Shareholders in exchange for 702,111 shares of the Company, constituting up to 9.6% of the issued and outstanding shares of common stock, $0.001 par value per share (the “Common Stock”), of the Company (the “Share Exchange”).
Pursuant to the Agreement, the Company agreed to file a Certificate of Determination with the State of California, as soon as practicable after the closing of the Share Exchange (“Closing”), creating a new class of preferred stock of the Company, the Series B Preferred Stock (the “New Preferred”) , and further agreed to issue, as a post-closing covenant, 1,000,000 shares of the New Preferred to Principal Holdings, LLC (“Principal”), in consideration of Principal successfully negotiating the Agreement and performing due-diligence in connection with the Agreement.
Additionally, pursuant to the Agreement, the parties agreed that INTB’s then principal shareholder, Bagel Hole Inc. (“Bagel Hole”), which is owned solely by Philip Romanzi, the Company’s Chief Executive and Financial Officer and sole director, will return to INTB, for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole.
Additionally, pursuant to the Agreement, the parties agreed that at Closing, Mr. Romanzi, the Company’s sole officer and director, would resign from all positions with the Company and that certain members of the Cannavolve team would be appointed as officers and directors of the Company. Specifically, it was agreed that George Furlan would be appointed as the Company’s Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer, and that Dante Jones would be appointed as the Company’s sole director. Further, the parties agreed that two additional directors, to be designated by Cannavolve, would be appointed to the Company’s board of directors after Closing.
The Share Exchange closed on February 14, 2020. At Closing, pursuant to the Agreement, we issued an aggregate of 702,111 shares of Common Stock to the Cannavolve Shareholders in exchange for 33,674,262 shares of Cannavolve common stock, constituting 81.5% of the issued and outstanding shares of Cannavolve, resulting in Cannavolve becoming our 81.5% owned subsidiary.
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At the Closing, Bagel Hole returned to INTB for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole. At Closing, Bagel Hole also returned for cancellation and retirement an additional 667,402 shares of the Company’s Common Stock owned by Bagel Hole.
Also at Closing, on February 14, 2020, Mr. Romanzi resigned from all officer and director positions with the Company. At Closing, the following individuals were appointed to the indicated positions:
George Furlan – Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer
Dante Jones – sole director
James Mansour – Chief Marketing Officer
We anticipate that, in the near future, the size of the Board will be increased to three directors and that two directors, to be designated by Cannavolve, will be appointed to fill the vacancies created by the increase in the size of the Board.
The Agreement contains customary representations, warranties, covenants and conditions for a transaction of this type for the benefit of the parties.
For federal income tax purposes, it is intended that the Share Exchange qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). However we did not obtain any tax opinion and there can be no assurance that our intent that the Share Exchange qualify as a reorganization under the provisions of Section 368(a) of the Code is correct.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is filed as Exhibit 2.6 to this Report and which is incorporated herein by reference.
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FORM 10 DISCLOSURES
Immediately prior to the Closing of the Share Exchange described in detail above pursuant to which Cannavolve became a majority owned subsidiary of the Company, the Company was a “shell company,” as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Item 2.01(f) of Form 8-K states that if the registrant was a “shell” company, such as the Company was immediately before the Share Exchange, then the registrant must disclose on a Current Report on Form 8-K the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, this Report includes all of the information that would be included in a Form 10.
The Share Exchange was accounted for using the acquisition method of accounting and is based on the historical consolidated financial statements of the Company and Cannavolve. The acquisition method of accounting is set forth in Accounting Standards Codification (“ASC”) 805, Business Combinations, and uses the fair value concepts defined in ASC 820, Fair Value Measurement. Under the acquisition method of accounting, the assets acquired, and liabilities assumed are generally recorded as of the completion of the purchase at their respective fair values and added to those of the Company. Financial statements and reported results of operations of the Company issued after completion of the purchase will reflect these fair value adjustments, but the Company’s previously issued historical financial statements will not be retroactively restated.
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BUSINESS
The disclosure in this “Business” section relates primarily to Cannavolve, an operating company that became a majority owned subsidiary of the Company at the Closing of the Share Exchange. From October 2016 until the Closing, the Company did not have any material operations and was a shell company as such term is defined in Rule 12b-2 of the Exchange Act.
Organizational History of the Company and Cannavolve
Intelligent Buying, Inc.
Intelligent Buying, Inc. was incorporated in the State of California on March 22, 2004. The Company initially was engaged in the business of asset management and sales of high-end computerized networking equipment to emerging high technology companies. Commencing in 2011, the Company began providing advertising services to promote products and services of third parties (primarily a related company, Anchorfree Wireless, Inc.) to the Company’s customer base. Under this business model, third parties paid the Company a fee to disseminate their advertising to the Company’s customer base.
On February 9, 2015, the Company’s principal shareholders sold their shares of Common Stock to AMS Encino Investments, Inc., a California corporation controlled by Hector Guerrero, which resulted in a change of control of the Company. Following this change of control, in October 2016, management discontinued the Company’s operations.
On February 14, 2020, Intelligent Buying, Inc. entered into the Agreement with Cannavolve. Pursuant to the Agreement, the Company agreed to acquire up to 33,674,262 shares of Cannavolve constituting up to 81.5% of the issued and outstanding shares of Cannavolve from the Cannavolve Shareholders in exchange for 702,111 shares of the Company constituting up to 9.6% of the issued and outstanding shares of Common Stock.
Pursuant to the Agreement, the Company agreed to file a Certificate of Determination with the State of California, as soon as practicable after Closing, creating the New Preferred, and further agreed, as a post-closing covenant, to issue 1,000,000 shares of the New Preferred to Principal, in consideration of Principal successfully negotiating the Agreement and performing due-diligence in connection with the Agreement.
Additionally, pursuant to the Agreement, the parties agreed that INTB’s then principal shareholder, Bagel Hole, which is owned solely by Mr. Romanzi, the Company’s Chief Executive and Financial Officer and sole director, will return to INTB, for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole.
Additionally, pursuant to the Agreement, the parties agreed that at Closing, Mr. Romanzi, the Company’s sole officer and director, would resign from all positions with the Company and that certain members of the Cannavolve team would be appointed as officers and directors of the Company. Specifically, it was agreed that George Furlan would be appointed as the Company’s Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer, and that Dante Jones would be appointed as the Company’s sole director. Further, the parties agreed that two additional directors, to be designated by Cannavolve, would be appointed to the Company’s board of directors after Closing.
The Share Exchange closed on February 14, 2020. At Closing, pursuant to the Agreement, we issued an aggregate of 702,111 shares of Common Stock to the Cannavolve Shareholders in exchange for 33,674,262 shares of Cannavolve common stock constituting 81.5% of the issued and outstanding shares of Cannavolve, resulting in Cannavolve becoming our 81.5% owned subsidiary.
At the Closing, Bagel Hole returned to INTB for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole. At Closing, Bagel Hole also returned for cancellation and retirement an additional 667,402 shares of the Company’s Common Stock owned by Bagel Hole.
Also at Closing, on February 14, 2020, Mr. Romanzi resigned from all officer and director positions with the Company. At Closing, the following individuals were appointed to the indicated positions:
George Furlan – Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer
Dante Jones – sole director
James Mansour – Chief Marketing Officer
We anticipate that, in the near future, the size of the Board will be increased to three directors and that two directors, to be designated by Cannavolve, will be appointed to fill the vacancies created by the increase in the size of the Board.
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At Closing, the business of Cannavolve became the business of the Company.
We plan to acquire the remaining shares of Cannavolve such that the Company will own 100% of the issued and outstanding shares of Cannavolve in the future. However there can be no assurance that the foregoing can occur as planned or at all and there can be no assurance of the timing of such if it does indeed occur.
Cannavolve
Cannavolve was incorporated in the state of Washington on July 6, 2012. To date, Cannavolve’s operations have consisted primarily of providing advisory and operational services to hemp and ancillary cannabis companies, serving as a full-blown business accelerator working with startups and emerging brands nationwide. Headquartered in Seattle, Cannavolve has guided clients through every phase of the startup process, including business planning and forecasting, funding and investment, human resources and legal operations and manufacturing, and sales and marketing. Cannavolve’s go-to-market strategies and program implementation processes were designed with one goal in mind: to drive innovation and position startups for sustainable momentum and growth.
Overview of Cannavolve Business
Any references to “the Company,” “we,” “us,” “our” or words of similar import in this “Overview of Cannavolve Business” Section, refer to Cannavolve.
Toward the end of 2019, Cannavolve began to decrease its advisory and operational services to hemp and ancillary cannabis companies and shifted its focus to product development, brand management and creating CBD lifestyle brands. Cannavolve’s mission now is to launch and operate best-in-class brands in the Luxury, Premium and Mass Market space with an objective on innovation and product uniqueness, derived from research insights, demographic data, customer interviews and omni-channel experiences.
We value our customers’ personal well-being as much as we value the well-being of our planet. We believe in responsible luxury that respects nature and humankind, a luxury that prepares for a better world for future generations.
We believe that ethics and moral values are becoming increasingly important for consumers in such a way that they are starting to strongly influence their purchasing decisions. Environment, sustainability, cruelty-free production and labor practices are all elements now taken into consideration when buying a product.
Our full spectrum CBD used in our products is rich in Phytocannabinoids and is THC free. Our CBD is sustainably farmed and sourced. We employ supercritical CO2 and alcohol extraction technologies without the use of any harsh chemicals. All of our CBD use in our products is tested up to 20 times through cultivation, extraction and manufacturing process to final packaged product. Our CBD is also vegan, gluten free, cruelty free and Non-GMO.
Each of our portfolio brands is planned to have its own digital architecture which will allow us to closely monitor our sales channel strategies and continually refine sales channels while exploring new ones which we believe represent the greatest potential. We intend to build brand loyalty by endorsing consumer core values of authenticity and relatability and maintain a commitment to following sustainable practices and rigorous product testing.
Principal Products and Services
The Company currently has one main product line and three in development. The Company’s current active product line is Revive Now.
Revive Now
Revive Now a mass market, premium-quality, full spectrum, hemp-based CBD product brand. Revive Now offers quality products at competitive market pricing, such as CBD-infused tinctures, softgels, creams, powders, gumdrops, and sprays. Products currently sold under the Revive Now product line include:
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CBD-Infused Dried Fruits and Gummies
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CBD Topicals
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CBD Sprays
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Revive Now products are indented to provide a safe and effective way to consume hemp-based CBD.
Revive Now Target Market
Our initial target demographic for the Revive Now brand is women over the age of 35. However, we intend to target the mass market with this brand, selling to potential purchasers of any income and background. We believe anyone looking for support for aches and pain, anxiety, inflammation, insomnia and depression are potential customers for the Revive Now brand. We intend to target customers who are looking for CBD infused products at affordable price points.
Future Product Lines
The Company has three product lines planned for introduction by the end of 2020.
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Ouevre - a next generation CBD luxury skin care line and lifestyle brand.
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F.A.M.E. - a millennial, premium priced dual-gender lifestyle brand
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LevelLab – a premium priced millennial fitness/wellness/performance product line
Ouevre
Oeuvre - “A Body of Art” – is the next product line we plan to launch in Spring 2020, and is intended to be a next generation CBD luxury skin care line and lifestyle brand. Planned product offerings under this line include:
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Purifying Exfoliator
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Replenishing Oil
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Ultra-Nourishing Face Cream
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Revitalizing Eye Cream
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High Potency Tincture
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CBD infused and scented candles
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CBD infused women’s fragrance
Drawing inspiration from petals, leaves, roots, minerals and gemstones, Ouevre celebrates the artistry of well-being and beauty, inside and out. Ouevre products are non-toxic, ungendered products made with zero GMO, retinyl palmitate, petroleum, mineral oil, parabens, sulfates, and synthetic colors.
Ouevre Target Market
Ouevre is planned to be our luxury segment product line. With Ouevre, we are targeting a large and influential consumer class of the of individuals that are “HENRYs” – High-Earners-Not-Rich-Yet. They have discretionary income and are highly likely to be wealthy in the future. HENRYs earn between $100,000 and $250,000 annually. They are digitally fluent, love online shopping online, and are big discretionary spenders. Therefore, ouvreskincare.com offers inclusive, aspirationally affordable luxury products positioned for them.
We believe the benefit of onboarding this demographic to Ouevre are twofold: securing valuable present customers and building relationships and business with those most likely to be amongst the most affluent consumers in the future. By the year 2025, Millennials and Generation Z will represent more than 40% of the overall luxury goods market, according to a 2019 report published by Boston Consulting Group. We seek to target such group for the sale of our Ouevre products.
On social media, we will target the following audiences for the Ouevre brand
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Women aged 30+
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Luxury Skincare Enthusiasts
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CBD Enthusiasts
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Crystal Lovers
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Wellness Audience
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Makeup Artists
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Art
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Beauty
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Influencers
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Bloggers
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Stores
LevelLab
We intend LevelLab to be a premium priced millennial fitness, wellness, and performance product line. Intended products include:
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Therapeutic recovery cream that provides heating and cooling effects to sooth pain, containing isolate hemp CBD, 100% THC free.
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LevelLab Bundle including daily facial cleanser, hyaluronic and vitamin C moisturizer, and retinol night cream.
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LevelLab Active Hydration – supplement for mineral replenishment and optimal hydration for before, during, and after workout.
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LevelLab Fuel – a recovery drink containing a unique combination of CBD and amino acids.
LevelLab Target Market
We plan to target Millennials (generally ages 23 – 38 as of 2019) for our LevelLab product line. These consumers, who came of age in a hyper-connected, digital world, have unique shopping preferences, spend their time in different mediums, and respond to a different style of messaging than generations past. This evolution in consumer behavior accompanies a significant transition of purchasing power to the Millennial generation. According to the 2015 U.S. Census Bureau, Millennials accounted for more than 25% of the U.S. population, exceeding the number of baby boomers and making it the largest percentage of the workforce in the United States. Further, according to the U.S. Bureau of Labor Statistics, people born after 1981, including Millennials and Generation Z, accounted for approximately $1.7 trillion or 22% of the nation’s total consumer expenditure in 2017. We expect this number to significantly increase as Millennials enter their peak earning years and an increasing percentage of Generation Z joins the workforce.
F.A.M.E
F.A.M.E. will merge health and wellness with art and entertainment to curate unique and impactful products, content, and activities for a global community. As stated in a 2017 article on the Wellness industry published by Forbes,, 72% of millennials would rather spend money on experiences than on material goods. With F.A.M.E., we intend to give them both. Products and offerings under the F.A.M.E. brand name are currently under development.
F.A.M.E Target Market
The target market for F.A.M.E. is also Millennials. We intend to market F.A.M.E. to premium consumers – both male and female – in the Millennial market.
Distribution
We have three primary methods through which we sell our products:
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Cannavolve’s direct-to consumer online e-commerce platform
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Wholesale distributers; and
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private white label sales.
Our direct to consumer e-commerce platform is tailored to the specific brands we offer or intend to offer. For example we currently sell Revive Now products through www.buyrevivenow.com. Information contained on, or accessible through, our website is not a part of, and is not incorporated by reference into, this document. In the future, we will have a separate e-commerce platform for our other brands and product lines, such as Ouevre, LevelLab, etc. Currently, the vast majority of our sales are made via private white label sales – but we intend to increase direct-to-consumer and wholesale distribution sales in the future.
Marketing Strategy
We support brand launches with social media & marketing campaigns, including influencers. Leading marketing and PR firms were engaged by the Company to spearhead the launch of Revive Now, and will likely be engaged for our future planned brand launches.
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Industry Overview
The market for products based on extracts of hemp and cannabis, is expected to grow substantially over the coming years. Arcview Market Research and BDS Analytics are forecasting the combined market to reach nearly $45 billion within the U.S. in the year 2024. While much of this market is expected to be comprised of high potency THC-based products that will be sold in licensed dispensaries, the research firms are still predicting the market to grow to $5.3 billion, $12.6 billion, and $2.2 billion by 2024 for the product areas of low THC cannabinoids, THC-free Cannabinoids and pharmaceutical cannabinoids, respectively.
We believe the recent passage of the 2018 Farm Bill will allow the Company to expand its marketplace opportunities. On December 20, 2018, President Donald J. Trump signed into law the Agriculture Improvement Act of 2018, otherwise known as the “Farm Bill.” Prior to its passage, hemp, a member of the cannabis family, and hemp-derived CBD were classified as a Schedule I controlled substances, and so illegal under the CSA. Under Section 10113 of the Farm Bill, hemp cannot contain more than 0.3 percent THC. THC refers to the chemical compound found in cannabis that produces the psychoactive “high” associated with cannabis. Any cannabis plant that contains more than 0.3 percent THC would be considered non-hemp cannabis—or marijuana—under federal law and would thus face no legal protection under this new legislation and would be an illegal Schedule 1 drug under the CSA.
With the passage of the Farm Bill, hemp cultivation is broadly permitted. The Farm Bill explicitly allows the transfer of hemp-derived products across state lines for commercial or other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law.
Government Regulation
The United States Food & Drug Administration (“FDA”) is generally responsible for protecting the public health by ensuring the safety, efficacy, and security of (1) prescription and over the counter drugs; (2) biologics including vaccines, blood & blood products, and cellular and gene therapies; (3) foodstuffs including dietary supplements, bottled water, and baby formula; and, (4) medical devices including heart pacemakers, surgical implants, prosthetics, and dental devices.
Regarding its regulation of drugs, the FDA process requires a review that begins with the filing of an investigational new drug (IND) application, with follow on clinical studies and clinical trials that the FDA uses to determine whether a drug is safe and effective, and therefore subject to approval for human use by the FDA.
Aside from the FDA’s mandate to regulate drugs, the FDA also regulates dietary supplement products and dietary ingredients under the Dietary Supplement Health and Education Act of 1994. This law prohibits manufacturers and distributors of dietary supplements and dietary ingredients from marketing products that are adulterated or misbranded. This means that these firms are responsible for evaluating the safety and labeling of their products before marketing to ensure that they meet all the requirements of the law and FDA regulations, including, but not limited to the following labeling requirements: (1) identifying the supplement; (2) nutrition labeling; (3) ingredient labeling; (4) claims; and, (5) daily use information.
The FDA has not approved cannabis, marijuana, hemp or derivatives as a safe and effective drug for any indication. As of the date of this filing, we have not, and do not intend to file an IND with the FDA, concerning any of our products that contain CBD derived from industrial hemp or cannabis. Further, our products containing CBD derived from industrial hemp are not marketed or sold using claims that their use is safe and effective treatment for any medical condition subject to the FDA’s jurisdiction.
Government Approvals
The Company does not currently require any government approvals for its operations or product offerings. In August 2019 the DEA affirmed that CBD was not a scheduled drug. As a result of the 2018 Farm Bill the FDA has been tasked with developing CBD regulations. The FDA has not yet published regulations.
Competition
We have experienced, and expect to continue to experience, intense competition from a number of companies.
The current market for hemp-derived CBD products is highly competitive, consisting of publicly-trade and privately-owned companies, many of which are more adequately capitalized than the Company. The Company’s current publicly listed competitors include market leader Charlotte’s Web, CV Sciences, Elixinol, Abacus, and Green Growth Brands, and private companies such as BeBoe, St. Jane. Mary’s, Lord Jones, Bluebird Folium Biosciences, Global Cannabinoids, and Pure Kana. In addition, both public and private U.S. multi-state operators and Canadian LP’s have entered the hemp-derived CBD consumer market or have announced plans to do so. This market is highly fragmented, and according to the Hemp Business Journal, the vast majority of industry participants generate less than ~$2 million of annual revenue. We see this an opportunity to get a foothold in the CBD consumer marketplace, and build our company as a major brand name in this space.
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Cannavolve’s Growth Strategies:
In order to grow our company, Cannavolve intends to:
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Create a leading consumer packaged goods company;
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Partner with established distributers and retailers;
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Focus on operational excellence and product quality; and
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Establish ongoing communication with the capital markets
Cannavolve’s mission is to create the next generation of CBD consumer brands. The Company believes it has assembled a highly accomplished team of branding and marketing professionals who have successfully launched and operated major brands in the consumer market space, which the Company believes will give it a competitive edge in the industry.
Suppliers
The Company has several third party suppliers, and is not reliant on any particular supplier for its product offerings. Many of our products contain CBD derived from industrial hemp or cannabis which we get from third parties. Hemp cultivation can be impacted by weather patterns and other natural events, but we have not faced any supply issues to date with obtaining raw materials for our products.
Customers
The Company currently sells products under its Revive Now direct to consumers, as well as via wholesale and private white label sales. The majority of the Company’s customers are currently other companies, as white-label products comprise the majority of the Company’s sales. The Company is not reliant on any particular customer.
Intellectual Property
The Company does not currently own any patents or trademarks. The Company expects to rely on trade secrets and proprietary know-how protection for our confidential and proprietary information, however we have not yet taken security measures to protect this information.
Research and Development
We are constantly in the process of identifying and/or developing potential new products to offer to our customers. Our expenditures on research and development have historically been small and immaterial compared to our other business expenditures. We are currently developing new formulations for additional product lines.
Employees
The Company has no employees. It relies on the services of contractors.
Reports to Security Holders
We intend to furnish our shareholders annual reports containing financial statements audited by our independent registered public accounting firm and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year. We file Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K with the SEC in order to meet our timely and continuous disclosure requirements. We may also file additional documents with the SEC if they become necessary in the course of our company’s operations.
The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
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RISK FACTORS
In this “RISK FACTORS” section of this Form 8-K, any references to “the Company,” “we,” “us,” “our” or words of similar import, refer to the Company and Cannavolve on a combined basis.
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS CURRENT REPORT ON FORM 8-K BEFORE DECIDING WHETHER TO INVEST IN THE REGISTRANT’S COMMON STOCK. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO THE REGISTRANT OR THAT THE REGISTRANT CURRENTLY DEEMS IMMATERIAL MAY ALSO IMPAIR THE REGISTRANT’S BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THE REGISTRANT’S BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OR THE REGISTRANT’S COMMON STOCK COULD DECLINE AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
THIS CURRENT REPORT ON FORM 8-K ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. PLEASE SEE “NOTE REGARDING FORWARD-LOOKING STATEMENTS”.
Risks Related to Our Business and Industry
We are an early stage company with very limited operating history. Such limited operating history may not provide an adequate basis to judge our future prospects and results of operations.
We have a limited operating history. Cannavolve was formed on July 6, 2012. We have limited experience and operating history in which to assess our future prospects as a company, and this limited experience is compounded by our recent shift in business towards product development and sales. In addition, the market for our products is highly competitive. If we fail to successfully develop and offer our products and services in an increasingly competitive market, we may not be able to capture the growth opportunities associated with them or recover our development and marketing costs, and our future results of operations and growth strategies could be adversely affected. Our limited history may not provide a meaningful basis for investors to evaluate our business, financial performance, and prospects.
We may fail to successfully execute our business plan.
Our shareholders may lose their entire investment if we fail to execute our business plan. Our prospects must be considered in light of the following risks and uncertainties, including but not limited to, competition, the erosion of ongoing revenue streams, the ability to retain experienced personnel and general economic conditions. We cannot guarantee that we will be successful in executing our business plan. If we fail to successfully execute our business plan, we may be forced to cease operations, in which case our shareholders may lose their entire investment.
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We have a history of losses, and may have to further reduce our costs by curtailing future operations to continue as a business.
Historically we have had operating losses and our cash flow has been inadequate to support our ongoing operations. For the nine months ended September 30, 2019, we had a net loss of $1,333,640, and as of December 31, 2018, we had an accumulated deficit of $6,031,806. Our ability to fund our capital requirements out of our available cash and cash generated from our operations depends on a number of factors, including our ability to gain market acceptance of our products and continue growing our existing operations. If we cannot generate positive cash flow from operations, we will have to reduce our costs and try to raise working capital from other sources. These measures could materially and adversely affect our ability to execute our operations and expand our business.
The Company may suffer from lack of availability of additional funds.
We expect to have ongoing needs for working capital in order to fund operations and to continue to expand our operations. To that end, we may be required to raise additional funds through equity or debt financing. However, there can be no assurance that we will be successful in securing additional capital on favorable terms, if at all. If we are successful, whether the terms are favorable or unfavorable, there is a potential that we will fail to comply with the terms of such financing, which could result in severe liability for our Company. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund liabilities, or (d) seek protection from creditors. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties.
In addition, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.
The commercial success of our products is dependent, in part, on factors outside our control.
The commercial success of our products is dependent upon unpredictable and volatile factors beyond our control, such as the success of our competitors’ products. Our failure to attract market acceptance and a sustainable competitive advantage over our competitors would materially harm our business.
We are attempting to launch brands in new markets and with new products. Our inability to effectively execute our business plan in relation to these new brands could negatively impact our business.
We are attempting launch new CBD product brands into the marketplace. The CBD products market is relatively new, and therefore potentially more risky than other, more established product categories. Further, we are attempting to launch new product lines containing CBD products, rather than rely on brands that we have currently launched. Launching new products into new markets is risky, and requires extensive marketing and business expertise. There can be no assurances we will have the capital, personnel resources, or expertise to be successful in launching these new business efforts.
Our Business Can be Affected by Unusual Weather Patterns
Hemp cultivation can be impacted by weather patterns and these unpredictable weather patterns may impact our client-customers’ ability to harvest hemp. In addition, severe weather, including drought and hail, can destroy a hemp crop, which could result a shortage of raw materials. If our suppliers are unable to obtain sufficient hemp from which to process CBD, our ability to meet customer demand, generate sales, and maintain operations will be impacted.
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Our business and financial performance may be adversely affected by downturns in the target markets that we serve or reduced demand for the types of products we sell.
Demand for our products is often affected by general economic conditions as well as product-use trends in our target markets. These changes may result in decreased demand for our products. The occurrence of these conditions is beyond our ability to control and, when they occur, they may have a significant impact on our sales and results of operations. The inability or unwillingness of our customers to pay a premium for our products due to general economic conditions or a downturn in the economy may have a significant adverse impact on our sales and results of operations.
Changes within the cannabis industry may adversely affect our financial performance.
Changes in the identity, ownership structure and strategic goals of our competitors and the emergence of new competitors in our target markets may harm our financial performance. New competitors may include foreign-based companies and commodity-based domestic producers who could enter our specialty markets if they are unable to compete in their traditional markets.
We are subject to certain tax risks and treatments that could negatively impact our results of operations.
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking-controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly, and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.
The Company’s industry is highly competitive, and we have less capital and resources than many of our competitors which may give them an advantage in developing and marketing products similar to ours or make our products obsolete.
We are involved in a highly competitive industry where we may compete with numerous other companies who offer alternative methods or approaches, who may have far greater resources, more experience, and personnel perhaps more qualified than we do. Such resources may give our competitors an advantage in developing and marketing products similar to ours or products that make our products less desirable to consumers or obsolete. There can be no assurance that we will be able to successfully compete against these other entities.
We may be unable to respond to the rapid change in the industry and such change may increase costs and competition that may adversely affect our business
Rapidly changing technologies, frequent new product and service introductions and evolving industry standards characterize our market. The continued growth of the Internet and intense competition in our industry exacerbates these market characteristics. Our future success will depend on our ability to adapt to rapidly changing trends and capitalize on them. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of our products. In addition, any new enhancements must meet the requirements of our current and prospective customers and must achieve significant market acceptance. We could also incur substantial costs if we need to modify our products and services or infrastructures to adapt to these changes.
We also expect that new competitors may introduce products or services that are directly or indirectly competitive with us. These competitors may succeed in developing products and services that have greater functionality or are less costly than our products and services and may be more successful in marketing such products and services. Technological changes have lowered the cost of operating, communications and computer systems and purchasing software. These changes reduce our cost of selling products and providing services, but also facilitate increased competition by reducing competitors’ costs in providing similar products and services. This competition could increase price competition and reduce anticipated profit margins.
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Our acquisition strategy creates risks for our business.
We expect that we will pursue acquisitions of other businesses, assets or technologies to grow our business. We may fail to identify attractive acquisition candidates or we may be unable to reach acceptable terms for future acquisitions. We might not be able to raise enough cash to compete for attractive acquisition targets. If we are unable to complete acquisitions in the future, our ability to grow our business at our anticipated rate will be impaired.
We may pay for acquisitions by issuing additional shares of our Common Stock, which would dilute our stockholders, or by issuing debt, which could include terms that restrict our ability to operate our business or pursue other opportunities and subject us to meaningful debt service obligations. We may also use significant amounts of cash to complete acquisitions. To the extent that we complete acquisitions in the future, we likely will incur future depreciation and amortization expenses associated with the acquired assets. We may also record significant amounts of intangible assets, including goodwill, which could become impaired in the future. Acquisitions involve numerous other risks, including:
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difficulties integrating the operations, technologies, services and personnel of the acquired companies;
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challenges maintaining our internal standards, controls, procedures and policies;
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diversion of management’s attention from other business concerns;
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over-valuation by us of acquired companies;
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litigation resulting from activities of the acquired company, including claims from terminated employees, customers, former stockholders and other third parties;
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insufficient revenues to offset increased expenses associated with the acquisitions and unanticipated liabilities of the acquired companies;
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insufficient indemnification or security from the selling parties for legal liabilities that we may assume in connection with our acquisitions;
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entering markets in which we have no prior experience and may not succeed;
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risks associated with foreign acquisitions, such as communication and integration problems resulting from geographic dispersion and language and cultural differences, compliance with foreign laws and regulations and general economic or political conditions in other countries or regions;
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potential loss of key employees of the acquired companies; and
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impairment of relationships with clients and employees of the acquired companies or our clients and employees as a result of the integration of acquired operations and new management personnel.
Our management team’s attention may be diverted by recent acquisitions and searches for new acquisition targets, and our business and operations may suffer adverse consequences as a result.
Mergers and acquisitions are time intensive, requiring significant commitment of our management team’s focus and resources. If our management team spends too much time focused on recent acquisitions or on potential acquisition targets, our management team may not have sufficient time to focus on our existing business and operations. This diversion of attention could have material and adverse consequences on our operations and our ability to be profitable.
We may be unable to scale our operations successfully.
Our growth strategy will place significant demands on our management and financial, administrative and other resources. Operating results will depend substantially on the ability of our officers and key employees to manage changing business conditions and to implement and improve our financial, administrative and other resources. If the Company is unable to respond to and manage changing business conditions, or the scale of its operations, then the quality of its services, its ability to retain key personnel, and its business could be harmed.
The Company may suffer from a lack of liquidity.
By incurring indebtedness, the Company subjects itself to increased debt service obligations which could result in operating and financing covenants that would restrict our operations and liquidity. This would impair our ability to hire the necessary senior and support personnel required for our business, as well carry out its acquisition strategy and other business objectives.
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Economic conditions or changing consumer preferences could adversely impact our business.
A downturn in economic conditions in one or more of the Company’s markets could have a material adverse effect on our results of operations, financial condition, business and prospects – especially in light of the fact that we are selling products generally considered non-essential and/or discretionary. Although we attempt to stay informed of economic and customer trends, any sustained failure to identify and respond to trends could have a material adverse effect on our results of operations, financial condition, business and prospects.
The requirements of remaining a public company may strain our resources and distract our management, which could make it difficult to manage our business.
We are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements are time-consuming and expensive and could have a negative effect on our business, results of operations and financial condition.
If we secure intellectual property rights in the future, such intellectual property rights will be valuable, and if we are unable to protect them or are subject to intellectual property rights claims, our business may be harmed.
If we secure intellectual property rights, including those rights related to trademarks, copyrights and trade secrets, they will be important assets for us. We do not hold any patents protecting our intellectual property at this time. Various events outside of our control may pose a threat to any intellectual property rights that we acquire as well as to our business. For example, we may be subject to third-party intellectual property rights claims, and our technologies may not be able to withstand any such claims. Regardless of the merits of the claims, any intellectual property claims could be time-consuming and expensive to litigate or settle. In addition, if any claims against us are successful, we may have to pay substantial monetary damages or discontinue any of our practices that are found to be in violation of another party’s rights. We also may have to seek a license to continue such practices, which may significantly increase our operating expenses or may not be available to us at all. Also, the efforts we may take to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our potential future intellectual property rights could harm our business or our ability to compete.
If we are unable to protect the confidentiality of our trade secrets and know-how, our business and competitive position would be harmed.
The Company has not currently filed for any protection of its intellectual property. We expect to rely on trade secrets and proprietary know-how protection for our confidential and proprietary information, and we have taken security measures to protect this information. These measures, however, may not provide adequate protection for our trade secrets, know-how, or other confidential information. Among other things, we seek to protect our trade secrets, know-how, and confidential information by entering into confidentiality agreements with parties who have access to them, such as our employees, collaborators, contract manufacturers, consultants, advisors, and other third parties. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Moreover, there can be no assurance that any confidentiality agreements that we have with our employees, consultants, or other third parties will provide meaningful protection for our trade secrets, know-how, and confidential information or will provide adequate remedies in the event of unauthorized use or disclosure of such information. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. Accordingly, there also can be no assurance that our trade secrets or know-how will not otherwise become known or be independently developed by competitors.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position would be materially and adversely harmed.
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Trade secrets and know-how can be difficult to protect as trade secrets and know-how will over time be disseminated within the industry through independent development, the publication of journal articles, and the movement of personnel skilled in the art from company to company or academic to industry scientific positions. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. Because from time to time we expect to rely on third parties in the development, manufacture and distribution of our products and provision of our services, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, license agreements, collaboration agreements, supply agreements, consulting agreements or other similar agreements with our advisors, employees, collaborators, licensors, suppliers, third-party contractors, and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets and know-how. Despite the contractual provisions employed when working with third parties, the need to share trade secrets, know-how, and other confidential information increases the risk that such trade secrets and know-how become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or know-how, or other unauthorized use or disclosure would impair our competitive position and may have an adverse effect on our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, collaborators, licensors, suppliers, third-party contractors, and consultants to publish data potentially relating to our trade secrets or know-how, although our agreements may contain certain limited publication rights. Despite our efforts to protect our trade secrets and know-how, our competitors may discover our trade secrets or know-how, either through breach of our agreements with third parties, independent development, or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets or know-how would impair our competitive position and have a material adverse impact on our business.
The auditor included a “going concern” note in its audit report.
As noted in our audited financials for the years ended December 31, 2018 and 2017, we’ve sustained recurring operating losses and our accumulated deficit raises substantial doubt about our ability to continue as a going concern. We may not have enough funds to sustain the business until it becomes profitable. Even if we obtain financing, we may not accurately anticipate how quickly we may use the funds and whether these funds are sufficient to bring the business to profitability.
We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”) and if we fail to continue to comply, our business could be harmed, and the price of our securities could decline.
Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require an annual assessment of internal control over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm. The standards that must be met for management to assess the internal control over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards. We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis. It is difficult for us to predict how long it will take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In the event that our Chief Executive Officer or Chief Financial Officer determines that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our securities will be affected; however, we believe that there is a risk that investor confidence and the market value of our securities may be negatively affected.
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Risks Related to Government Regulation
Possible yet unanticipated changes in federal and state law could cause any of our current products, containing hemp-derived CBD oil to be illegal, or could otherwise prohibit, limit or restrict any of our products containing CBD.
We distribute certain products containing hemp-derived CBD, and we currently intend to develop and launch additional products containing hemp-derived CBD in the future. Until 2014, when 7 U.S. Code §5940 became federal law as part of the Agricultural Act of 2014 (the “2014 Farm Act”), products containing oils derived from hemp, notwithstanding a minimal or non-existing THC content, were classified as Schedule I illegal drugs. The 2014 Farm Act expired on September 30, 2018, and was thereafter replaced by the Agricultural Improvement Act of 2018 on December 20, 2018 (the “2018 Farm Act”), which amended various sections of the U.S. Code, thereby removing hemp, defined as cannabis with less than 0.3% THC, from Schedule 1 status under the Controlled Substances Act, and legalizing the cultivation and sale of industrial-hemp at the federal level, subject to compliance with certain federal requirements and state law, amongst other things. More specifically, industrial hemp is defined as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” The hemp oil we use comports with this definition of less than 0.3% THC. THC is the psychoactive component of plants in the cannabis family generally identified as marihuana or marijuana. There is no assurance that the 2018 Farm Act will not be repealed or amended such that our products containing hemp-derived CBD would once again be deemed illegal under federal law.
The 2018 Farm Act delegates the authority to the states to regulate and limit the production of hemp and hemp derived products within their territories. Although many states have adopted laws and regulations that allow for the production and sale of hemp and hemp derived products under certain circumstances, currently Idaho, Mississippi and South Dakota have not adopted laws and regulations permitted by the 2018 Farm Act. No assurance can be given that such state laws may not be implemented, repealed or amended such that our products containing hemp-derived CBD would be deemed legal in those states that have not adopted regulations pursuant to the 2018 Farm Act, or illegal under the laws of one or more states now permitting such products, which in turn would render such intended products illegal in those states under federal law even if the federal law is unchanged. In the event of either repeal of federal or of state laws and regulations, or of amendments thereto that are adverse to our intended products, we may be restricted or limited with respect to those products that we may sell or distribute, which could adversely impact our intended business plan with respect to such intended products.
Additionally, the FDA has indicated its view that certain types of products containing CBD may not be permissible under the FDCA. The FDA’s position is related to its approval of Epidiolex, a marijuana-derived prescription medicine to be available in the United States. The active ingredient in Epidiolex is CBD. On December 20, 2018, after the passage of the 2018 Farm Bill, FDA Commissioner Scott Gottlieb issued a statement in which he reiterated the FDA’s position that, among other things, the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce and that the FDCA prohibits introducing into interstate commerce food products containing added CBD, and marketing products containing CBD as a dietary supplement, regardless of whether the substances are hemp-derived. We do not believe that any of our products fall within the FDA’s regulatory authority reiterated by Commissioner Gottlieb in December 2018, as we have not, and do not intend to market any of our products with a claim of therapeutic benefit or with any other disease claim. However, should any regulatory action, including action taken by the FDA, and/or legal proceeding alleging violations of such laws could have a material adverse effect on our business, financial condition and results of operations.
If our hemp oil products are found to violate federal law or if there is negative press from being in a hemp or cannabis-related business, we could be criminally prosecuted or forced to suspend or cease operations.
There is a misconception that that hemp and marijuana are the same thing. This perception drives much of the regulation of hemp products. Although hemp and marijuana are both part of the cannabis family, they differ in cultivation, function, and application. Despite the use of marijuana becoming more widely legalized, it is viewed by many regulators and many others as an illegal product. Hemp, on the other hand, is used in a variety of other ways that include clothing, skin products, pet products, dietary supplements (the use of CBD oil), and thousands of other applications. Hemp may be legally sold, however the inability of many to understand the difference between hemp and marijuana often causes burdensome regulation and confusion among potential customers. Therefore, we may be affected by laws related to cannabis and marijuana, even though our products are not the direct targets of these laws.
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Cannabis is currently a Schedule I controlled substance under the Controlled Substance Act (“CSA”) and is, therefore, illegal under federal law. Even in those states in which the use of cannabis has been legalized pursuant to state law, its use, possession and/or cultivation remains a violation of federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse. The U.S. Department of Justice (the “DOJ”) describes Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.” If the federal government decides to enforce the CSA in the states, persons that are charged with distributing, possessing with intent to distribute or growing cannabis could be subject to fines and/or terms of imprisonment, the maximum being life imprisonment and a $50 million fine.
Notwithstanding the CSA, 29 U.S. states, the District of Columbia and the U.S. territories of Guam and Puerto Rico allow their residents to use medical cannabis. The states of Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont (effective July 1, 2018) and Washington, and the District of Columbia, allow cannabis for adult recreational use. Such state and territorial laws are in conflict with the federal CSA, which makes cannabis use and possession illegal at the federal level.
However, cannabis, as mentioned above, is a schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of cannabis has been legalized, its production and use remains a violation of federal law. Since federal law criminalizing the use of cannabis preempts state laws that legalize its use, strict enforcement of federal laws regarding marijuana that would apply to the sale and distribution of our hemp oil products could result in criminal charges brought against us and would likely result in our inability to proceed with our business plan.
In addition, any negative press resulting from any incorrect perception that we have entered into the marijuana space could result in a loss of current or future business. It could also adversely affect the public’s perception of us and lead to reluctance by new parties to do business with us or to own our Common Stock. We cannot assure you that additional business partners, including but not limited to financial institutions and customers, will not attempt to end or curtail their relationships with us. Any such negative press or cessation of business could have a material adverse effect on our business, financial condition, and results of operations.
Our product candidates are not approved by the FDA or other regulatory authority, and we face risks of unforeseen medical problems, and up to a complete ban on the sale of our product candidates.
The efficacy and safety of pharmaceutical products is established through a process of clinical testing under FDA oversight. Our products have not gone through this process because we believe that the topical products, we sell are not subject to this process. However, if an individual were to use one of our products in an improper manner, we cannot predict the potential medical harm to that individual. If such an event were to occur, the FDA or similar regulatory agency might impose a complete ban on the sale or use of our products.
Sources of hemp-derived CBD depend upon legality of cultivation, processing, marketing and sales of products derived from those plants under state law.
Hemp-derived CBD can only be legally produced in states that have laws and regulations that allow for such production and that comply with the 2018 Farm Act, apart from state laws legalizing and regulating medical and recreational cannabis or marijuana, which remains illegal under federal law and regulations. We purchase all of our hemp-derived CBD from licensed growers and processors in states where such production is legal. As described in the preceding risk factor, in the event of repeal or amendment of laws and regulations which are now favorable to the cannabis/hemp industry in such states, we would be required to locate new suppliers in states with laws and regulations that qualify under the 2018 Farm Act. If we were to be unsuccessful in arranging new sources of supply of our raw ingredients, or if our raw ingredients were to become legally unavailable, our intended business plan with respect to such products could be adversely impacted.
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Because our distributors may only sell and ship our products containing hemp-derived CBD in states that have adopted laws and regulations qualifying under the 2018 Farm Act, a reduction in the number of states having such qualifying laws and regulations could limit, restrict or otherwise preclude the sale of intended products containing hemp-derived CBD.
The interstate shipment of hemp-derived CBD from one state to another is legal only where both states have laws and regulations that allow for the production and sale of such products and that qualify under the 2018 Farm Act. Therefore, the marketing and sale of our intended products containing hemp-derived CBD is limited by such factors and is restricted to such states. Although we believe we may lawfully sell any of our finished products, including those containing CBD, in a majority of states, a repeal or adverse amendment of laws and regulations that are now favorable to the distribution, marketing and sale of finished products we intend to sell could significantly limit, restrict or prevent us from generating revenue related to our products that contain hemp-derived CBD. Any such repeal or adverse amendment of now favorable laws and regulations could have an adverse impact on our business plan with respect to such products.
Risks Associated With Bank And Insurance Laws And Regulations
We and our customers may have difficulty accessing the service of banks, which may make it difficult to sell our products and services and manage our cash flows.
Since the commerce in cannabis, as not strictly defined in the 2018 Farm Bill, is illegal under federal law, federally most chartered banks will not accept deposit funds from businesses involved with cannabis. Consequently, businesses involved in the cannabis industry often have trouble finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for our customers to operate. There does appear to be recent movement to allow state-chartered banks and credit unions to provide banking to the industry, but as of the date of this report there are only nominal entities that have been formed that offer these services. Further, in a February 6, 2018, Forbes article, United States Secretary of the Treasury, Steven Mnuchin, is reported to have testified that his department is “reviewing the existing guidance.” But he clarified that he doesn’t want to rescind it without having an alternate policy in place to address public safety concerns.
Financial transactions involving proceeds generated by cannabis-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter statute and the U.S. Bank Secrecy Act. Despite guidance from the U.S. Department of the Treasury suggesting it may be possible for financial institutions to provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act, banks remain hesitant to offer banking services to cannabis-related businesses. Consequently, those businesses involved in the cannabis industry continue to encounter difficulty establishing banking relationships. Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan. Similarly, many of our customers are directly involved in cannabis sales and further restrictions to their ability to access banking services may make it difficult for them to purchase our products, which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to certain federal regulations relating to cash reporting.
The Bank Secrecy Act, enforced by FinCEN, requires us to report currency transactions in excess of $10,000, including identification of the customer by name and social security number, to the IRS. This regulation also requires us to report certain suspicious activity, including any transaction that exceeds $5,000 that we know, suspect or have reason to believe involves funds from illegal activity or is designed to evade federal regulations or reporting requirements and to verify sources of funds. Substantial penalties can be imposed against us if we fail to comply with this regulation. If we fail to comply with these laws and regulations, the imposition of a substantial penalty could have a material adverse effect on our business, financial condition and results of operations.
Due to our involvement in the cannabis industry, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liability
Insurance that is otherwise readily available, such as general liability, and directors and officer’s insurance, is more difficult for us to find, and more expensive, because we are service providers to companies in the cannabis industry. There are no guarantees that we will be able to find such insurances in the future, or that the cost will be affordable to us. If we are forced to go without such insurances, it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and financial liabilities.
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Risks Related to Our Common Stock
There is no public trading market for our Common Stock.
Currently there is no public trading marketing for our Common Stock and there can be no assurance that one will ever develop. In 2010, the Company’s Common Stock was approved by FINRA to trade on the OTCBB under the symbol “INTB” on an unpriced basis. There has never been a two-sided quotation for the stock and it has yet to trade. The Company’s Common Stock is currently quoted on the Pink Tier of the OTC Marketplace under the symbol of “INTB.” The OTC Market is a computer network that provides information on current “bids” and “asks”, as well as volume information. As of the date hereof, no trading market has developed for our Common Stock. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result, holders of our securities may not find purchasers for our securities should they seek to sell securities held by them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time. Transfer of our Common Stock may also be restricted under the securities or Blue Sky laws of various states and foreign jurisdictions. Consequently, investors may not be able to liquidate their investments and should be prepared to hold the Common Stock for an indefinite period of time.
We will be subject to the “penny stock” rules which will adversely affect the liquidity of our Common Stock.
The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. We expect the market price of our Common Stock will be less than $5.00 per share and therefore we will be considered a “penny stock” according to SEC rules. This designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our Common Stock and therefore reduce the liquidity of the public market for our shares should one develop.
Securities which are traded on the OTCPink®, may not provide as much liquidity for our investors as more recognized senior exchanges such as the Nasdaq stock market or other national or regional exchanges.
In 2010, the Company’s Common Stock was approved by FINRA to trade on the OTCBB under the symbol “INTB” on an unpriced basis. There has never been a two-sided quotation for the stock and it has yet to trade. The Company’s Common Stock is currently quoted on the Pink Tier of the OTC Marketplace under the symbol of “INTB.” The OTC Market is a computer network that provides information on current “bids” and “asks”, as well as volume information. As of the date hereof, no active trading market has developed for our Common Stock. Securities traded on these OTC Markets are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTC Markets. Quotes for stocks included on the OTC Markets are not listed in newspapers, and are often unavailable at many of the online websites which publish stock quotes. Therefore, prices for securities traded solely on the OTC Markets may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price.
Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our Common Stock, which could depress the price of our Common Stock.
FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.
The sale of the additional shares of Common Stock could cause the value of our Common Stock to decline.
The sale of a substantial number of shares of our Common Stock, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish.
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The Common Stock constitutes restricted securities and is subject to limited transferability.
The Common Stock should be considered a long-term, illiquid investment. The Common Stock has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and cannot be sold without registration under the Securities Act or any exemption from registration. In addition, the Common Stock is not registered under any state securities laws that would permit their transfer. Because of these restrictions and the absence of an active trading market for our securities, a stockholder will likely be unable to liquidate an investment even though other personal financial circumstances would dictate such liquidation.
Because we will likely issue additional shares of our Common Stock, investment in the Company could be subject to substantial dilution.
Investors’ interests in the Company will be diluted and Investors may suffer dilution in their net book value per share when we issue additional shares. We are authorized to issue 50,000,000 shares of Common Stock, $0.001 par value per share, and 25,000,000 shares of preferred stock, $0.001 par value per share. We anticipate that all or at least some of our future funding, if any, will be in the form of equity financing from the sale of our Common Stock. If we do sell or issue more Common Stock, investors’ investment in the Company will be diluted. Dilution is the difference between what you pay for your stock and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in the Company’s Common Stock could seriously decline in value.
Our Common Stock is subject to risks arising from restrictions on reliance on Rule 144 by shell companies or former shell companies.
Under a regulation of the SEC known as “Rule 144,” a person who beneficially owns restricted securities of an issuer and who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which would be six months for shares of a company which has never been a shell company. However, Rule 144 is unavailable for the resale of securities issued by an issuer that is a shell company (other than a business combination related shell company) or, unless certain conditions are met, that has been at any time previously a shell company. Because we had been a shell company in the past, shareholders purchasing restricted securities will be unable to publicly resell their shares until one year after this Form 8-K is filed at the earliest, if at all.
The SEC defines a shell company as a company that has (a) no or nominal operations and (b) either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets.
As a result of the Closing of the Share Exchange as described in Items 1.01 and 2.01, the Company ceased being a shell company as such term is defined in Rule 12b-2 under the Exchange Act.
While we believe that as a result of the Closing of the Share Exchange, the Company ceased to be a shell company, the SEC and others whose approval is required in order for shares to be sold under Rule 144 might take a different view.
Rule 144 is available for the resale of securities of former shell companies if and for as long as the following conditions are met:
(i)
the issuer of the securities that was formerly a shell company has ceased to be a shell company,
(ii)
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act,
(iii)
the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
(iv)
at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company known as “Form 10 Information.”
Although the Company is filing Form 10 Information with the SEC on this Form 8-K, shareholders who receive the Company’s restricted securities will not be able to sell them pursuant to Rule 144 without registration until the Company has met the other conditions to this exception and then for only as long as the Company continues to meet the condition described in subparagraph (iii), above, and is not a shell company. No assurance can be given that the Company will meet these conditions or that, if it has met them, it will continue to do so, or that it will not again be a shell company.
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Fiduciaries investing the assets of a trust or pension or profit sharing plan must carefully assess an investment in our Company to ensure compliance with ERISA.
In considering an investment in the Company of a portion of the assets of a trust or a pension or profit-sharing plan qualified under Section 401(a) of the Code and exempt from tax under Section 501(a), a fiduciary should consider (i) whether the investment satisfies the diversification requirements of Section 404 of ERISA; (ii) whether the investment is prudent, since the Company’s common stock shares are not freely transferable and there may not be a market created in which the Common Stock may be sold or otherwise disposed; and (iii) whether interests in the Company or the underlying assets owned by the Company constitute “Plan Assets” under ERISA.
Our Common Stock price may decrease due to factors beyond our control.
The stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging growth companies and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our stock, if a trading market for our stock ever develops. If our shareholders sell substantial amounts of their stock in the public market, the price of our stock could fall. These sales also might make it more difficult for us to sell equity, or equity-related securities, in the future at a price we deem appropriate.
The market price of our stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
·
variations in our quarterly operating results,
·
changes in general economic conditions,
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changes in market valuations of similar companies,
·
announcements by us or our competitors of significant acquisitions, strategic partnerships or joint ventures, or capital commitments,
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poor reviews;
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loss of a major customer, partner or joint venture participant; and
·
the addition or loss of key managerial and collaborative personnel.
Any such fluctuations may adversely affect the market price or value of our Common Stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our Board.
If we are unable to comply with the financial reporting requirements mandated by the SEC’s regulations, investors may lose confidence in our financial reporting and the price of our common stock, if a market ever does develop for it, could decline.
If we fail to maintain effective internal controls over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be impaired. If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline. In the past we have been delinquent in our SEC reporting and have not maintained adequate internal control over financial reporting. We plan remain current with our filing obligations with the SEC after the filing of this Form 8-K. However, there can be no assurance that we will be able to do so.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
The following discussion and analysis of the results of operations and financial condition of Cannavolve for the years ended December 31, 2018 and 2017, and the interim period ended September 30, 2019, should be read in conjunction with the other sections of this Report, including “Risk Factors,” “Description of Business” and the Financial Statements and notes thereto of Cannavolve filed herewith as Exhibits 99.1 and 99.2. The various sections of this discussion contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Report as well as other matters over which we have no control. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report.
Overview
On February 14, 2020, we entered into an Agreement and Plan of Reorganization (the “Agreement”) with Cannavolve and each of the 37 shareholders of Cannavolve who executed a counterpart signature to the Agreement (the “Cannavolve Shareholders”). Pursuant to the Agreement, the Company agreed to acquire up to 33,674,262 shares of Cannavolve constituting up to 81.5% of the issued and outstanding shares of Cannavolve from the Cannavolve Shareholders in exchange for 702,111 shares of the Company constituting up to 9.6% of the issued and outstanding shares of the Company.
Pursuant to the Agreement, the Company agreed to file a Certificate of Determination with the State of California creating a new class of preferred stock of the Company, the Series B Preferred Stock (the “New Preferred”) as soon as practicable after Closing, and further agreed to issue 1,000,000 shares of the New Preferred to Principal Holdings, LLC (“Principal”) as a post-closing covenant, in consideration of Principal successfully negotiating the Agreement and performing due-diligence in connection with the Agreement.
Additionally, pursuant to the Agreement, it was agreed that INTB’s then principal shareholder, Bagel Hole Inc. (“Bagel Hole”), which is owned solely by Philip Romanzi, the Company’s Chief Executive and Financial Officer and sole director, will return to INTB, for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole.
Additionally, pursuant to the Agreement, the parties agreed that at Closing, Mr. Romanzi, the Company’s sole officer and director, would resign from all positions with the Company and that certain members of the Cannavolve team would be appointed as officers and directors of the Company. Specifically, it was agreed that George Furlan would be appointed as the Company’s Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer, and that Dante Jones would be appointed as the Company’s sole director. Further, the parties agreed that two additional directors, to be designated by Cannavolve, would be appointed to the Company’s board of directors after Closing.
The Agreement closed (the “Closing”) on February 14, 2020. At Closing, pursuant to the Agreement, we issued an aggregate of 702,111 shares of the Company’s $0.001 par value per share common stock (the “Common Stock”) to the Cannavolve Shareholders in exchange for 33,674,262 shares of Cannavolve constituting 81.5% of the issued and outstanding shares of Cannavolve (the “Share Exchange”), resulting in Cannavolve becoming our 81.5% owned subsidiary.
At the Closing, Bagel Hole returned to INTB for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole. At Closing, Bagel Hole also returned for cancellation and retirement an additional 667,402 shares of the Company’s Common Stock owned by Bagel Hole.
At Closing, on February 14, 2020, Philip Romanzi resigned from all officer and director positions with the Company. At Closing, George Furlan was appointed as the Chief Operating Officer of the Company and as the Interim Chief Executive Officer and Interim Chief Financial Officer of the Company, and Dante Jones was appointed as a Director of the Company. At Closing, in connection with the Agreement, James Mansour was appointed as the Company’s Chief Marketing Officer.
As a result of the Closing of the Share Exchange we acquired the business of Cannavolve, and Cannavolve became our 81.5% owned subsidiary and Cannavolve’s business operations became the business operations of the Company.
As the result of the Closing of the Share Exchange and the change in business and operations of the Company, a discussion of the past financial results of the Company is not pertinent, and under applicable accounting principles the historical financial results of Cannavolve prior to the Share Exchange are considered the historical financial results of the Company.
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The following discussion highlights Cannavolve’s results of operations and the principal factors that have affected its financial condition as well as its liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on Cannavolve’s audited and unaudited financial statements contained in this Report, which were prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Organizational History and Overview of Intelligent Buying, Inc. and Cannavolve
Intelligent Buying, Inc.
Intelligent Buying, Inc. was incorporated in the State of California on March 22, 2004. The Company initially was engaged in the business of asset management and sales of high-end computerized networking equipment to emerging high technology companies. Commencing in 2011, the Company began providing advertising services to promote products and services of third parties (primarily a related company, Anchorfree Wireless, Inc.) to the Company’s customer base. Under this business model, third parties paid the Company a fee to disseminate their advertising to the Company’s customer base.
On February 9, 2015, the Company’s principal shareholders sold their shares of Common Stock to AMS Encino Investments, Inc., a California corporation controlled by Hector Guerrero, which resulted in a change of control of the Company. Following this change of control, in October 2016, management discontinued the Company’s operations.
On February 14, 2020, Intelligent Buying, Inc. entered into the Agreement with Cannavolve resulting in Cannavolve becoming our 81.5% owned subsidiary of INTB. As a result of the Closing of the Share Exchange we acquired the business of Cannavolve, and Cannavolve becoming our 81.5% owned subsidiary and Cannavolve’s business operations became the business operations of the Company.
Cannavolve
Jaguaring Company d/b/a Cannavolve Holdings referred to herein as “Cannavolve” was incorporated in the state of Washington on July 6, 2012. Cannavolve’s operations thus far have consisted of providing advisory and operational services to hemp and ancillary cannabis companies, serving as a full-blown business accelerator working with startups and emerging brands nationwide. Headquartered in Seattle, Cannavolve has guided clients through every phase of the startup process, including business planning and forecasting, funding and investment, human resources and legal operations and manufacturing, and sales and marketing. Cannavolve’s go-to-market strategies and program implementation processes were designed with one goal in mind: to drive innovation and position startups for sustainable momentum and growth.
Since late 2019, Cannavolve has decided to decrease its consulting and services business and decided to focus on product development and brand management and creating CBD lifestyle brands. Cannavolve’s mission is to launch and operate best-in-class brands in the Luxury, Premium and Mass Market space with an objective on innovation and product uniqueness, derived from research insights, demographic data, customer interviews and omni-channel experiences.
Results of Operations
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Income. Cannavolve’s total income for the twelve months ended December 31, 2018 decreased 54.2% to $26,038 from $56,889 for the twelve months ended December 31, 2017. This decrease was largely the result of a shift in Cannavolve’s focus away from service offerings to product offerings, which resulted in less service revenue to Cannavolve in 2018, which was Cannavolve’s primary source of income at the time.
Operating Expenses. Total operating expenses were $1,403,410 for the twelve months ended December 31, 2018 compared to $1,403,773 for the twelve months ended December 31, 2017. While Cannavolve slightly reduced its payment of management and consulting fees, rent, and travel expenses in 2018 compared to 2017, this was largely offset by an additional $46,306 incurred in legal and professional fees for the twelve months ended December 31, 2018 compared to $0 for the same period in 2017, as well as an increase in general and administrative expenses of $27,033 compared to the same period in 2017. The legal fees were incurred in connection with the Reorganization Agreement and the legal work involved in that process and the increase of general and administrative expenses was the result of implementing US GAAP accounting standards.
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Net Loss. As a result of the foregoing, net loss for the twelve months ended December 31, 2018 increased 8% to $(1,461,107.00) from $(1,352,384.00) for the twelve months ended December 31, 2017.
Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018
Income. Cannavolve ’s total income for the nine months ended September 30, 2019 increased 66.4% to $49,912 from $30,000 for the nine months ended September 30, 2018. This increase was largely the result of an increase in revenues from product offerings, which supplemented Cannavolve’s service revenues, which was the Company’s primary source of revenue for the nine months ended September 30, 2018.
Operating Expenses. Total operating expenses were $1,306,669 for the nine months ended September 30, 2019, a 4% increase from $1,255,899 for the nine months ended September 30, 2018. Cannavolve significantly reduced its management and consulting fees to related parties during the nine months ended September 30, 2019, incurring $797,657 in fees compared to $1,123,543 for the same period in 2018. This was the result of reducing consultants while moving away from service offerings. The reduction in these fees were offset by the addition of $296,826 in business development expenses incurred in connection with developing new product offerings for the nine months ended September 30, 2019 compared to $0 for the same period in 2018. Additionally, there was a significant increase in legal and professional fees incurred during the nine months ended September 30, 2019 – which totaled $96,193 - compared to $6,006 for the same period in 2018. The increase in legal fees was the result of preparation for the Share Exchange.
Net Loss. As a result of the foregoing, net loss for the nine months ended September 30, 2019 was $1,333,640, a 3.0% increase from $1,294,366 for the nine months ended September 30, 2018.
Liquidity and Capital Resources
At September 30, 2019, Cannavolve had working capital of ($523,249), as compared to working capital of ($71,768) at December 31, 2018. At September 30, 2019, the primary sources of liquidity consisted of account receivables of $67,500. The deterioration of working capital from December 31, 2018 to September 30, 2019 was due primarily to significant increases in loans payable, which were $635,415 at September 30, 2019 compared to $7,042 at December 31, 2018, resulting a longer period of time to complete the Share Exchange than first anticipated.
Net Cash Used in Operating Activities. Net cash used in operating activities increased 79.7% from $(352,947) for the nine months ended September 30, 2018 to $(634,265) for the nine months ended September 30, 2019. This increase was largely the result of a reduction in shares issued to employees and consultants for the nine months ended September 30, 2019, which was $706,480, compared to the same period in 2018, which was $902,898. This was largely due to reducing our utilization of consultants, and increasing our spend on products. In addition, there was $40,425 in amortization of discounts on convertible notes and conversion of accrued interest during the nine months ended September 30, 2019 compared to $7,924 for the same period in 2018.
Net Cash provided by Financing activities. Net cash provided by financing activities increased 101.2% from $394,381 for the nine months ended September 30, 2018 to $793,656 for the nine months ended September 30, 2019. This increase was largely the result of proceeds from the issuance of the loans payable of $662,373 for the nine months ended September 30, 2019 (which was $0 for the same period in 2018), largely comprised of loans from investors interested in lending funds to be converted in the Rule 506(b) offering. See “Note Financings” below.
Cannavolve has historically financed its operations through the cash flow generated from operations and investments from shareholders and convertible note financings.
Note Financings
During the year ended December 31, 2018, Cannavolve issued convertible notes in two series – Series 1 for a total of $243,900 and Series 2 for a total of $75,000, both of which were convertible into Class B Common Stock of Cannavolve . The Series 2 notes bore interest at 8% per annum. The Series 1 convertible notes did not bear interest, but provided for a conversion of 20% below the Series 2 convertible notes upon the occurrence of a financing event. On February 19, 2019, $77,560 of Series 2 convertible notes including $2,347 of accrued interest, were converted at a rate of $0.20 per share into 387,803 shares of Cannavolve‘s Class B common stock and $246,400 of Series 1 convertible notes (that were converted at a rate of $0.16 per share into 1,540,000 shares of Cannavolve‘s Class B common stock. As of the date of this Report, there are no Series 1 or Series 2 convertible notes outstanding.
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On March 15, 2019, Cannavolve issued a promissory note to Bagel Hole, Inc., a Company owned by Phillip Romanzi, in the amount of $235,415. This note bore interest at 10% per annum, and initially had a maturity date of July 15, 2019, which was subsequently extended to August 31, 2019. The note was automatically convertible into shares of Common Stock of INTB that were to be issued to investors in INTB’s planned 506(c) offering (subsequently amended to be a 506(b) offering) (the “Offering”) at a conversion price equal to the same per share price paid by investors in the Offering, which was $1.1713469. per share. Cannavolve subsequently defaulted on the note – however, the Bagel Hole, Inc. did not deliver a notice of default to Cannavolve. On January 6, 2020, INTB closed its Offering, and the balance of this note was invested in the Offering and Bagel Hole Inc. was issued a total of 223,757 shares of INTB Common Stock, consisting of 200,977 shares issued in exchange for principal amount of the note of $235,415; and (ii) an additional 22,779 shares as compensation for Cannavolve’s default under the note. As such, this note is no longer outstanding as of the date of this Report.
On June 6, 2019, Cannavolve issued a secured promissory note to Frank Gallo in the amount of $200,000, and on June 11, 2019, issued a promissory note to Emil Assentato in the amount of $200,000. These notes bore interest at 12% per annum and matured on July 31, 2019. Cannavolve s indirect ownership of an incubator investment, Green Ambrosia, was pledged as collateral for the promissory notes. In addition, under the terms of the notes, both Mr. Gallo and Mr. Assentato were to be repaid in INTB Common Stock issued to be issued to investors in INTB’s planned Offering, as described above. Cannavolve subsequently defaulted on each of these notes. On January 6, 2020, INTB closed its Offering, and the balance of each of Frank Gallo’s and Emil Assentato’s notes ($200,000 each) were invested in the Offering and 170,444 shares of INTB’s common stock was issued to the note holders in exchange for same, and a total of 340,888 shares of INTB were issued to the note holders. In addition, as compensation for the default under the notes by the Company, each of Frank Gallo and Emil Assentato were issued an additional 70,000 shares of the INTB’s common stock upon closing of the Offering. These notes are no longer outstanding as of the date of this Report.
Plan of Operations
Our optimum level of growth for success will be achieved if we are able to raise $1,000,000 in the next six months. However, funds are difficult to raise in today’s economic environment. If we are unable to raise $400,000 our ability to implement our business plan and achieve our goals will be significantly diminished.
We have experienced a history of losses. With our revenues increasing, however, we are less reliant on outside capital as we have been in the past, but are still dependent on investment capital to continue our survival. There is no guarantee that funds will be available to us in the future or on terms acceptable to us.
We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
In the future, Cannavolve intends to expand its operations further by (a) taking majority stakes, (b) acquiring companies in their entirety, and/or (c) conducting joint ventures within the global cannabis and hemp space. Cannavolve’s strategy is to develop these portfolio positions for the purpose of selling them or spinning them off as their own public companies, with the objective of maximizing shareholder value.
Trends
The FDA is evaluating the regulatory frameworks that apply to certain cannabis-derived products (such as CBD) that are intended for non-drug uses, including whether and/or how the FDA might consider updating its regulations, as well as whether potential legislation might be appropriate. The regulation and legislation that the FDA ultimately deems appropriate for CBD products may alter current manufacturing and sales channel rules and restrictions. We believe less stringent regulation could result in more competition in the market, while more stringent regulation could result in greater costs to operate. We cannot predict what the effects of such regulation would be, or when the FDA will put such regulations into effect.
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Critical Accounting Policies
The Company’s accounting policy is to prepare its financial statements on the accrual basis of accounting, whereby revenue is recognized when earned and expenses are recognized when incurred.
Use of Estimates
The preparation of Cannavolve’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of commitments and contingencies. Actual results could differ from those estimates.
Income Taxes
During each of the nine months ended September 30, 2019 and 2018, net loss attributable to common shareholders was $1.3 million, but the Company did not recognize an income tax benefit. The income tax benefit differed from the federal statutory rate due to an increase in the valuation allowance for deferred tax assets as a result of Cannavolve’s history of net operating losses.
Off-Balance Sheet Arrangements
As of September 30, 2019, there were no off-balance sheet arrangements.
26
DESCRIPTION OF PROPERTY
Prior to the Share Exchange, the Company’s headquarters were located at 400 Seventh Avenue, Brooklyn, NY 11215. Since the Share Exchange, the Company no longer uses the foregoing property.
Effective as of the Closing, the Company’s principal office is located at 300 Park Avenue, 12th Floor, NY, NY 10022, where the Company leases approximately 100 square feet of office space for $2,000 per month. We believe that these facilities are adequate to support the Company’s existing operations and that we will be able to obtain appropriate additional facilities or alternative facilities on commercially reasonable terms if and when necessary.
LEGAL PROCEEDINGS
The Company’s officers and directors are not aware of any threatened or pending litigation to which the Company is a party or which any of its property is the subject and which would have any material, adverse effect on the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Please refer to Item 4.01 of this Form 8-K for this information, which is incorporated by reference herein.
27
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name and positions of our current executive officers and directors.
Name |
| Age |
| Position |
Dante Jones |
| 39 |
| Director |
George Furlan |
| 62 |
| Chief Operating Officer, Interim Chief Financial Officer and Interim Chief Executive Officer |
James Mansour |
| 58 |
| Chief Marketing Officer |
Dante Jones. Dante Jones was appointed as sole Director of the Company on February 14, 2020 at the Closing of the Share Exchange. Mr. Jones co-founded Cannavolve in 2012 with the mission to incubate businesses and accelerate fellow cannabis industry entrepreneurs to invent, innovate and succeed. Mr. Jones brings 15 years of experience in project management, leadership and budgeting, while delivering results across global teams. He has served as Cannavolve’s President since 2012. From 2014 to 2017, Mr. Jones worked as a Technology Manager at Amazon.com, Inc., managing a large global team in designing and deploying new eCommerce for the AWS Cloud.
George Furlan. George Furlan was appointed as the Company’s Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer on February 14, 2020 at the Closing. Mr. Furlan brings more than 20 years of experience in building and expanding early stage, mid-tier and global brands He has held senior positions with Hugo Boss and Versace as well as being president of Mr. Tommy Hilfiger’s personal fashion investment. From 2014 to 2019, Mr. Furlan served as a Principal of GF Partners, Inc., a consulting service to fashion businesses. Prior to joining GF Partners, Inc. in 2014, Mr. Furlan served as president of NAHM Apparel, LLC, a women’s designer fashion company, where he built the organization’s infrastructure, guided the successful launch of many national brands, and lead sales and marketing efforts for U.S. and Canadian markets. In his role as COO, Mr. Furlan will be responsible for managing the day-to-day operations of the Company.
James Mansour. James Mansour was appointed as the Chief Marketing Officer of the Company on February 14, 2020 at the Closing. Mr. Mansour is an award-winning branding authority who was instrumental in the development of many retail brands that became icons in the marketplace, including Bath and Body Works, Abercrombie & Fitch and Victoria’s Secret. He has also created award-winning work for 3M, Dupont Corian and others. From February 2015 to February 2020 Mr. Mansour was the president and branding consultant of Mansour Design Inc. Consulting where he ran the day to day operations of the business.
Committees
We do not have a standing nominating, compensation or audit committee. Rather, our full board of directors performs the functions of these committees. We do not believe it is necessary for our board of directors to appoint such committees because the volume of matters that come before our board of directors for consideration permits the directors to give sufficient time and attention to such matters to be involved in all decision making. Additionally, because our Common Stock is not listed for trading or quotation on a national securities exchange, we are not required to have such committees.
Director Independence
We do not have any independent directors, as such term is defined in the listing standards of The NASDAQ Stock Market, at this time. The Company’s Common Stock is not listed or quoted on any exchange that has director independence requirements, or any exchange at all at this time.
Code of Ethics
We have adopted a code of ethics, which is filed as Exhibit 14.1 to this Current Report on Form 8-K.
Family Relationships
None.
Involvement in Certain Legal Proceedings
No executive officer, member of the board of directors or control person of our Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
28
EXECUTIVE COMPENSATION
No executive compensation was paid by the Company from February 2016 through the Closing of the Share Exchange. In October 2016, the Company ceased substantially all of its operating activities.
The following table sets forth the cash and non-cash compensation for the fiscal years ended December 31, 2019 and 2018 awarded to or earned by Mr. Romanzi, INTB’s principal executive officer during 2019.
Summary Compensation Table Of Intelligent Buying, Inc.
Name and principal position |
|
| Year |
|
| Salary |
|
| Bonus |
|
| Stock |
|
| Option |
|
| Non- |
|
| Nonqualified |
|
| All Other |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip Romanzi, |
|
| 2019 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Chief Executive Officer and Chief Financial Officer |
|
| 2018 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
The following table sets forth the cash and non-cash compensation for the fiscal years ended December 31, 2019 and 2018 awarded to or earned by Mr. Jones, Cannavolve’s principal executive officer during 2019.
Name and Principal Position |
| Fiscal Year |
| Salary |
|
| Bonus |
|
| Stock Awards |
|
| Option Awards |
|
| All Other Compensation |
|
| Total |
| ||||||
Dante Jones, President |
| 12/31/2019 |
| $ | 60,000 |
|
| $ | — |
|
| $ | 24,000 |
|
| $ | — |
|
| $ | — |
|
| $ | 84,000 |
|
|
| 12/31/2018 |
| $ | 120,000 |
|
| $ | — |
|
| $ | 40,000 |
|
| $ | — |
|
| $ | — |
|
| $ | 160,000 |
|
Employment Agreements
As of the date of this Current Report on Form 8-K, the Company has entered into an employment agreement with George Furlan, a copy of which is filed as Exhibit 10.5 hereto and into a consulting agreement with James Mansour, a copy of which is filed as Exhibit 10.4 hereto. The Company intends to enter into employment agreements with Mr. Jones but currently has no formal arrangements (written or unwritten) in place concerning Mr. Jones employment with, or compensation by, the Company.
Furlan Employment Agreement
In December 2019, the Company entered into an Employment Agreement with George Furlan, to engage his services as an executive officer of the Company pursuant to which the Company agreed to pay Mr. Furlan a base salary of $60,000 per year with such base salary being increased to $120,000 per year beginning on the one (1) year anniversary of the completion of a financing by the Company of no less than $3,000,000. The Employment Agreement also contains an annual bonus based on the amount of revenue generated by the Company from the sale of certain products. The Employment Agreement has a term of three years from the effective date.
Pursuant to the Employment Agreement, Mr. Furlan agreed to enter into a Restricted Stock Agreement to purchase 718,403 shares of the Company’s Common Stock.
The foregoing description of the Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the Employment Agreement, a copy of which is filed as Exhibit 10.5 to this Current Report on Form 8-K and which is incorporated herein by reference.
Mansour Consulting Agreement
On January 8, 2020, the Company entered into a Consulting Agreement with James Mansour, pursuant to which the Company engaged his services as an executive officer of the Company and agreed to pay Mr. Mansour $5,000 per month.
Pursuant to the Consulting Agreement, Mr. Mansour agreed to enter into a Restricted Stock Agreement to purchase 718,403 shares of the Company’s Common Stock.
29
The foregoing description of the Consulting Agreement does not purport to be complete and is qualified in its entirety by reference to the Consulting Agreement, a copy of which is filed as Exhibit 10.4 to this Current Report on Form 8-K and which is incorporated herein by reference.
Restricted Stock Agreements
On December 26, 2019, George Furlan entered into a Restricted Stock Purchase Agreement with the Company pursuant to which he agreed to purchase 718,403 shares of the Company’s Common Stock for a total purchase price of $8,520.26. According to the agreement the 239,467 of the shares thereunder vest immediately upon execution and the remaining 478,936 shares will best in 12 equal installments of 39,911 on the last day of each fiscal quarter. The foregoing description of the Restricted Stock Agreement does not purport to be complete and is qualified in its entirety by reference to the Restricted Stock Agreement, a copy of which is filed as Exhibit 10.15 to this Current Report on Form 8-K and which is incorporated herein by reference.
On January 8, 2020, James Mansour entered into a Restricted Stock Purchase Agreement with the Company pursuant to which he agreed to purchase 718,403 shares of the Company’s Common Stock for a total purchase price of $8,520.26. According to the agreement the 359,201 of the shares thereunder vest immediately upon execution and the remaining 359,202 shares will best in 12 equal installments of 29,933 on the last day of each fiscal quarter. The foregoing description of the Restricted Stock Agreement does not purport to be complete and is qualified in its entirety by reference to the Restricted Stock Agreement, a copy of which is filed as Exhibit 10.14 to this Current Report on Form 8-K and which is incorporated herein by reference.
Outstanding Equity Awards at Fiscal Year-End
None of the Named Executive Officers had any outstanding equity awards at the 2019 fiscal year-end.
Compensation Plans
We have not adopted any compensation plan to provide for future compensation of any of our directors or executive officers.
Director Compensation
The Company has not paid any of its directors in their capacities as such. Historically, our directors have not received compensation for their service. Notwithstanding, at some point in the near future, we plan to adopt a new director compensation program pursuant to which each of our non-employee directors will receive some form of an annual retainer. At such point in time, our corporate governance committee will review and make recommendations to the board regarding compensation of directors, including equity-based plans. We will reimburse our non-employee directors for reasonable travel expenses incurred in attending board and committee meetings. We also intend to allow our non-employee directors to participate in any equity compensation plans that we adopt in the future.
Executive Compensation Philosophy
Our Board determines the compensation given to our executive officers in their sole determination. Our Board reserves the right to pay our executives or any future executives a salary, and/or issue them shares of stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock-based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, the Board reserves the right to grant performance base stock options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board may grant incentive bonuses to our executive officers and/or future executive officers in its sole discretion, if the Board believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue and profits we are able to generate each month, both of which are a direct result of the actions and ability of such executives.
Long-Term, Stock Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executives and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board, which we do not currently have any immediate plans to award.
30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The following includes a summary of transactions since the beginning of the 2019 fiscal year, or any currently proposed transaction, in which INTB or Cannavolve were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of their total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.
Related party transactions of Cannavolve:
·
During the nine months ended September 30, 2019, Cannavolve issued 3,532,551 shares of its common stock to the founders and officers of Cannavolve in exchange for their advisory and consulting services provided to its customers. During the nine months ended September 30, 2019 and 2018, Cannavolve recognized management and consulting fees of $0.7 million and $0.9 million, respectively, associated with the issuance of stock to founders and officers in exchange for services provided to customers.
·
During the nine months ended September 30, 2019, Cannavolve advanced a total of $305,343 to two companies in support of the business development activities in each entity. The agreements call for the Company to be paid back these funds with interest upon the satisfaction of certain future events. As these future events are uncertain and repayment of such funds is not assured, such funding has been expensed in the Statement of Operations for the nine months ended September 30, 2019. Of the total Business development expense $234,443 was paid to an affiliated entity.
·
On March 15, 2019, Mr. Romanzi’s company, Bagel Hole, Inc. loaned Cannavolve $235,415, pursuant to a promissory note (the “Cannavolve Note”). The Cannavolve Note bore interest at 10% per annum and had a maturity date July 15, 2019, which was subsequently extended to August 31, 2019. Cannavolve defaulted on the note. On January 6, 2020, the balance of this note was invested in the Offering and Bagel Hole Inc. was issued a total of 223,757 shares of INTB Common Stock. The Cannavolve Note is no longer outstanding as of the date of this Report.
Related party transactions of the Company:
·
As described above, on March 15, 2019, Bagel Hole, Inc., a company owned by INTB’s sole officer and director at the time, Philip Romanzi, loaned Cannavolve $235,415, pursuant to a promissory note (the “Cannavolve Note”). The Cannavolve Note bore interest at 10% per annum and had a maturity date July 15, 2019, which was subsequently extended to August 31, 2019. Cannavolve defaulted on the note. On January 6, 2020, the balance of this note was invested in the Offering and Bagel Hole Inc. was issued a total of 223,757 shares of INTB Common Stock. The Cannavolve Note is no longer outstanding as of the date of this Report.
31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of the date of this Report, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possesses sole voting and investment power with respect to the shares shown. Unless otherwise indicated, the address for the beneficial owners listed below is 300 Park Avenue, 12th Floor, New York, NY 10022.
Name and Address of Beneficial Owner |
| Positions with the Company |
| Title of Class |
|
| Amount and |
|
| Percent of |
| |||
Officers and Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Furlan, Interim CEO and CFO and Chief Operating Officer(3) |
|
|
|
| Common Stock |
|
|
| 279,378 |
|
| 3.60 | % |
|
Dante Jones, Director |
|
|
|
| Common Stock |
|
|
| 109,114 |
|
| 1.41 | % |
|
James Mansour, Chief Marketing Officer(4) |
|
|
|
| Common Stock |
|
|
| 389,134 |
|
| 5.01 | % |
|
All directors and officers as a group (3 persons) |
|
|
|
| Common Stock |
|
|
| 777,626 |
|
| 10.02 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Holdings, LLC, 100 Diplomat Drive Mount Kisco, NY 10549 (5) |
|
|
|
| Common Stock |
|
|
| 1,241,741 |
|
| 16.00 | % |
|
Bogaard Holdings LLC, 111 East 14th Street, New York, NY 10003 (6) |
|
|
|
| Common Stock |
|
|
| 718,403 |
|
| 9.25 | % |
|
Pure Energy 714 LLC, 21 Ridge Road, Atlantic Highlands NJ 07716 (7) |
|
|
|
| Common Stock |
|
|
| 632,284 |
|
| 8.15 | % |
|
Gregg Templeton (8) |
|
|
|
| Common Stock |
|
|
| 718,403 |
|
| 9.25 | % |
|
Bagel Hole Inc. (9) |
|
|
|
| Common Stock |
|
|
| 434,877 |
|
| 5.60 | % |
|
———————
(1)
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrants.
(2)
Based on 7,762,363 shares of the Company’s common stock issued and outstanding as of the date of this Current Report.
(3)
Includes 39,911 shares of the Company’s common stock that vests within the next 60 days pursuant to a restricted stock agreement.
(4)
Includes 29,933 shares of the Company’s common stock that vests within the next 60 days pursuant to a restricted stock agreement.
(5)
Principal Holdings, LLC is owned and controlled solely by Danielle Doukas.
(6)
Bogaard Holdings LLC is owned and controlled by Jelena Vadanjel.
(7)
Pure Energy 714 LLC is owned and controlled by Louis Sorrentino.
(8)
Gregg Templeton is an employee of the Company.
(9)
Bagel Hole Inc. is owned and controlled solely by Philip Romanzi.
32
DESCRIPTION OF SECURITIES
General
Our authorized capital stock consists of 75,000,000 shares, consisting of 50,000,000 shares of common stock, par value $0.001 per share and 25,000,000 shares of preferred stock, $0.001 par value per share, of which 7,762,363 shares of common stock are currently outstanding; and 0 shares of preferred stock are currently outstanding.
Common Stock
Each holder of our Common Stock is entitled to one vote for each share owned of record on all matters voted upon by shareholders, and a majority vote is required for actions to be taken by shareholders. The Common Stock has no preemptive rights, no cumulative voting rights and no redemption, sinking fund or conversion provisions.
Preferred Stock
The Company is authorized to issue 25,000,000 shares of preferred stock, $0.001 par value per share and the Company’s Board of Directors is authorized to establish, from the authorized shares of preferred stock, one or more classes or series of shares, to designate each such class and series, and fix the rights and preferences of each such class of preferred stock, which shall have voting powers, preferences, participating, optional or other special rights, qualifications and limitations or restrictions as adopted by the Board of Directors prior to the issuance of any such preferred shares.
Series A Preferred:
There are currently no shares of Series A Preferred Stock issued and outstanding.
The Series A Preferred carries two votes for each share of preferred stock and in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, holders of Series A Preferred Stock shall be entitled, before any distribution or payment out of the assets of the Company may be made to or set aside for the holders of any common stock, to receive in full an amount equal to $2.00 per share, together with an amount equal to all accrued and unpaid dividends accrued to the date of payment.
Series B Preferred:
Pursuant to the Agreement, the Company agreed to file a Certificate of Determinations with the State of California creating a new class of preferred stock of the Company, the Series B Preferred Stock (the “New Preferred”) as soon as practicable after Closing, and further agreed to issue 1,000,000 shares of the New Preferred to Principal Holdings, LLC (“Principal”) as a post-closing condition, in consideration of Principal successfully negotiating the Agreement and performing due-diligence in connection with the Agreement.
There are a total of 1,000,000 shares of the New Preferred authorized and the New Preferred does not have any dividend rights and or liquidation preference over the other classes of stock of the Company, and will not be entitled to receive any distributions upon any liquidation, dissolution or winding up of the Company. The New Preferred will have no rights of conversion. On the fifth anniversary of the date of issuance of the New Preferred, the shares of New Preferred shall automatically, and without further action by the Company, be cancelled and void, and may not be reissued.
All 1,000,000 authorized shares of New Preferred will have voting power equal to the percentage of Common Stock that equals 51% of the total number of Common Stock shares issued and outstanding, and which may be voted for any matter requiring 51% approval by shareholder vote of the Company’s Common Stock. As such, Principal Holdings, LLC will have 51% of the voting power of the Company once issued the 1,000,000 shares of New Preferred.
Warrants
There are currently no outstanding warrants of the Company.
Options
There are currently no options outstanding.
Anti-Takeover Effects of Certain Provisions of Our Bylaws
We do not have any anti-takeover provisions in our Bylaws.
33
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
In 2010, the Company’s common stock was approved by FINRA to trade on the OTCBB under the symbol “INTB” on an unpriced basis. There has never been a two-sided quotation for the stock and it has yet to trade. The Company’s Common Stock is currently quoted on the Pink Tier of the OTC Marketplace under the symbol of “INTB.” The Company plans to update its symbol to “SENT” pending FINRA approval of the Company’s name change to “Sentient Brands, Inc.”, which the Company has not yet submitted to FINRA. The OTC Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks,” as well as volume information. The trading of securities on the OTC Pink is often sporadic and investors may have difficulty buying and selling our shares or obtaining market quotations for them, which may have a negative effect on the market price of our common stock.
Dividends
The Company has not declared any dividends since inception and does not anticipate paying any dividends in the foreseeable future on its common stock. The payment of dividends is within the discretion of the Board of Directors and will depend on the Company’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Company’s ability to pay dividends on its common stock other than those generally imposed by applicable state law.
Equity Compensation Plans
The Company has not adopted an equity compensation plan and has no stock options granted or outstanding.
Holders
As of the date of this Report, we had 7,762,363 shares of our common stock par value, $.001 issued and outstanding, and approximately 83 record owners of our common stock.
Transfer Agent and Registrar
The Company’s transfer agent is VStock Transfer, LLC and is located at 18 Lafayette Pl, Woodmere, NY 11598 and has a phone number of (212) 828-8436.
34
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company is a California corporation and is subject to the California General Corporation Law (the “CGCL”), which provides a detailed statutory framework covering indemnification of any officer or other agent of a corporation who is made or threatened to be made a party to any legal proceeding by reason of his or her services on behalf of such corporation.
With respect to indemnification, the CGCL provides that to the extent any officer, director or other agent of a corporation is successful “on the merits” in defense of any legal proceeding to which such person is a party or is threatened to be made a party by reason of his or her service on behalf of such corporation or in defense of any claim, issue, or matter therein, such agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith, but does not require indemnification in any other circumstance. The CGCL also provides that a corporation may indemnify any agent of the corporation, including officers and directors, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in a third party proceeding against such person by reason of his or her services on behalf of the corporation, provided the person acted in good faith and in a manner he or she reasonably believed to be in the best interests of such corporation. The CGCL further provides that in derivative suits a corporation may indemnify such a person against expenses incurred in such a proceeding, provided such person acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation and its shareholders. Indemnification is not available in derivative actions (i) for amounts paid or expenses incurred in connection with a matter that is settled or otherwise disposed of without court approval or (ii) with respect to matters for which the agent shall have been adjudged to be liable to the corporation unless the court shall determine that such person is entitled to indemnification.
The CGCL permits the advancing of expenses incurred in defending any proceeding against a corporate agent by reason of his or her service on behalf of the corporation upon the giving of a promise to repay any such sums in the event it is later determined that such person is not entitled to be indemnified. Finally, the CGCL provides that the indemnification provided by the statute is not exclusive of other rights to which those seeking indemnification may be entitled, by bylaw, agreement or otherwise, to the extent additional rights are authorized in a corporation’s articles of incorporation. The law further permits a corporation to procure insurance on behalf of its directors, officers and agents against any liability incurred by any such individual, even if a corporation would not otherwise have the power under applicable law to indemnify the director, officer or agent for such expenses.
Our Articles of Incorporation do not provide for any indemnification. The Bylaws of the Company provide that it shall, to the maximum extent permitted by the CGCL, have power to indemnify each of its agents against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact any such person is or was an agent of the corporation, and shall have power to advance to each such agent expenses incurred in defending any such proceeding to the maximum extent permitted by that law.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Recent Sales Of Unregistered Securities
Reference is made to Item 3.02 of this Current Report on Form 8-K for a description of additional recent sales of unregistered securities, which is hereby incorporated by reference.
35
Item 3.02 Unregistered Sales of Equity Securities.
Pursuant to the Agreement, at Closing, we issued an aggregate of 702,111 shares of the Company’s $0.001 par value per share restricted common stock (the “Common Stock”) to the Cannavolve Shareholders in exchange for 33,674,262 shares of Cannavolve constituting 81.5% of the issued and outstanding shares of Cannavolve, resulting in Cannavolve becoming our 81.5% owned subsidiary.
The Company believes that the foregoing issuance of the restricted Common Stock was exempt from registration pursuant to Section 4(a)(2) of the Securities Act, of 1933, as amended (the “Securities Act”). An appropriate restrictive legend is affixed to the stock certificates issued for the Common Stock.
On January 6, 2020, the Company issued 1,095,393 shares of the Company’s Common Stock pursuant to a private placement (the “Offering”) to 5 investors in exchange for cash proceeds of $350,000 and for $735,415 of convertible notes previously issued by Cannavolve (the “Notes”) to 3 of the investors (the “Note Investors”). The price per share of the Company’s Common Stock in the Offering was $1.1713469 per share. The remaining total balances of the Notes were invested in the Offering; and 168,753 of the total 1,095,393 shares issued in the Offering were issued to the Note Investors as payment for late repayment of the convertible notes at a per share price of $1.1713469.
The Company believes that the issuance of such securities was exempt from registration pursuant to Rule 506(b) under the Securities Act. An appropriate restrictive legend is affixed to the stock certificates issued in the Offering.
On December 26, 2019 the Company issued 239,467 shares of its common stock pursuant to a Restricted Stock Agreement to George Furlan for a total purchase price of $8,520.26. 478,936 shares of common stock were also issued pursuant to the Restricted Stock Agreement and are being held in escrow by the Company in accordance with the terms of the Restricted Stock Agreement.
On January 8, 2020, the Company issued 359,201 shares of its common stock pursuant to a Restricted Stock Agreement to James Mansour for a total purchase price of $8,520.26. 359,202 shares of common stock were also issued pursuant to the Restricted Stock Agreement and are being held in escrow by the Company in accordance with the terms of the Restricted Stock Agreement.
The Company believes that the issuance of such securities was exempt from registration pursuant to Rule 506(b) under the Securities Act. An appropriate restrictive legend is affixed to the stock certificates issued pursuant to the Restricted Stock Agreements.
Item 4.01 Changes In Registrant’s Certifying Accountant.
As previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on August 6, 2019, on August 2, 2019, Prager Metis CPAs, LLC (“Prager”), the Company’s then independent registered public accounting firm, gave notice of its resignation due to partner rotation issues, effective on that date. As a result, the Company’s Board of Directors engaged Boyle CPA LLC (“Boyle”) to serve as the Company’s independent registered public accounting firm effective August 2, 2019. During the period that began when Prager was retained and through the date of Prager’s resignation, there was no disagreement between the Company and Prager on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Prager, would have caused it to make reference to the subject matter of such disagreement in connection with its audit report on such financial statements.
Prager has not indicated to the Company that its report on the audit, if completed, would contain an adverse opinion or disclaimer of opinion or would be qualified or modified as to uncertainty, audit scope, or accounting principles, except that the report thereon would contain an uncertainty about the Company’s ability to continue as a going concern.
Boyle did not audit the Company’s financial statements for any period prior to its retention. For the period beginning with Prager’s retention and ending on August 2, 2019, there were no events that were required to be reported pursuant to Items 304(a)(1)(iv) or (v) of Regulation S-K. Prior to Boyle’s retention, the Company did not consult with Boyle regarding any of the matters described in Items 304(a)(2)(i) and (ii) of Regulation S-K.
36
Item 5.01. Changes in Control of Registrant.
On February 14, 2020, the Company consummated the Share Exchange, pursuant to which INTB issued an aggregate of 702,111 shares of Common Stock to the Cannavolve Shareholders in exchange for 33,674,262 shares of Cannavolve common stock, constituting 81.5% of the issued and outstanding shares of Cannavolve, resulting in Cannavolve becoming our 81.5% owned subsidiary.
At the Closing, Bagel Hole returned to INTB for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole. At Closing, Bagel Hole also returned for cancellation and retirement an additional 667,402 shares of the Company’s Common Stock owned by Bagel Hole.
Also at Closing, the following individuals were appointed to the indicated positions:
George Furlan – Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer
Dante Jones – sole director
James Mansour – Chief Marketing Officer
We anticipate that, in the near future, the size of the Board will be increased to three directors and that two directors, to be designated by Cannavolve, will be appointed to fill the vacancies created by the increase in the size of the Board.
Pursuant to the Agreement, the Company agreed to file a Certificate of Determinations with the State of California to create the New Preferred as soon as practicable after Closing, and further agreed to issue 1,000,000 shares of the New Preferred to Principal as a post-closing condition, in consideration of Principal successfully negotiating the Agreement and performing due-diligence in connection with the Agreement. The New Preferred to be issued to Principal will have voting power equal to the percentage of Common Stock that equals 51% of the total number of Common Stock shares issued and outstanding, and which may be voted for any matter requiring 51% approval by shareholder vote of the Company’s Common Stock.
Prior to Closing, Mr. Romanzi beneficially owned 77.9% of the Company’s Common Stock and after Closing Mr. Romanzi owned 5.6% of the Company’s Common Stock, also after the Closing, the majority of the Company’s Common Stock is not owned by any single shareholder and after the issuance of the New Preferred, Principal will have voting control of the Company and therefore, as a result of the changes in management and ownership of the Common Stock shares and the New Preferred to be issued after Closing, upon completion of the Share Exchange, there was a change in control of the Company.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
At Closing, on February 14, 2020, Mr. Romanzi resigned from all officer and director positions with the Company. Mr. Romanzi’s resignation was not due to any disagreement with the Company on any matter relating to Company’s operation, policies, or practices.
Also at Closing, the following individuals were appointed to the indicated positions:
George Furlan – Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer
Dante Jones – sole director
James Mansour – Chief Marketing Officer
We anticipate that, in the near future, the size of the Board will be increased to three directors and that two directors, to be designated by Cannavolve, will be appointed to fill the vacancies created by the increase in the size of the Board.
The disclosure regarding Mr. Furlan’s Employment Agreement, Mr. Mansour’s Consulting Agreement, Mr. Furlan’s Restricted Stock Agreement and Mr. Mansour’s Restricted Stock Agreement set forth under “Executive Compensation” in Item 2.01 of this Current Report is incorporated herein by reference. The foregoing descriptions of the Employment Agreement, the Consulting Agreement, Mr. Furlan’s Restricted Stock Agreement and Mr. Mansour’s Restricted Stock Agreement do not purport to be complete and are qualified in their entireties by reference to the Employment Agreement, the Consulting Agreement, Mr. Furlan’s Restricted Stock Agreement and Mr. Mansour’s Restricted Stock Agreement, copies of which are filed as Exhibits 10.5, 10.4, 10.15 and 10.14, respectively, to this Current Report on Form 8-K and which are incorporated herein by reference.
37
Item 5.06. Change in Shell Company Status.
As a result of the Closing of the Share Exchange described in Items 1.01 and 2.01 of this Current Report, which description is incorporated by reference in this Item 5.06 of this Current Report, the Company ceased being a shell company as such term is defined in Rule 12b-2 under the Exchange Act.
Item 9.01. Financial Statement and Exhibits.
(a)
Financial Statements of Business Acquired.
The audited consolidated financial statements for Jaguaring Company d/b/a Cannavolve for the years ended December 31, 2018 and 2017 and the unaudited financial statements for the nine months ended September 30, 2019 for Jaguaring Company are filed herewith as Exhibits 99.1 and 99.2 hereto, respectively, and are incorporated herein by reference.
(b)
Pro Forma Financials
The unaudited pro forma balance sheet and statement of operations of Jaguaring Company and Intelligent Buying, Inc. and notes thereto are filed herewith as Exhibits 99.3 and 99.4 hereto and are incorporated herein by reference.
(d)
Exhibits
EXHIBIT INDEX
Exhibit Number |
| Description |
|
|
|
2.1 |
| |
2.2 |
| |
2.3 |
| |
2.4 |
| |
2.5* |
| |
2.6* |
| |
3.1 |
| |
3.2* |
| |
3.3 |
| |
3.4* |
| Certificate of Determination for Series B Preferred Stock of Intelligent Buying, Inc. |
10.1 |
| |
10.2 |
| |
10.3* |
| |
10.4*+ |
| |
10.5*+ |
| Employment Agreement between Intelligent Buying, Inc. and George V. Furlan dated December 2019. |
38
———————
*Filed herewith.
+ Includes management contracts and compensation plans and arrangements.
39
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 hereunto duly authorized.
| Intelligent Buying, Inc. |
|
|
Date: February 14, 2020 | /s/George Furlan |
| George Furlan |
| Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer |
40
EXHIBIT 2.5
TERMINATION OF AGREEMENT
Reference is made to the Reorganization Agreement (the "Agreement") last amended on January 2, 2020, by, between and among JAGUARING COMPANY d/b/a CANNAVOLVE HOLDINGS, a Washington corporation ("CANNAVOLVE"); the CANNAVOLVE shareholders listed in the CANNAVOLVE CAP TABLE, which will be provided by CANNAVOLVE before or upon the signing of this Agreement, who are all of the shareholders of CANNAVOLVE Class A and Class B common stock ( the “HOLDERS”); and INTELLIGENT BUYING, INC., a California corporation listed on the OTC Markets “Pink Sheets” (“INTB” or the "Company").
R E C I T A L S:
WHEREAS:
The respective Boards of Directors of CANNAVOLVE and INTB have determined that the Parties should enter into a different understanding and agreement regarding the acquisition of CANNAVOLVE by INTB, and therefore intend to terminate the Agreement;
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in the Agreement and in this Termination Agreement, the parties agree as follows:
1.
In accordance with Section 5(a) of the Agreement, the Agreement is hereby terminated by written mutual consent of CANNAVOLVE and INTB.
2.
In accordance with Section 5.02 of the Agreement, the Agreement has become void and have no effect, without any liability or obligation on the part of CANNAVOLVE, INTB or the HOLDERS; provided that nothing contained in this Termination shall relieve any party for any breach of the representations, warranties, covenants or agreements set forth in the Agreement.
IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Agreement as of the date first above written.
JAGUARING COMPANY, d/b/a CANNAVOLVE |
|
|
|
By: ________________________ |
|
|
INTELLIGENT BUYING, INC. |
|
|
|
By: Philip Romanzi, CEO |
|
EXHIBIT 2.6
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") as of made this __ day of February, 2020 is by, between and among JAGUARING COMPANY d/b/a CANNAVOLVE HOLDINGS, a Washington corporation ("CANNAVOLVE"); the CANNAVOLVE shareholders listed in the CANNAVOLVE CAP TABLE, which will be provided by CANNAVOLVE before or upon the signing of this Agreement, who are shareholders of CANNAVOLVE Class A and Class B common stock ( the “HOLDERS”); and INTELLIGENT BUYING, INC., a California corporation listed on the OTC Markets “Pink Sheets” (“INTB” or the "Company").
R E C I T A L S:
WHEREAS:
A. The respective Boards of Directors of CANNAVOLVE and INTB have determined that INTB should issue up to 702,111 restricted INTB common shares to acquire up to 81.48% of CANNAVOLVE from the HOLDERS (the “Reorganization”); and
B. INTB, CANNAVOLVE and HOLDERS agree to make certain representations, warranties, covenants and agreements in connection with the Reorganization, and also to prescribe various conditions to the Reorganization;
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties agree as follows:
ARTICLE I:
THE REORGANIZATION
1.01 The Reorganization.
(a)
Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the laws of California (the "Statutes"), INTB agrees to, and shall acquire (subject to the consent of each HOLDER who signs this Agreement, 81.48% of the issued and outstanding Class A and Class B common shares of CANNAVOLVE, in exchange for the issuance at the Closing as set forth in Section 1.02 herein of up to 702,111 shares of restricted Common Stock to the HOLDERS who sign this Agreement, in a reorganization pursuant to Section 368(a)(1)(B) of the Internal Code. The HOLDERS are set forth in the CANNAVOLVE HOLDERS list set forth in Exhibit “B” attached hereto. INTB shares will be issued to those HOLDERS who consent to exchange their CANNAVOLVE shares for INTB shares.
(b)
Upon the terms and subject to the terms and conditions set forth in this Agreement, at and as of the Closing of the Reorganization, the parties hereto agree that ownership of the common shares and Preferred Shares of INTB shall be as set forth in Exhibit “A,” attached hereto and made a part hereof.
(c)
Anything herein or in any Exhibits hereto to the contrary notwithstanding, the Parties agree that as of the Closing, (1) the ownership of the issued and outstanding shares of
INTB common stock shall be owned as set forth in Exhibit “A”, attached hereto; (2) Except as otherwise required by law, and for five (5) years from the date of issuance, the Series B Preferred Stock shall have the number of votes equal to fifty-one percent (51%) of the cumulative total vote of all classes of stock of the Corporation, common or preferred, whether such other class of stock is voting as a single class or the other classes of stock are voting together as a single group, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, or any other class of preferred stock, and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote, together with holders of Common Stock and any class of preferred stock entitled to vote, with respect to any question upon which holders of Common Stock or any class of preferred stock have the right to vote. After five years, the Series B Preferred Stock shall automatically, and without further action by the Corporation, be cancelled and void, and may not be reissued. (3) the Series B Preferred Stock shall be owned as set forth in Section 3.01(c) herein; and (4) as of the Closing of this Agreement, a Designation describing the Series B Preferred Stock shall have been approved by INTB’s Board of Directors, which Designation shall be filed with the Secretary of State of California as soon as practicable after the Closing.
1.02 Closing. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 5.01, and subject to the satisfaction or waiver of the conditions set forth in Article III, the closing of the Reorganization (the "Closing") will take place at 10:00 a.m. on the first business day after satisfaction of the conditions set forth in Article VI (or as soon as practicable thereafter following satisfaction or waiver of the conditions set forth in Article VI) (the "Closing Date"), at the offices of John B. Lowy, Esq., unless another date, time or place is agreed to in writing by the parties hereto.
1.03 Articles of Incorporation; Bylaws.
(a) The Certificate of Incorporation of the Company in effect immediately prior to the Effective Time of the Reorganization shall remain unchanged, except as set forth in Section 1.01(c) herein.
(b) INTB’s Bylaws in effect at the Effective Time of the Reorganization shall continue to be the Bylaws of INTB, unless and until thereafter changed or amended as provided therein or by applicable law, or in conformity with Section 1.01(c).
1.04 Transition Period. Upon the Effective Time of the Closing, the directors of INTB shall be Dante Jones and two designees to be named after the Closing.
ARTICLE II:
EFFECT OF THE REORGANIZATION
ON THE CAPITAL STOCK
2.01 Effect on Capital Stock. As of the Effective Time of the Reorganization, neither CANNAVOLVE nor INTB will have any outstanding warrants, options or any other contracts to purchase or issue any equity security of the Company, nor will there exist any convertible debt, preferred stock, or any other instrument convertible into equity securities of the Company,
except as set forth in Section 3.01(c) of this Agreement, specifically regarding INTB’s Series B Preferred Stock and the Convertible Note. Further, no dividends payable in any equity security of INTB or in cash shall be outstanding and unpaid.
ARTICLE III:
REPRESENTATIONS AND WARRANTIES OF INTB AND CANNAVOLVE
3.01 Representations and Warranties of INTB (the “Company”). INTB hereby represents and warrants to CANNAVOLVE and HOLDERS, jointly and severally, as follows:
(a) Organization, Standing and Corporate Power. The Company is duly organized, validly existing and in good standing under the laws of the State of California, and has the requisite corporate power and authority to carry on its business as now being conducted. INTB is not authorized to conduct business, and does not conduct business, in any other state or jurisdiction, except for the States of California and New York.
(b) Authority. The Company has the requisite corporate and other power and authority to enter into this Agreement and to consummate the Reorganization. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company, and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.
(c) Capital Structure. The authorized capital stock of the Company consists of 50,000,000 shares of Company common stock at par value $.001 per share, and 25,000,000 shares of Preferred Stock, par value $.001 per share. There are 7,975,003 shares of INTB common stock currently issued and outstanding, and 1,000,000 shares of Series B Preferred Stock, to be issued to Principal Holdings, LLC (“Principal”), in consideration of Principal successfully negotiating the purchase of INTB, structuring this Agreement and the capitalization, and performing due-diligence. All outstanding shares of common stock and Preferred Stock of the Company are duly authorized, validly issued, fully paid and nonassessable and are not subject to preemptive rights. At and as of the Closing INTB’s current principal shareholder (the “INTB Principal”) will return to INTB, for cancellation and retirement, 3,446,950 shares owned by the INTB Principal, so that, as a result of the retirement of the 3,446,950 shares by the INTB Principal, and assuming the issuance of up to 702,111 shares to the HOLDERS, INTB will have issued and outstanding 7,254,575 common shares as of the Closing. There are no outstanding bonds, debentures, notes or other indebtedness or other securities of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Company may vote, except for the Series B Preferred Shares and the INTB Convertible Note, which has been shown to CANNAVOLVE. Except for the INTB Note, the Series B Preferred Stock, and the proposed issuance of common shares to the HOLDERS pursuant to this Agreement, there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity or voting
securities of the Company. There are no agreements or arrangements pursuant to which the Company is or could be required to register shares of Company Common Stock or other securities under the Securities Act of 1933, as amended (the "Securities Act").
(d) Noncontravention; Consents. Neither the execution and delivery of this Agreement by the Company, nor the consummation of the transactions contemplated hereby will: (i) violate or conflict with any provision of the authorizing documents of the Company; (ii) violate, accelerate or result in, a restriction, lien, charge, pledge, security interest or other encumbrance on the Company of any kind; or (iii) conflict with or violate any governmental regulation, statute, judgment or proceeding of any kind. Other than the approval of this Agreement by the Board of Directors, no consent of any kind is required by either the Company or its shareholders to consummate these transactions, including but not limited to any third party, any governmental agency or regulatory body, wherever located, except as set forth in Section 1 herein.
(e) Absence of Certain Changes or Events. Since September 30, 2019, the Company has conducted its business only in the ordinary course consistent with past practice, and there is not and has not been: (i) any material adverse change with respect to the Company; (ii) any condition, event or occurrence which individually or in the aggregate could reasonably be expected to have a material adverse effect or give rise to a material adverse change with respect to the Company; (iii) any event which, if it had taken place following the execution of this Agreement, would not have been permitted by any provision of this Agreement without CANNAVOLVE’s prior consent; or (iv) any condition, event or occurrence which could reasonably be expected to prevent, hinder or materially delay the ability of the Company to consummate the transactions contemplated by this Agreement.
(f) Litigation; Matters; Compliance with Laws:
(i) There is no suit, judgment, action, proceeding or investigation outstanding, pending or, to the knowledge of the Company, threatened against or affecting the Company, or any basis for any such suit, action, proceeding or investigation, including (without limitation), any Federal or State regulatory authority, the Securities and Exchange Commission, FINRA or State Securities regulators’ suit, judgment, action, proceeding or investigation, that, individually or in the aggregate, could reasonably be expected to have a material adverse effect with respect to the Company, or prevent, hinder or materially delay the ability of the Company to consummate the transactions contemplated by this Agreement; nor is there any judgment, decree, injunction, rule or order of any governmental entity or arbitrator outstanding against the Company having, or which, insofar as reasonably could be foreseen by the Company, in the future, could have, any such effect.
(ii) The Company has never been involved in any bankruptcy proceedings, or similar proceedings, in any Federal or state court.
(g) Certain Employee Payments. Except for Employment Agreements with Gregg Templeton, George Furlan and James Mansour, the Company is not a party to any employment agreement which could result in the payment to any current, former or future director or employee of the Company of any money or other property or rights or accelerate or provide any other rights or benefits to any such employee or director as a result of the transactions
contemplated by this Agreement, whether or not (i) such payment, acceleration or provision would constitute a "parachute payment" (within the meaning of Section 280G of the Internal Revenue Code), or (ii) some other subsequent action or event would be required to cause such payment, acceleration or provision to be triggered.
(h) Tax Returns and Tax Payments. The Company has filed all state and Federal Tax Returns required to be filed by it, and has paid all or has made all Tax payments that are required. No material claim for unpaid Taxes has been made or become a lien against the property of the Company or is being asserted against the Company, no audit of any Tax Return of the Company is being conducted by a tax authority, and no extension of the statute of limitations on the assessment of any Taxes has been granted by the Company and is currently in effect. As used herein, "taxes" shall mean all taxes of any kind, including, without limitation, those on or measured by or referred to as income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental authority, domestic or foreign. As used herein, "Tax Return" shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes.
(i) Financial Statements. The Company’s audited financial statements, as of and for the years ended December 31, 2017 and December 31, 2018, are referred to hereinafter as the “INTB Financial Statements”). The INTB Financial Statements present fairly, in all material respects, the financial position of the Company as of the respective dates indicated and the results of operations and cash flows of the Company for the respective periods indicated, in conformity with generally accepted accounting principles applied on a consistent basis.
(j) Accuracy of Information. No statement, agreement, warranty or representation by the Company set forth herein or in the Exhibits hereto, and no statement set forth in any certificate or other instrument or document required to be delivered by or on behalf of INTB hereto, or in connection with consummation of the transactions contemplated hereby, contains any untrue statement of a material fact, or omits to state any material fact which is necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.
(k) SEC Filings. INTB is a reporting issuer pursuant to Section 13 of the Securities Exchange Act of 1934 (the “Exchange Act”). As of the Closing of the Reorganization contemplated by this Agreement, the Company will be current in its SEC filings for at least the previous three years.
(l) Symbol Status. INTB’s common shares are quoted on the OTC Markets “Pink Sheets,” under the symbol “INTB.” Company has received no stop order or similar order limiting or stopping trading in the Company’s common stock.
(m) Effect of Warranties and Representations. All of the warranties and representations in this Section 3.01 shall survive the Closing. No investigation by CANNAVOLVE or Holders shall affect or limit any of the warranties and representations made in this Section 3.01.
3.02. Representations and Warranties of CANNAVOLVE. CANNAVOLVE represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. CANNAVOLVE is duly organized, validly existing and in good standing under the laws of the State of Washington, and has the requisite corporate power and authority to carry on its business as now being conducted. CANNAVOLVE is authorized to conduct business in every state in which it is required to be authorized.
(b) Authority. CANNAVOLVE has the requisite corporate and other power and authority to enter into this Agreement and to consummate the Reorganization. The execution and delivery of this Agreement by CANNAVOLVE and the consummation by CANNAVOLVE of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of CANNAVOLVE. This Agreement has been duly executed and delivered by CANNAVOLVE, and constitutes a valid and binding obligation of CANNAVOLVE, enforceable against CANNAVOLVE in accordance with its terms.
(c) Capital Structure. The authorized capital stock of CANNAVOLVE consists of 5,000,000 shares of Class A common stock, no par value, and 99,000,000 shares of Class B common stock, no par value. CANNAVOLVE has no preferred shares either authorized or issued and outstanding. There are now, and will be as of immediately before the Closing of the Reorganization, no more than 41,330,703 shares of Class A and Class B common shares issued and outstanding, all of which shares, including all INTB common shares to be issued upon conversion of all of CANNAVOLVE’s existing convertible notes (the ‘CANNAVOLVE Notes),” of which up to 33,674,262 shares will be exchanged for a maximum of 702,111 shares of INTB common stock, if all HOLDERS sign this Agreement and exchange their CANNAVOLVE shares for INTB shares. All outstanding shares of common stock of CANNAVOLVE are duly authorized, validly issued, fully paid and nonassessable, are not subject to preemptive rights, and were issued in compliance with State and Federal securities laws. Any and all currently outstanding CANNAVOLVE Notes will be converted into common shares before the Closing, as a result of which there will be no outstanding bonds, debentures, notes or other indebtedness or other securities of CANNAVOLVE having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of CANNAVOLVE may vote as of the Closing. Other than as set forth in this Section 3.02(c), there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which CANNAVOLVE is a party or by which it is bound obligating CANNAVOLVE to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity or voting securities of CANNAVOLVE. There are no agreements or arrangements pursuant to which CANNAVOLVE is or could be required to register shares of Company Common Stock or other securities under the Securities Act of 1933, as amended (the "Securities Act").
(d) Noncontravention; Consents. Neither the execution and delivery of this Agreement by CANNAVOLVE, nor the consummation of the transactions contemplated hereby will: (i) violate or conflict with any provision of the authorizing documents of CANNAVOLVE; (ii)
violate, accelerate or result in, a restriction, lien, charge, pledge, security interest or other encumbrance on CANNAVOLVE of any kind; or (iii) conflict with or violate any governmental regulation, statute, judgment or proceeding of any kind. Other than the approval of this Agreement by the Board of Directors, no consent of any kind is required by CANNAVOLVE to consummate these transactions, including but not limited to any third party, any governmental agency or regulatory body.
(e) Absence of Certain Changes or Events. Since September 30, 2019, CANNAVOLVE has conducted its business only in the ordinary course consistent with past practice, and there is not and has not been: (i) any material adverse change with respect to CANNAVOLVE; (ii) any condition, event or occurrence which individually or in the aggregate could reasonably be expected to have a material adverse effect or give rise to a material adverse change with respect to CANNAVOLVE; (iii) any event which, if it had taken place following the execution of this Agreement, would not have been permitted by any provision of this Agreement without CANNAVOLVE’s prior consent; or (iv) any condition, event or occurrence which could reasonably be expected to prevent, hinder or materially delay the ability of CANNAVOLVE to consummate the transactions contemplated by this Agreement.
(f) Litigation; Matters; Compliance with Laws:
(i) There is no suit, judgment, action, proceeding or investigation outstanding, pending or, to the knowledge of CANNAVOLVE, threatened against or affecting CANNAVOLVE, or any basis for any such suit, action, proceeding or investigation, including (without limitation), any Federal or State regulatory authority, the Securities and Exchange Commission, FINRA or State Securities regulators’ suit, judgment, action, proceeding or investigation, that, individually or in the aggregate, could reasonably be expected to have a material adverse effect with respect to CANNAVOLVE, or prevent, hinder or materially delay the ability of CANNAVOLVE to consummate the transactions contemplated by this Agreement; nor is there any judgment, decree, injunction, rule or order of any governmental entity or arbitrator outstanding against CANNAVOLVE having, or which, insofar as reasonably could be foreseen by CANNAVOLVE, in the future, could have, any such effect.
(ii) CANNAVOLVE has never been involved in any bankruptcy proceedings, or similar proceedings, in any Federal or state court.
(g) Certain Employee Payments. CANNAVOLVE is not a party to any employment agreement which could result in the payment to any current, former or future director or employee of CANNAVOLVE of any money or other property or rights or accelerate or provide any other rights or benefits to any such employee or director, except for Eric Swaney’s Employment Agreement by which he will be employed by INTB on a full-time basis, overseeing INTB’s operations in Jamaica), and Dante Jones’ Employment Agreement. Both Swaney’s and Jones’ Employment Agreements have previously been provided to INTB There are no other agreements which could (i) constitute a "parachute payment" (within the meaning of Section 280G of the Internal Revenue Code), or (ii) result in some other subsequent action or event that would be required to cause such payment, acceleration or provision to be triggered.
(h) Tax Returns and Tax Payments. CANNAVOLVE has filed all state and Federal Tax Returns required to be filed by it, and has paid all or has made all Tax payments that are required. No material claim for unpaid Taxes has been made or become a lien against the property of CANNAVOLVE or is being asserted against CANNAVOLVE, no audit of any Tax Return of CANNAVOLVE is being conducted by a tax authority, and no extension of the statute of limitations on the assessment of any Taxes has been granted by CANNAVOLVE and is currently in effect. As used herein, "taxes" shall mean all taxes of any kind, including, without limitation, those on or measured by or referred to as income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental authority, domestic or foreign. As used herein, "Tax Return" shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes.
(i)Financial Statements. CANNAVOLVE has provided INTB with audited financial statements, as of and for the years ended December 31, 2017 and December 31, 2018, which audited financial statements were prepared in accordance with U.S. GAAP and signed by a PCAOB-registered auditing firm. CANNAVOLVE will provide unaudited financial statements for the September 30, 2019 stub period (the “Stub Period”). The audited financial statements and the stub period financial statements are the “CANNAVOLVE Financial Statements”. The CANNAVOLVE Financial Statements present and will present fairly, in all material respects, the financial position of CANNAVOLVE as of the respective dates indicated and the results of operations and cash flows of CANNAVOLVE for the respective periods indicated, in conformity with generally accepted accounting principles applied on a consistent basis. Upon presentation to INTB of the CANNAVOLVE financial statements for the Stub Period, INTB shall have the right, upon 10 days’ written notice to CANNAVOLVE, to terminate this Agreement with no liability to either INTB or CANNAVOLVE.
(j) Accuracy of Information. CANNAVOLVE has disclosed to INTB, and will continue to disclose to INTB from the date of this Agreement up to and including the date of Closing and thereafter, (I) all agreements of any kind or nature to which CANNAVOLVE is a party, and (II) any agreements which affect or could materially affect CANNAVOLVE’s business, assets, liabilities. No statement, agreement, warranty or representation by CANNAVOLVE set forth herein or in the Exhibits hereto, and no statement set forth in any certificate or other instrument or document required to be delivered by or on behalf of CANNAVOLVE hereto, or in connection with consummation of the transactions contemplated hereby, contains any untrue statement of a material fact, or omits to state any material fact which is necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.
(k) Recommendation. The Board of Directors of CANNAVOLVE has unanimously determined that the terms of the Reorganization are fair to and in the best interests of the HOLDERS of CANNAVOLVE’s common stock, and has recommended that each HOLDER agree to its terms.
(l) Representations of HOLDERS. At the Closing, each HOLDER will sign an investment letter, by which each HOLDER will represent that such HOLDER either (I) is an “Accredited Investor,” as that term is defined in SEC Rule 501(a); or (II) if not an accredited investor, such HOLDER either alone or with such HOLDER’s purchaser representative(s) has such knowledge and experience in financial and business matters that such HOLDER is capable of evaluating the merits and risks of the prospective share exchange.
(m) Investment Intent. Each HOLDER will represent that such HOLDER is acquiring the shares of INTB solely for each of their own accounts, as principals, for investment purposes and not with a view to, or for resale in connection with, any distribution or underwriting of such shares; and that the shares of Company stock issued to them under this Agreement have not been registered under either the United States Securities Act of 1933 or any state securities law, that the HOLDER must hold such shares unless they are subsequently registered under those laws or transferred in reliance on an opinion of counsel, acceptable to the Company, that registration under those laws is not required, and that the certificates representing such shares will bear a legend to the foregoing effect.
(n) Restrictive Legend. Each share certificate issued to the HOLDERS pursuant to this Agreement shall bear the following or similar restrictive legend:
THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS; NOR HAVE THEY BEEN PASSED UPON BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORY AUTHORITY. THE SHARES CANNOT BE SOLD, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
(o) Effect of Warranties and Representations. All of the warranties and representations in this Section 3.02 shall survive the Closing. No investigation by INTB shall affect or limit any of the warranties and representations made by CANNAVOLVE or HOLDERS in this Section 3.02.
ARTICLE IV:
ADDITIONAL AGREEMENTS
4.01 Public Announcements. CANNAVOLVE, on the one hand, and the Company, on the other hand, will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement; and neither shall issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or court process; provided, however, that a Form 8-K shall be filed within four days after this Reorganization Agreement is signed by CANNAVOLVE and INTB; and the “Super 8-K” shall be filed within four days after the Closing of the Reorganization The parties agree that the initial press release or releases to be issued with respect to the transactions contemplated by this Agreement shall be mutually agreed upon prior to the issuance thereof.
4.02 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses.
4.03 Filing of Super 8-K. Within four days after the Closing of the Reorganization, INTB shall file with the SEC the “Super 8-K,” which shall contain all of the information required by SEC rules and regulations pertaining thereto. Notwithstanding the previous sentence, the Parties agree that no filing containing CANNAVOLVE Financial Statements shall be made with the SEC without the prior written consent of both INTB’s and CANNAVOLVE’s auditors.
4.04 Appointment of Officers and Directors. At and as of the Closing, Philip Romanzi shall resign as INTB’s sole officer and director, and will appoint Dante Jones as a Director, and George Furlan as Interim CEO, CFO, COO and Principal Accounting Officer.
ARTICLE V:
TERMINATION, AMENDMENT AND WAIVER
5.01 Termination. This Agreement may be terminated and abandoned at any time prior to the Closing of the Agreement:
(a) by mutual written consent of CANNAVOLVE and INTB; or
(b) by either CANNAVOLVE or the Company if any governmental entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Reorganization and such order, decree, ruling or other action shall have become final and nonappealable; or
(c) by CANNAVOLVE, if a material adverse change shall have occurred relative to the Company, or if a failure of any representation and warranty of the Company shall have occurred; or
(d)
by CANNAVOLVE, if INTB willfully fails to perform in any material respect any of its material obligations under this Agreement; or
(e)
by INTB, if CANNAVOLVE willfully fails to perform in any material respect any of its respective obligations under this Agreement; or
(f)
by INTB, if a material adverse change shall have occurred relative to CANNAVOLVE, or if a failure of any representation and warranty of CANNAVOLVE shall have occurred; or
(g)
by INTB, if the number of shares owned by HOLDERS who approve this Agreement and agree to exchange their CANNAVOLVE SHARES constitutes less than 51% of CANNAVOLVE’s issued and outstanding shares.
5.02 Effect of Termination.
(a) In the event of proper termination of this Agreement by either the Company or CANNAVOLVE as provided in Section 5.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of CANNAVOLVE, INTB or the Holders. Nothing contained in this Section shall relieve any party for any breach of the representations, warranties, covenants or agreements set forth in this Agreement.
5.03 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf INTB and CANNAVOLVE.
ARTICLE VI:
GENERAL PROVISIONS
6.01 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by electronic mail, or overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to CANNAVOLVE or HOLDER Representative, to:
_____________
Email: _________________
If to INTB, to:
Philip Romanzi, CEO
Email: bagelhole@hotmail.com
-copy to-
John B. Lowy, P.C.
johnl@johnlowylaw.com
6.02 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the other agreements referred to herein constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. This Agreement is not intended to confer upon any person other than the parties any rights or remedies.
6.03 Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. In the event of any action being
brought pursuant to this Agreement, the parties irrevocably consent to the jurisdiction and venue of the action as the State of New York, County of New York.
6.04 No Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
6.05 Counterparts. This Agreement may be executed in one or more identical counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more such counterparts shall have been executed by each of the parties and delivered to the other parties.
6.06 Legal Counsel. Each of CANNAVOLVE, INTB and HOLDERS have been represented by, consulted with and been advised by legal counsel of their choice.
IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Agreement as of the date first above written.
JAGUARING COMPANY, d/b/a CANNAVOLVE
By: ________________________
INTELLIGENT BUYING, INC.
By: Philip Romanzi, CEO
HOLDER:
________________________________
Print Name: ________________________
# Cannavolve shs. exchanged:___________
# INTB shs. to be received: _____________
____________________________________
EXHIBIT “A”:
POST-CLOSING LIST OF INTB COMMON STOCK OWNERSHIP:
CannAvolve:
861,738 shares -(Entire Side)
INTB Side:
3,142,248 shares
Investors in 506(b) offering:
1,095,380 shares
Employees (3):
2,155,209 shares
EXHIBIT “B”:
LIST OF CANNAVOLVE SHAREHOLDERS TO CONSENT:
EXHIBIT 3.2
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EXHIBIT 3.4
CERTIFICATE OF DETERMINATION
OF
SERIES B PREFERRED STOCK
OF
INTELLIGENT BUYING, INC.,
a California corporation
Pursuant to Section 401 of the Corporations Code of the State of California, the undersigned, Philip Romanzi, DOES HEREBY CERTIFY as follows:
| A. | That he is the duly elected and acting Chief Executive Officer, Chief Financial Officer and Sole Director of INTELLIGENT BUYING, INC., a California corporation (the “Corporation”).
|
| B. | The authorized number of shares of preferred stock, $0.001 par value per share, of the Corporation is 25,000,000.
|
| C. | Pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board”) in accordance with the provisions of the Corporation’s Articles of Incorporation, as amended, and applicable law, the Board, on February 13, 2020, duly adopted the following resolutions creating a series of 2,000,000 shares of preferred stock designated as the “Series B Preferred Stock,” and such resolutions have not been modified or rescinded and remain in full force and effect. None of the shares of Series B Preferred Stock have been issued. |
WHEREAS, the Articles of Incorporation, as amended, of the Corporation authorize preferred stock comprising 25,000,000 shares issuable from time to time in one or more series; and
WHEREAS, the Board is authorized to designate the rights, preferences, privileges, and restrictions granted to or imposed upon the respective series of shares of preferred stock or the holders thereof and, without restriction, to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of preferred stock; and
WHEREAS, it is the desire of the Board, pursuant to its authority as aforesaid, to fix the rights, preferences, privileges, and restrictions and other matters relating to the Series B Preferred Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority expressly granted to and vested in the Board in accordance with the provisions of the Corporation’s Articles of Incorporation, as amended, and applicable law, a series of preferred stock designated Series B Preferred Stock of the Corporation be and hereby is created;
FURTHER RESOLVED, that the Board has determined that the rights, preferences, privileges, and restrictions granted to or imposed upon the Series B Preferred Stock, as stated and expressed herein, are under the circumstances prevailing on the date hereof fair and equitable to all the existing shareholders of the Corporation; and
FURTHER RESOLVED, that the designation and authorized number of shares of, and the rights, preferences, privileges, and restrictions granted to or imposed upon the Series B Preferred Stock are as follows:
1.
Number. The number of authorized shares of the Series B Preferred Stock is two million (2,000,000) shares. The holder(s) of shares of Series B Preferred Stock shall be referred to herein as “Series B Holders.”
2.
Dividend Provisions. The Series B Preferred Stock shall not bear a dividend and shall not be entitled to participate in any dividends payable to other shares of stock of the Corporation.
3.
No Liquidation Preference. The Series B Preferred Stock shall not be entitled to any liquidation preference or any distributions upon any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary.
4.
Redemption and Cancellation. The shares of Series B Preferred Stock shares shall be non-redeemable other than upon the mutual agreement of the Company and the holder of shares to be redeemed, provided however, that on the fifth anniversary of the date of issuance of the shares of Series B Preferred Stock, the shares of Series B Preferred Stock shall automatically, and without further action by the Corporation, be cancelled and void, and may not be reissued.
5.
No Conversion. The holders of the Series B Preferred Stock shall have no conversion rights.
6.
Voting Rights. Other than as set forth in Section 7, all 2,000,000 shares of Series B Preferred Stock shall have a number of votes at any time equal to (i) the number of votes then held or entitled to be made by all other equity securities of the Corporation, including, without limitation, the common stock, par value $0.001 per share, of the Corporation (the “Common Stock”), any other classes of Preferred Stock of the Corporation, debt securities of the Corporation or pursuant to any other agreement, contract or understanding of the Corporation, plus (ii) one (1), with all such votes to be apportioned equally and pro rata between all of the shares of Series B Preferred Stock then issued and outstanding, including with respect to fractional voting power thereof. The Series B Preferred Stock shall vote on any matter submitted to the holders of the Common Stock, or any class thereof, for a vote, and shall vote together with the Common Stock, or any class thereof, as applicable, on such matter for as long as the share of Series B Preferred Stock is issued and outstanding. The Series B Preferred Stock shall not have the right to vote on any matter as to which solely another class of Preferred Stock of the Corporation is entitled to vote pursuant to the certificate of determinations of such other class of Preferred Stock of the Corporation.
7.
Amendment and Protective Provisions.
(a)
The Corporation may not, and shall not, amend or repeal this Certificate of Determination without the prior written consent of Series B Holders holding a majority of the Series B Preferred Stock then issued and outstanding, in which vote each share of Series B Preferred Stock then issued and outstanding shall have one vote, voting separately as a single class, in person or by proxy, either in writing without a meeting or at an annual or a special meeting of such Series B Holders, and any such act or transaction entered into without such vote or consent shall be null and void ab initio, and of no force or effect.
(b)
In addition to any other rights and restrictions provided under applicable law, without the prior written consent of Series B Holders holding a majority of the Series B Preferred Stock then issued and outstanding, in which vote each share of Series B Preferred Stock then issued and outstanding shall have one vote, voting separately as a single class, in person or by proxy, either in writing without a meeting or at an annual or a special meeting of such Series B Holders, the Corporation shall not amend or repeal any provision of, or add any provision to, the Corporation’s Articles of Incorporation or Bylaws if such action would materially and adversely alter or materially and adversely change the preferences, rights, privileges, or powers of, or restrictions provided for the benefit of, the Series B Preferred Stock and any such act or transaction entered into without such vote or consent shall be null and void ab initio, and of no force or effect.
(c)
Other than as set forth in Section 7(b), to the maximum extent permitted by appliable law, the Series B Preferred Stock shall not have any right to vote, whether as a separate class or as a part of any other class, in in connection with the authorization, designation, increase or issuance of any other shares of any class or series (including additional preferred shares of any series) of stock that rank junior to, on a parity with, or senior to the Series B Preferred Stock as to any rights or preferences, including, without limitation, any dividend, approval or liquidation rights, or in connection with the authorization, designation, increase or issuance of any bonds, mortgages, debentures or other debt obligations of the Corporation, whether convertible into shares of stock of the Corporation or otherwise, or in connection with any amendments or modifications to any of the foregoing.
8.
Notices. Any notice required by the provisions of this Certificate of Determination to be given to the Series B Holders shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of the Corporation.
We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct and of our own knowledge.
| Date: February 13, 2020 |
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| Name: Philip Romanzi |
| Title: Chief Executive Officer, Chief Financial |
| Officer and Sole Director |
EXHIBIT 10.3
SUBSCRIPTION AGREEMENT
OFFERING OF SHARES OF COMMON STOCK OF
INTELLIGENT BUYING, INC.
ACCREDITED INVESTORS ONLY
THE SHARES OF COMMON STOCK (THE “SHARES”) OF INTELLIGENT BUYING, INC. (“INTB” OR THE “COMPANY”) SUBJECT TO THIS SUBSCRIPTION AGREEMENT (THIS “SUBSCRIPTION AGREEMENT”) ARE SECURITIES WHICH HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE BEING OFFERED) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, PROVIDED BY REGULATION D, RULE 506(b), AND MAY BE PURCHASED ONLY BY “ACCREDITED INVESTORS” (AS THAT TERM IS DEFINED IN THE ACT). THE DEFINITION OF “ACCREDITED INVESTOR” IS SET FORTH IN SECTION 4. OF THIS SUBSCRIPTION AGREEMENT.
January 1, 2020
1,707,436 pre-forward split shares; pre-forward split price of $1.1713469 per share.
$2,000,000 Total Offering
Minimum Purchase per Investor: $50,000
INTELLIGENT BUYING, INC. (“INTB” or the “Company”) is offering a minimum of 883,598 shares ($1,035,000 in gross proceeds), up to a maximum of 1,707,436 common shares (maximum proceeds of $2,000,000), at a pre-forward split offering price of $1.1713469 per share, which will be approximately $.156 per share after a proposed, approximate 7.5-for-1 forward split. The purpose of the offering is to enable INTB to complete its proposed and signed acquisition (the “Acquisition”) of Jaguaring, Inc., d/b/a Cannavolve (“Cannavolve”) as described herein, and for working capital. If and when INTB completes its acquisition of Cannavolve, the Company then intends to effect an approximate 7.5-for-1 forward split of all issued and outstanding common shares, after completing the Acquisition The
offering is being made on a minimum $1,035,000-maximum $2,000,000 basis, meaning that Purchasers’ subscriptions: (a) are being maintained in the Escrow Account noted in the signature page; or (b) will consist of the conversion of convertible promissory notes (the “Notes”) owed by INTB to certain Noteholders (the proceeds of which Notes has previously been received by the Company). At least $1,035,000 (883,598 shares) must be subscribed to and accepted by the Company on or before January 6, 2020, or the subscriptions being held in escrow will be returned to subscribers.
The amended Reorganization Agreement with Cannavolve has been signed, but the Acquisition has not been completed, and will not be completed until all pre-closing conditions to the Acquisition are completed, including the filing of the so-called “Super 8-K” containing audited financial statements of both INTB and CANNAVOLVE. If at least the minimum proceeds ($1,035,000) is subscribed to before the Acquisition of Cannavolve is completed, the Company will nevertheless accept the subscriptions for at least the minimum proceeds (provided that each proposed investor is an “Accredited Investor” and otherwise acceptable to the Company). Upon acceptance of at least the minimum proceeds, (a) certain Promissory Notes held by Noteholders will be converted into restricted INTB common shares at a conversion rate of $1.1713469 per pre-forward split share, and (b) subscribers whose funds are being held in escrow will be released to INTB, and those subscribers will be issued restricted shares at the same price of $1.1713469 per share.
If and when at least the minimum proceeds is received and accepted by the Company, additional subscriptions will be deposited directly into the Company’s account as and when they are received and accepted. The offering will terminate on the sooner to occur of: (a) the maximum of $2,000,000 being received from subscribers and accepted by INTB, i.e., 1,707,436 pre-forward split restricted INTB shares; or (b) March 31, 2020.
The proposed approximate 7.5-for-1 forward split of INTB’s post-Acquisition issued and outstanding common shares is intended to take place as soon as practicable after the closing of the Acquisition.
Reference is hereby made to the following Exhibits to this Subscription Agreement, which are incorporated by reference and made a part hereof:
Exhibit “A”: The link to INTB’s filings with the Securities and Exchange Commission.
Exhibit “B”: The Second Amended Reorganization Agreement between INTB and Cannavolve, dated December 31, 2019
Exhibit “C”: Cannavolve (Sentient Brands) Investor Deck
Exhibit “D”: Audited Balance Sheet and Income Statement of Cannavolve, as of and for the fiscal year ended December 31, 2018.
Exhibit “E”: 9 Months 2019
1.
SUBSCRIPTION
(a)
The undersigned (the “Purchaser”) hereby subscribes to purchase the number of Shares inserted in the Signature Page below (minimum subscription $50,000) in Intelligent Buying, Inc. (the “Company”), a California corporation, for the aggregate price inserted in the Signature Page, all in accordance with the terms and conditions of this Subscription Agreement and the Exhibits attached hereto and made a part hereof, as the same may be amended or supplemented from time to time, including the Exhibits thereto (collectively, the “Offering Documents”).
The Purchaser’s subscription consists of either conversion of an outstanding convertible promissory note (the “Note”), or the purchase of common shares of the Company, as noted on the Subscription Page.
The Purchaser acknowledges and agrees that this subscription cannot be withdrawn, terminated or revoked. The Purchaser agrees to become a shareholder of the Company if the Company, in its sole and absolute discretion, accepts any portion of this subscription, upon, and assuming, the Closing of the Acquisition, as to which there is no assurance. This subscription is not transferable or assignable by the Purchaser.
(b)
This subscription may be rejected as a whole or in part by the Company in its sole and absolute discretion. If this subscription is rejected, the Purchaser’s funds shall be returned to the extent of such rejection, without interest, charge or deduction. This subscription shall be binding on the Company only upon acceptance by the Company and to the extent of such acceptance. Until the Purchaser’s subscription is accepted or returned, the Purchasers’ subscription will be held in an Escrow Account, as set forth above.
(c)
This is an Agreement to purchase the Shares on an if and when issued basis; and the Purchaser will become a Shareholder only when the Purchaser’s funds are transferred to the operating account of the Company and after all other procedural requirements of the offering of the Shares (this “Offering”) have been completed.
(d)
The Purchaser’s rights and responsibilities will be governed by the terms and conditions of this Subscription Agreement and the Offering Documents. The Company will rely upon the information provided by the Purchaser in this Subscription Agreement and the Appendix, to confirm that the Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Act.
2.
GENERAL REPRESENTATIONS AND WARRANTIES
By signing below, the Purchaser represents and warrants as follows:
(a)
I have received and read the Offering Documents, and I am familiar with the proposed business, operations, properties and financial condition of the Company. I have relied solely upon the Offering Documents and independent investigations made by me or my representative with respect to my investment in the Shares. No oral or written representations beyond the Offering Documents have been made to me or been relied upon by me.
(b)
I have been given the opportunity to discuss any questions and concerns with representatives of the Company. I (i) am over the age of 21 (if an individual); (ii) have adequate means of providing for my current needs and possible contingencies, and have no need for liquidity of my investment in the Company; (iii) can bear the economic risk of losing my entire investment therein; (iv) have such knowledge and experience in business and financial matters, alone or with a purchaser representative, so that I am capable of evaluating the relative risks and merits of this investment; (v) understand the speculative nature and uncertainty of the Company's business; and (vi) understand that I may lose my entire investment.
(c)
I am purchasing the Shares for my own account (or for a trust if I am a trustee), for investment purposes only and not with a view or intention to resell or distribute the same. I have no present intention, agreement or arrangement to divide my participation with others or to resell, assign, transfer or otherwise dispose of all of part of the Shares, or to do so after the passage of a certain amount of time.
(d)
I or my investment or other professional advisors have such knowledge and experience in financial and business matters such that I can evaluate the risks of the prospective investment and to make an informed investment decision. I have been advised to consult my own attorney concerning this investment and to consult with independent tax counsel and/or advisors regarding the tax considerations of purchasing the Shares and investing in the Company. I have carefully reviewed the definition of
“Accredited Investor” set forth in section 4 below; and I represent and warrant to the Company that I am an Accredited Investor.
(e)
I have carefully reviewed the Offering Documents. I have carefully evaluated my financial resources and investment position and acknowledge that I am able to bear the economic risks of this investment. I further acknowledge that my financial condition is such that I am not under any present necessity or constraint to dispose of the Shares to satisfy any existent or contemplated debt or undertaking. I have adequate means of providing for my current needs and possible contingencies, have no need for liquidity in my investment and can afford to lose my entire investment in the Shares.
(f)
I have been advised that the Shares have not been registered under the Securities Act or qualified under any state securities laws, on the basis, among others, that no public offering of the Shares is being effected and the Shares will be issued by the Company in connection with a transaction that does not involve any public offering within the meaning of Section 4(a)(2) of the Securities Act or under the Rules and Regulations of the Securities and Exchange Commission. I acknowledge and agree that the stock certificate, when issued to me, will bear a restrictive legend substantially similar to the following:
"These securities have not been registered under the Securities Act of 1933, as amended. They may not be sold or transferred in the absence of an effective Registration Statement under that Act, or without an opinion of counsel satisfactory to the Company that such registration is not required."
(g)
All information which I have furnished in this Subscription Agreement, concerning myself, my financial position, my knowledge of financial and business matters, and my being an “Accredited Investor,” is correct, current and compete and does not fail to omit a material fact with respect thereto.
3.
PATRIOT ACT AND ANTI-MONEY LAUNDERING REPRESENTATIONS
(a)
The undersigned represents that all evidence of identity provided is genuine and all related information furnished is accurate.
(b)
The undersigned agrees to provide any information deemed necessary by the Company, in its sole and absolute discretion, to comply with any applicable anti-money laundering and anti-terrorist financing program(s) and related responsibilities. The Undersigned acknowledges that the Company may require additional information about the Underlying Investor (defined below) and/or any person or entity representing the Underlying Investor in order to comply with applicable law. The undersigned agrees promptly to provide any such information required by law.
(c)
The undersigned represents that:
The undersigned is acquiring the Shares for his, her or its own account, risk and beneficial interest, and, additionally:
·
is not acting as agent, representative, intermediary/nominee or in any similar capacity for any other person;
·
does not have any intention or obligation to sell, distribute, assign or transfer all or a portion of the Shares to any other person; and
·
no other person will have a beneficial or economic interest in the Shares, or any portion thereof.
(d)
The undersigned understands that the Company prohibits any investment in the Company by or on behalf of the following persons (each, a “Prohibited Investor”):
·
A person, country, territory or entity whose name appears on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control;
·
A foreign shell bank (a bank without a physical presence in any country and as defined in the U.S.A. PATRIOT Act);
·
A “senior foreign political figure”, or any “immediate family” member or “close associate” of a senior foreign political figure. (A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a non-U.S. government (whether elected or not), a senior official of a major non-U.S. political party, or a senior executive of a non-U.S. 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. “Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws. 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 U.S. and non-U.S. financial transactions on behalf of the senior foreign political figure); and
·
Any other person or entity that the Company in its sole and absolute discretion determines to be a Prohibited Investor.
(e)
The undersigned acknowledges that as part of the Company’s responsibility for protection against money laundering, the Company and its appointed agents may require additional information including detailed verification of the identity of the Purchaser. The undersigned agrees that, upon request of the Company, it will provide such information as the Company may require to satisfy applicable anti-money laundering laws and regulations.
4.
INVESTOR ELIGIBILITY AND SUITABILITY STANDARDS
This Offering is being made in reliance on the exemption from the registration and qualification requirements of the Securities Act provided by Regulation D, Rule 506(b), and applicable state securities laws. The Company will accept subscriptions to purchase Shares only from persons who are “accredited investors” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
FOR ALL INVESTORS: An “accredited investor” is defined by Rule 501(a) of Regulation D as:
1.
Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and who has a reasonable expectation of reaching the same income level in the current year;
2.
Any natural person whose individual net worth or joint net worth, with that person’s spouse, at the time of their purchase exceeds $1,000,000, excluding the value of such person’s primary residence;
3.
Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities and Exchange Act of 1934 (the “Exchange Act”); any insurance company as defined in Section 2(13) of the Exchange Act; any investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company (SBIC) licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons who are accredited investors;
4.
Any private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940;
5.
Any organization described in Section 501(c)(3)(d) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
6.
Any director or executive officer, or general partner of the issuer of the securities being sold, or any director, executive officer or general partner of a general partner of that issuer;
7.
Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Section 506(b)(2)(ii); or
8.
Any entity in which all the equity owners are accredited investors as defined above.
5.
MISCELLANEOUS
(a)
CHOICE OF LAW: This Subscription Agreement will be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of law.
(b)
ENTIRE AGREEMENT: This Subscription Agreement constitutes the entire agreement between and among the parties and may be amended only by written agreement between all parties.
(c)
BINDING ARBITRATION: Any dispute under this Subscription Agreement will be resolved under the then prevailing arbitration rules in the County of New Castle, State of Delaware.
(d)
TERMINATION OF AGREEMENT: If this subscription is rejected, in whole or in part, by the Company, then, to the extent rejected, (i) this Subscription Agreement shall be null and void and of no further force and effect; (ii) no party shall have any rights against any other party; and (iii) the Company shall promptly request that the Escrow Agent return the funds delivered with this Subscription Agreement without interest, charge or deduction.
(e)
TAXES. There is no discussion of the Federal or state income tax considerations arising from investment in the Company set forth in the Offering Documents. The Federal income tax considerations to the Purchaser of investment in the Company will depend on individual circumstances. There can be no assurance the Internal Revenue Code of 1986, as amended (the “Code”), or the Regulations under the Code will not be amended in a manner adverse to the interests of the Purchaser or the Company. All Purchasers are strongly advised to obtain independent advice regarding the tax consequences of the purchase of the Shares and an investment in the Company under Federal and applicable state tax laws, or the tax laws of other jurisdictions for Purchasers subject to other tax jurisdictions.
(f)
DULY AUTHORIZED. If the Purchaser is a corporation, limited liability company, partnership, trust or other entity, the individuals signing in its name and on its behalf are duly authorized
to execute and deliver this Subscription Agreement on behalf of such entity, and the purchase of the Shares by such entity will not violate any law or agreement by which it is bound.
(g)
SUCCESSORS. This Subscription Agreement and the representations, warranties and agreements contained herein shall be binding on the Purchaser's directors, officers, other employees, agents, successors, assigns, heirs, legal representatives and other affiliates and shall inure to the benefit of the respective successors and assigns of the Company and its directors, officers, other employees, agents, representatives and other affiliates. If the Purchaser is more than one person, the obligations of all of them shall be joint and several, and the representations and warranties contained herein shall be deemed to be made by and to be binding upon each such person and his/her/its respective heirs, executors, administrators, successors and assigns.
(h)
INDEMNIFICATION. The Purchaser shall indemnify and defend the Company and its directors, officers, other employees, agents, representatives and other affiliates from and against any and all liability, damage, cost or expense (including attorneys’ fees) arising out of or in connection with:
(i)
Any inaccuracy in, or breach of, any of the Purchaser’s representations, warranties, covenants or agreements set forth in this Subscription Agreement or any other document or writing delivered to the Company;
(ii)
Any Transfer by the Purchaser of all or any of the Shares in violation of this Subscription Agreement or applicable law; or
(iii)
Any action, suit, proceeding or arbitration alleging any of the foregoing.
(i)
CHANGES IN INFORMATION. The Purchaser agrees to notify the Company promptly of any material change in any statement or response made in this Subscription Agreement before acceptance by the Company of this subscription.
6.
FORM OF OWNERSHIP; IDENTIFYING INFORMATION
The undersigned Purchaser intends to hold the Shares as indicated as part of the electronic subscription process, and acknowledges and agrees that the Company reserves the right to ask the Purchaser for additional information regarding form of ownership and other identifying information before accepting this subscription.
SUBSCRIPTION, SIGNATURE PAGE AND APPENDIX FOLLOW
SUBSCRIPTION INFORMATION AND SIGNATURE
Total Number of Shares Subscribed For: _________* Aggregate Purchase Price $ *
*For cash purchase or Note conversion; do not include Late Payment Shares (see below). Divide Aggregate Purchase Price by $1.1713469 per share.
Method of Subscribing: (a) Purchase of _______ common shares; and/or (b) conversion of $_______ Note; and (if applicable), (c) _________ the number of additional shares being issued to you for late repayment of your Note (the “Late Payment Shares”), for which no cash payment is required.*
*Fill in whether (a) or (b), or both. If purchase of shares, subscription is currently in the IOLA Trust Account of John B. Lowy, P.C. If conversion of Note, see signature agreement below.
Name _____________________________________ Tax ID Number: ___________________
First
Middle
Last
Residential Address: _____________________________
_____________________________
Address for Notices (if different): ___________________________
eMail Address: _______________________________
copy to (if anyone): _______________________________
The undersigned has carefully read the definition of “Accredited Investor” set forth above in Section 4 of this Subscription Agreement, and affirms, warrants and represents that the undersigned is an “Accredited Investor” by reason of subsection(s) _________ of that definition.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the Purchaser, intending to be legally bound, has executed this Subscription Agreement on January __, 2020. If purchasing by Note conversion, upon acceptance of this Subscription the Purchaser hereby irrevocably elects to convert the Note into the number of INTB shares set forth above, and to return the Note to INTB, marked “Paid.”:
____________________________________
Signature
ACCEPTANCE: SUBSCRIPTION NOT VALID UNTIL ACCEPTED BY COMPANY
Subject to the terms and conditions of this Subscription Agreement, the Company hereby accepts this Subscription, in the following amount: $_______________, for the number of Shares set forth above:
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EXHIBIT “A”
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&filenum=001-34861&owner=exclude&count=40
EXHIBIT “B”
Second Amended Reorganization Agreement with Cannavolve - https://bit.ly/2FaG7Bi
EXHIBIT “C”
Link to Business Plan: SENTIENT BRANDS Œuvre Skin Care
EXHIBIT “D”
Consolidated financial statements for the fiscal year ended December 31, 2018: https://bit.ly/2ZKsfHl
EXHIBIT “E”
9 Months 2019 https://bit.ly/2MEWquk
EXHIBIT 10.4
EXECUTIVE CONSULTING AGREEMENT
THIS EXECUTIVE CONSULTING AGREEMENT (this “Agreement”), entered into this 8th day of January, 2020 (the “Effective Date”), sets forth the arrangement between JAMES MANSOUR, with his principal address at 11 Sylvia Street, Newburgh, New York 12550 (hereinafter referred to as “Executive Consultant”), and INTELLIGENT BUYING, INC., a California corporation, with its principal place of business at 400 Seventh Avenue, Brooklyn, New York 11215 (hereinafter referred to as “Company”, and collectively with the Executive Consultant, the “Parties”, or individually, the “Party”), with respect to compensation to which Executive Consultant may become entitled under the terms and conditions set forth in this Agreement.
W I T N E S S E T H:
WHEREAS, the Company desires to retain the services of the Executive Consultant and, to that end, desires to enter into an agreement with the Executive Consultant, upon the terms and conditions set forth in this Agreement.
WHEREAS, the Executive Consultant desires to provide certain business advisory, sales, marketing, product design and development, branding, and business development services (hereinafter, the “Services”) to the Company upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement, the Parties agree as follows:
1.
Consulting Services.
(a)
Services. In consultation with the Chief Executive Officer (the “CEO”) and Board of Directors of the Company (the “Board”), the Executive Consultant shall undertake to provide the Services to the Company. Company desires to engage Executive Consultant in connection with the Services. Concurrent with the Effective Date, Executive Consultant agrees to serve as Chief Marketing Officer of the Company. Executive Consultant shall not have any authority to execute contracts or make any commitments on behalf of the Company. Executive Consultant shall use his commercially reasonable best efforts to preserve the confidentiality of confidential information designated as confidential by Company or that may be assumed to be confidential. Executive Consultant accepts the engagement provided in this Agreement.
(b)
Time Commitment. During the Term (as defined below), the Executive Consultant agrees to devote such time as is necessary to provide Services to the Company, however, Executive Consultant shall not be required to devote his full time and attention to the Services.
(c)
Point of Contact. In performing the Services, Executive Consultant shall report to such person as may, from time to time, be designated by the Board of Directors of the Company (the “Board”), or Company’s Chief Executive Officer, or such other Executive Officer of the Company.
(d)
Reports. Executive Consultant agrees that Executive Consultant shall keep the Company advised as to Executive Consultant’s progress in performing the Services under this Agreement, and that Executive Consultant will, as requested by the Company, prepare written reports with respect his activities. Executive Consultant certifies that Executive Consultant has no outstanding agreement or obligation that conflicts with any of the provisions of this Agreement or that would preclude Executive Consultant from complying with the provisions of this Agreement. Executive Consultant further certifies that Executive Consultant will not enter into any such conflicting agreement during the Term of this Agreement.
(e)
No Conflicting Obligations. Executive Consultant certifies that Executive Consultant has no outstanding agreement or obligation that conflicts with any of the provisions of this Agreement or that would
1
preclude Executive Consultant from complying with the provisions of this Agreement. Executive Consultant further certifies that Executive Consultant will not enter into any such conflicting agreement during the Term of this Agreement. Upon the Company’s shares of common stock being publicly listed on a U.S. trading platform or national exchange, Executive Consultant is required to promptly disclose to the Board any new outside activities or interests within the cannabis and CBD industry, including ownership or participation in the development of inventions, that conflict or may conflict with the interests of the Company in the Services to be provided under this Agreement. Prompt disclosure is required if the activity or interest is related, directly or indirectly, to any activity that Executive Consultant may be involved with on behalf of the Company.
(f)
Standard of Service. The Executive Consultant will provide Services in a timely, accurate, professional, and competent manner in accordance with the terms of this Agreement and in compliance with all applicable laws and regulations.
(g)
Future Business Assignments. Upon the Company achieving a market capitalization of twenty million dollars ($20,000,000), Executive Consultant shall immediately negotiate in good faith with the Company a mutually equitable agreement to assign any and all of Executive Consultant’s cannabis industry and CBD industry related consulting engagements and clients to the Company; provided, however, that Executive Consultant’s relationship with Bath and Body Works shall not be subject to this Section 1(g).
2.
Compensation. In consideration for providing the Services hereunder, the Company shall pay to Executive Consultant a cash fee of $5,000 per month (the "Monthly Fees"). Executive Consultant shall provide the Company with a written invoice for each Monthly Fee. Simultaneously with the execution hereof, the Executive Consultant is purchasing from the Company 718,403 shares of the Company’s common stock for the purchase price, and subject to the terms and conditions specified in, a Restricted Stock Purchase Agreement, of even date herewith, between the Executive Consultant and the Company, which is attached hereto as Exhibit A. In addition, subject to pre-approval in writing by the Board in its sole discretion, (i) in consideration for commencing the design of additional product brands (each, a “Brand Design”) (in addition to the “Oeuvre” luxury skin care brand and related product line), the Company shall issue to Executive Consultant a common stock option to acquire shares of common stock equal to one percent (1%) of the issued and outstanding common stock of the Company upon the commencement by Consultant of each Brand Design, and (ii) in the event the Company commences the manufacturing and production of a Brand Design (each, a “Brand Production”) (in addition to the “Oeuvre” luxury skin care brand and related product line), the Company shall issue to Executive Consultant a common stock option to acquire shares of common stock equal to one percent (1%) of the issued and outstanding common stock of the Company upon the commencement by the Company of each Brand Production. The Company shall reimburse Executive Consultant for all reasonable out-of-pocket expenses that are pre-approved in writing by the Company including without limitation acceptable travel and lodging, printing, legal, and mailing cost that Consultant may incur in performance of the Services under this Agreement. Payment of such expenses shall be made against receipt of an expense statement, with customary receipts and vouchers, in accordance with the Company's current policies. The Parties acknowledge that additional compensation may be paid to Executive Consultant at the Board’s sole discretion.
3.
Independent Contractor Relationship. This Agreement is intended to create an independent contractor relationship between Executive Consultant and Company.
(a)
No Taxes Withheld from Compensation. Company will not withhold any taxes from any compensation paid to Executive Consultant according to this Agreement. It is acknowledged and agreed by the Parties that Company has not, is not, and shall not be obligated to make, and that it is the sole responsibility of Executive Consultant to make, in connection with compensation paid to Executive Consultant according to this Agreement, all periodic filings and payments required to be made in connection with any withholding taxes, FICA taxes, Federal unemployment taxes, and any other federal, state or local taxes, payments or filings required to be paid, made or maintained.
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(b)
Executive Consultant Controls Time and Effort. It is agreed that Company is interested only in the ultimate results of Executive Consultant’s activities pursuant to this Agreement, and that Executive Consultant shall have exclusive control over the time and effort invested by Executive Consultant pursuant to this Agreement, and the manner and means of Executive Consultant’s performance under this Agreement.
(c)
Independence from Company. The Parties further agree that Executive Consultant shall have no control or supervision over Company’s employees, officers, directors, representatives or affiliates, with the exception of those individuals reporting directly to the CMO. Executive Consultant will not represent that it is an employee of Company. Executive Consultant shall at all times represent himself and be construed as independent of Company. Executive Consultant shall not, under any circumstances, be deemed to be a servant or employee of Company for any purpose, including for Federal tax purposes. Executive Consultant’s relationship to Company is that of a founder and an independent contractor, and nothing in this Agreement shall constitute this Agreement as a joint venture or partnership between Executive Consultant and Company. Executive Consultant shall have no authority to bind Company or any of its employees, officers, directors, representatives or affiliates by any promise or representation, oral or otherwise, unless specifically authorized in a writing bearing an authorized signature of a Company officer, director or representative. All discussions and negotiations with any source for funding and/or financing shall be conducted by Company.
4.
Confidentiality.
(a)
Definition. For purposes of this Agreement, the term “Confidential Information” means any data, information, or material related to the Company, customers, licensees, or its affiliates, whether provided or retained in writing, verbally, by electronic or other data transmission, or in any other form or media whatsoever or obtained through on-site visits at the Company’s or its affiliates’ facilities and whether furnished or made available before or after the date of this Agreement. Notwithstanding the foregoing or anything to the contrary in this Agreement, Confidential Information does not include any of the following: (i) information that is or subsequently comes within the public domain without any violation of this Agreement and through no fault of the Parties; and (ii) information that is independently developed by a third party and is disclosed on a non-confidential basis by such third party, provided that such third party is not subject to any duty of confidentiality with respect to the information. To the extent that Executive Consultant is required by law or an order of a court of competent jurisdiction or applicable governmental, quasi-governmental or regulatory body to disclose Confidential Information, Executive Consultant shall promptly notify the Company of its disclosure obligation (unless prohibited by such law or order) and shall provide the Company a reasonable opportunity to (and, upon the Company’s request, reasonably assist in) challenge the obligation to disclose the Confidential Information, seek protection against the disclosure, and have the disclosure made under a protective order; provided, however, that any such disclosure by Executive Consultant will be limited to that required by the applicable law or order; and provided further, that any such Confidential Information so disclosed shall remain, for all purposes under this Agreement, Confidential Information.
(b)
Prohibition Against Unauthorized Disclosure and Use. At any time during the Term or at any time thereafter, the Executive Consultant agrees that it will not, directly or indirectly, make any unauthorized disclosure or use of the Confidential information of the Company, its customers, licensees, or its affiliates. The phrase “unauthorized disclosure or use” includes, but is not limited to, any disclosure or use outside the ordinary course of the Executive Consultant’s performance of Services for the Company, such as use for the Executive Consultant’s benefit or for the benefit of third parties without the express written permission of the Company. In addition, the Executive Consultant shall take all precautions with the Company’s Confidential Information that it takes with its own confidential information, which, at a minimum, shall be taking all steps reasonably necessary to insure the maintenance of confidentiality.
(c)
Return of Confidential or Proprietary Information. Upon the earlier of the Company’s request or the expiration or termination of this Agreement, the Executive Consultant shall immediately turn over to the Company, and not keep or deliver to any other person (or destroy if it cannot be returned), all Confidential Information of the Company or its customers, licensees, or affiliates that the Executive Consultant obtained through the course of providing Services to the Company.
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5.
Intellectual Property.
(a)
Intellectual Property. The Executive Consultant agrees that all Intellectual Property (defined below) that the Executive Consultant conceives, discovers, identifies, creates, develops, or secures in performing the Services shall be the exclusive property of and be exclusively owned by the Company. The Executive Consultant shall promptly provide the Company with written notice of (and copies of) all Intellectual Property that the Executive Consultant conceives, discovers, identifies, creates, develops, or secures on behalf of the Company.
(b)
Work Product. Any and all deliverables produced by Executive Consultant in the course of its performance of Services (the “Work Product”) will be the sole and exclusive property of the Company, and Executive Consultant will have no rights to retain or use any of the Work Product. The Executive Consultant shall promptly provide the Company with written notice of and copies of all Work Product as and when created or as and when requested by the Company.
(c)
Works for Hire. The Company and Executive Consultant expressly agree that the Intellectual Property and Work Product are part of a collective work and, to the extent legally permissible, constitute “work made for hire”, and that the Company shall be considered the “author” of the Intellectual Property and Work Product for purposes of 17 U.S.C. §§ 101 and 201 and any other applicable copyright laws. The Company will own the copyright, the right to register and renew the copyright, the right of first publication, the reproduction right, the performance right, and all other rights provided by the Copyright Act of 1976, as amended, in each “work made for hire.”
(d)
Assignment. The Executive Consultant hereby expressly assigns and transfers to the Company all of its right, title, and interest of any kind in or to any Intellectual Property conceived, discovered, identified, created, developed, or secured in performing the Services and the Work Product. At any time (including, without limitation, after the expiration of the Term) upon the Company’s request, the Executive Consultant shall at the Company’s expense execute and deliver any and all assignments and other documents, take such other actions, and render such other assistance (including, without limitation, filings with governmental agencies) as the Company deems reasonably necessary or appropriate to: (i) give effect to the Company’s ownership of the Intellectual Property and Work Product; (ii) perfect and protect the Company’s right, title, and interest in and to the Intellectual Property or Work Product; or (iii) otherwise give effect to the provisions of this section of the Agreement. Without limitation to the foregoing, the Executive Consultant hereby irrevocably appoints the Company as its attorney-in-fact, coupled with an interest, grants the Company a power-of- attorney, coupled with an interest, and authorizes the Company to execute any such documents and take any such actions in such Executive Consultant’s name and on the Executive Consultant’s behalf.
(e)
Moral Rights. To the extent allowed by applicable law, the assignment of the Intellectual Property and Work Product includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral” and the like (collectively, the “Moral Rights”). To the extent Executive Consultant retains any such Moral Rights under applicable law, Executive Consultant hereby irrevocably and unconditionally waives, to the maximum extent permitted by law, and agrees not to institute, support, maintain, or permit any action or proceeding on the basis of, or otherwise assert, such Moral Rights against the Company or its affiliates, successors, licensees, or assigns. Further, the Executive Consultant expressly consents to any action or omission of the Company or its affiliates, successors, licensees, or assigns that would violate its Moral Rights.
(f)
Definition. For purposes of this Agreement, the term “Intellectual Property” shall include (without limitation) all of the following, whether or not registered, patentable, or reduced to practice, and all worldwide rights and goodwill in or related thereto: (i) the “Oeuvre” luxury skin care brand, product line and any and all intellectual property related to or in connection with such Oeuvre brand and product line, (ii) patents, (iii) trademarks, service marks, trade dress, trade names, and corporate names, (iv) copyrights, (v) trade secrets, (vi) ideas, products, know-how, information, documents, inventions, discoveries, innovations, improvements, business and product developments, development plans, and other developments of any kind, (vii) computer programs and software, source code, object code, software routines, firmware routines, technology, software libraries, devices, tools, machines, apparatus, appliances, design practices,
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processes, methods, formulas, designs, data, techniques, and products, (viii) applications, registrations, continuations, renewals, extensions and similar items related to any of the foregoing, (ix) any other proprietary information, intellectual property, and similar items of any kind, (x) Confidential Information related to any of the foregoing, (xi) any tangible manifestations of any of the foregoing, and (xii) the right to sue and collect for infringement of the foregoing.
6.
Non-Competition; Non-Solicitation. Commencing on the date hereof and ending on the last day of the Restricted Period (as defined below), Executive Consultant covenants and agrees that he will not, without the Company’s prior written consent, directly or indirectly, either on behalf of himself or on behalf of any business venture, as an employee, consultant, partner, principal, stock holder, officer, director, trustee, agent, or otherwise (other than on behalf of the Company or its Affiliates):
(A)
be employed by, engage or participate in the ownership, management, operation or control of, or act in any advisory, expert, consulting or other capacity for, any entity or individual that competes directly with the Company or its Affiliates in the United States; provided, however, that the Company expressly acknowledges that Executive Consultant currently maintains consulting engagements with clients which operate within the cannabis and CBD markets. In addition, the Company expressly acknowledges that Executive Consultant’s company, Mansour Design (“Mansour Design”), is currently in the process of developing brand concepts for the “Prestige”, “Millennial” and “Mass” market segments (the “Existing Market Segments”) for other clients of Executive Consultant. The Company expressly agrees that Mansour Design is free to continue to operate in the Existing Market Segments.
(B)
solicit or divert any business or any customer from the Company or its Affiliates or assist any person, firm, corporation or other entity in doing so or attempting to do so;
(C)
cause or seek to cause any person, firm or corporation to refrain from dealing or doing business with the Company or its Affiliates or assist any person, firm, corporation or other entity in doing so; or
(D)
hire, solicit or divert from the Company or its Affiliates any of their respective employees, or agents who have, at any time during the immediately preceding one (1) year period from the date hereof or during the Restricted Period, been engaged by the Company or its Affiliates, nor assist any person, firm, corporation or other entity in doing so.
As used in this Agreement, the term “Affiliates” shall mean any entity controlling, controlled by or under the common control of the Company. For the purpose of this Agreement, “control” shall mean the direct or indirect ownership of thirty (30%) percent or more of the outstanding shares or other voting rights of an entity or possession, directly or indirectly, of the power to direct or cause the direction of management and policies of an entity.
As used in this Agreement, “Restricted Period” means the period commencing on the date hereof and ending two (2) years from the date that the Executive Consultant ceases to be an Executive Consultant of the Company or its successors.
7.
Term; Termination; Effect of Termination.
(a)
The term of this Agreement shall be for a period of thirty-six (36) months (the “Term”); provided, however, that the Company may terminate this Agreement at any time for Cause (as defined below). The Parties may mutually agree to terminate this Agreement. The Parties may mutually agree to extend the Term of this Agreement, and if the Parties so agree, then such extension shall be documented in a separate written agreement between the Parties. Upon the termination of this Agreement: (i) the Executive Consultant will deliver copies of all complete or incomplete projects to the Company and will use reasonable efforts to transition any requested Services to the Company or a third party; and (ii) all rights and obligations under this Agreement shall automatically and immediately cease and terminate, except: (A) any rights or obligations that accrued under this Agreement prior to the effective date of such termination; and (B) any rights or obligations that survive the termination of this Agreement by their own terms or that are necessary for a reasonable interpretation of this Agreement post-termination.
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(b)
For purposes of this Agreement, “Cause” shall mean:
i.
the Executive Consultant’s willful failure to materially perform Executive Consultant’s duties (other than any such failure resulting from incapacity due to physical or mental illness);
ii.
the Executive Consultant’s willful failure to materially comply with any valid and legal directive of the Board or the CEO;
iii.
the Executive Consultant engaged in gross misconduct, or gross incompetence which is materially detrimental to the Company;
iv.
the Executive Consultant willfully failed to comply in any material respect with the Agreement, the Company’s share dealing code, or any other reasonable policies of the Company where non-compliance would be materially detrimental to the Company;
v.
the Executive Consultant’s willful engagement in dishonesty, illegal conduct, or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;
vi.
the Executive Consultant’s embezzlement, misappropriation, or fraud, whether or not related to the Executive Consultant’s employment with the Company;
vii.
the Executive Consultant’s conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude, if such felony or other crime is work-related, materially impairs the Executive Consultant’s ability to perform services for the Company, or results in material reputational or financial harm to the Company or its affiliates;
viii.
the Executive Consultant’s material violation of the Company’s written policies or codes of conduct related to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct; or
ix.
the Executive Consultant’s material breach of any material obligation under this Agreement, or the Company’s written policies or codes of conduct, or any other written agreement between the Executive Consultant and the Company;
8.
Return of Materials. Upon expiration or termination of this Agreement, for whatever reason, the Executive Consultant shall return to the Company all of the Company’s records of any sort and in any form, including, without limitation: all literature, supplies, letters, written or printed forms, phone lists, customer information, product information, pricing information, information as to sources of services, Company financial information, and memoranda pertaining to the Company’s or any of its affiliates’ business or property. All such items shall be considered the property of Company at all times. The Executive Consultant shall also, immediately upon termination or expiration of this Agreement, return to the Company all other Company property in Executive Consultant’s possession.
9.
Mutual Indemnification. Executive Consultant and the Company shall mutually indemnify, defend, and hold harmless each other, and their members, managers, officers, employees, agents, representatives, successors, and assigns (collectively, the “Indemnified Parties”), from and against any claims, losses, damages, penalties, liabilities, and expenses of every kind and nature whatsoever (including attorneys’ fees and expenses and expenses in connection with investigating, preparing for, or defending any action or claim) suffered or incurred by an Indemnified Party arising out of or resulting from: (a) any breach of this Agreement by either Party, or their respective agents and representatives, or (b) the negligent, reckless, or intentional acts or omissions of either Party, or their respective agents and representatives. In the event either
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Party is successful in asserting its rights under this Agreement, such indemnified Party shall be entitled to receive from the other indemnifying Party all costs associated with the indemnified Party’s enforcement of this Agreement, including, without limitation, attorneys’ fees, costs, and expenses.
10.
Right to Engage in Other Activities. The Services provided under this Agreement are not to be deemed exclusive. To the extent the Executive Consultant’s other activities are not interfering in any way with the Executive Consultant’s performance of Services, nothing contained in this Agreement shall restrict the Executive Consultant from engaging in any other business or devoting time and attention to the management, investment, involvement, or other aspects of any other business. However, if the Company determines (in its sole discretion) that the Executive Consultant’s other activities are interfering with the performance of the Services, then the Company may request that the Executive Consultant cease such other activities, and if the Executive Consultant does not comply with the Company’s request within five (5) business days, then the Company may reduce the Monthly Fee payable to the Executive Consultant in proportion to the extent of the interference with the Services (as determined by the Company in its sole discretion), or negotiate with Executive Consultant in good faith to resolve the monetary loss to the Company as a result of Executive Consultant’s lack of performance due to interference of the Services. Nothing in this Agreement shall be interpreted to provide that the Executive Consultant shall be the exclusive provider of Services to the Company.
11.
Notice. Any notice required under this Agreement shall be deemed duly delivered (and shall be deemed to have been duly received if so given), if personally delivered, sent by a reputable courier service, or mailed by registered or certified mail, postage prepaid, return receipt requested, addressed to the Parties at the addresses set forth above or to such other address as any Party may have furnished to the other in writing in accordance with this Section.
12.
Law and Jurisdiction. The laws of the State of New York apply to this Agreement, without deference to the principles of conflicts of law. Both jurisdiction and venue for any litigation pursuant to this Agreement shall be proper in the courts of New York.
13.
Mutually Equitable Relief. The Company and Executive Consultant acknowledge that a violation of this Agreement by either Party would result in irreparable harm to the non-violating Party and that damages would be an inadequate remedy. Therefore the Parties agree that in such instance the non-violating Party is entitled, in addition to any other remedies, to seek injunctive relief to secure the specific performance of this Agreement and to prevent a breach or contemplated breach of this Agreement. The Parties agree that in such instance the violating Party waives any requirement that the non-violating Party post a bond or other security in connection with any application for or order granting injunctive relief.
14.
Contractual Remedies Not Exclusive. The Parties acknowledge and agree that the remedies provided for in this Agreement are cumulative and are intended to be and are in addition to any other remedies available either Party, either Party, either at law or in equity.
15.
Severability. If the law does not allow a provision of this Agreement to be enforced, such unenforceable provision shall be amended to become enforceable and reflect the intent of the Parties, and the rest of the provisions of this Agreement shall remain in effect.
16.
Waiver. The failure of any Party, in any instance, to insist upon strict enforcement of the provisions of this Agreement shall not be construed to be a waiver or relinquishment of enforcement in the future, and the terms of this Agreement shall continue to remain in full force and effect.
17.
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, lawful assigns, heirs, and personal representatives. The Executive Consultant may not assign or delegate this Agreement without the prior written consent of the Company. Any purported assignment or delegation of this Agreement, in whole or in part, without the prior written consent of the Company shall be void and of no effect. The Company may freely assign or delegate this Agreement.
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18.
Amendment. This Agreement may only be amended or modified in a writing signed by both of the Parties and referring to this Agreement.
19.
Entire Agreement. This Agreement constitutes the entire agreement and final understanding of the Parties with respect to the subject matter of this Agreement and supersedes and terminates all prior and/or contemporaneous understandings and/or discussions between the Parties, whether written or verbal, express or implied, relating in any way to the subject matter of this Agreement.
20.
Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one in the same instrument. Confirmation of execution by electronic transmission of a facsimile signature shall be binding on the confirming Party.
SIGNING THIS AGREEMENT INDICATES ACCEPTANCE OF THE TERMS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
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Exhibit A
[Restricted Stock Purchase Agreement]
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EXHIBIT 10.5
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EXHIBIT 10.6
INDEPENDENT CONTRACTOR AGREEMENT
This Agreement is made and entered into, as of 05/01/2019, (“Effective Date”), by and between Jaguaring Co. dba, CannAvolve Inc. (“Company”), having a principal place of business at 2211 Elliott Ave Suite 200, Seattle, WA 98121 and Dante Jones, an individual, of the state of Washington, having a principal place of business at 929 N. 82nd St. Seattle, WA 98103 (“Contractor”).
1.
Engagement of Services. Company may issue Project Assignments to Contractor in the form attached to this Agreement as Exhibit A (Services). A Project Assignment will become binding when both parties have signed it and once signed, Contractor will be obligated to provide the services as specified in such Project Assignment. The terms of this Agreement will govern all Project Assignments and Services undertaken by Contractor for Company. Contractor will not subcontract or otherwise delegate performance of any work to third parties (“Subcontractors”) without, in each instance, first executing an agreement with each Subcontractor that contains (a) confidentiality provisions substantially similar to Contractor’s confidentiality obligations under this Agreement, and (b) intellectual property rights provisions that, among other things, assign all Company Innovations (defined below) resulting from such Subcontractor’s work to Contractor. Company will have the right to approve the form of such confidentiality and assignment agreements between Contractor and Subcontractors, or to provide its own form of agreement for execution by Subcontractors. Upon request by Company, Contractor will provide copies of all confidentiality and proprietary rights assignment agreements executed by Subcontractors performing services for Company’s benefit.
2.
Compensation; Timing. Company will pay Contractor the fee set forth in each Project Assignment for the services provided as specified in such Project Assignment. If provided for in the Project Assignment, Company will reimburse Contractor’s expenses no later than thirty (30) days after Company’s receipt of Contractor’s invoice, provided that reimbursement for expenses may be delayed until such time as Contractor has furnished reasonable documentation for authorized expenses as Company may reasonably request. Upon termination of this Agreement for any reason, Contractor will be (a) paid fees on the basis stated in the Project Assignment(s) and (b) reimbursed only for expenses that are incurred prior to termination of this Agreement and which are either expressly identified in a Project Assignment or approved in advance in writing by an authorized Company manager.
3.
Independent Contractor Relationship. Contractor’s relationship with Company is that of an independent contractor, and nothing in this Agreement is intended to, or will be construed to, create a partnership, agency, joint venture, employment or similar relationship. Contractor will not be entitled to any of the benefits that Company may make available to its employees, including, but not limited to, group health or life
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insurance, profit-sharing or retirement benefits. Contractor is not authorized to make any representation, contract or commitment on behalf of Company unless specifically requested or authorized in writing to do so by a Company manager. Contractor is solely responsible for, and will file, on a timely basis, all tax returns and payments required to be filed with, or made to, any federal, state or local tax authority with respect to the performance of services and receipt of fees under this Agreement. Contractor is solely responsible for, and must maintain adequate records of, expenses incurred in the course of performing services under this Agreement. No part of Contractor’s compensation will be subject to withholding by Company for the payment of any social security, federal, state or any other employee payroll taxes. Company will regularly report amounts paid to Contractor by filing Form 1099-MISC with the Internal Revenue Service as required by law.
Disclosure and Assignment of Work Resulting from Project Assignments.
4.
“Innovations” and “Company Innovations” Definitions. “Innovations” means all discoveries, designs, developments, improvements, inventions (whether or not protectable under patent laws), works of authorship, information fixed in any tangible medium of expression (whether or not protectable under copyright laws), trade secrets, know-how, ideas (whether or not protectable under trade secret laws), mask works, trademarks, service marks, trade names and trade dress. “Company Innovations” means Innovations that Contractor, solely or jointly with others, conceives, develops or reduces to practice related to any Project Assignment.
5.
Disclosure and Assignment of Company Innovations. Contractor agrees to maintain adequate and current records of all Company Innovations, which records will be and remain the property of Company. Contractor agrees to promptly disclose and describe to Company all Company Innovations. Contractor hereby does and will assign to Company or Company’s designee all of Contractor’s right, title and interest in and to any and all Company Innovations and all associated records. To the extent any of the rights, title and interest in and to Company Innovations cannot be assigned by Contractor to Company, Contractor hereby grants to Company an exclusive, royalty-free, transferable, irrevocable, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to practice such non-assignable rights, title and interest. To the extent any of the rights, title and interest in and to the Company Innovations can neither be assigned nor licensed by Contractor to Company, Contractor hereby irrevocably waives and agrees never to assert such non-assignable and non-licensable rights, title and interest against Company or any of Company’s successors in interest.
6.
Assistance. Contractor agrees to perform, during and after the term of this Agreement, all acts that Company deems necessary or desirable to permit and assist Company, at its expense, in obtaining, perfecting and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company Innovations as provided to Company under this Agreement. If Company is unable for any reason to secure Contractor’s signature to any document required to file, prosecute, register or memorialize the assignment of any rights under any Company Innovations as provided
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under this Agreement, Contractor hereby irrevocably designates and appoints Company and Company’s duly authorized officers and agents as Contractor’s agents and attorneys-in-fact to act for and on Contractor’s behalf and instead of Contractor to take all lawfully permitted acts to further the filing, prosecution, registration, memorialization of assignment, issuance and enforcement of rights under such Company Innovations, all with the same legal force and effect as if executed by Contractor. The foregoing is deemed a power coupled with an interest and is irrevocable.
7.
Out-of-Scope Innovations. If Contractor incorporates or permits to be incorporated any Innovations relating in any way, at the time of conception, reduction to practice, creation, derivation, development or making of such Innovation, to Company’s business or actual or demonstrably anticipated research or development but which were conceived, reduced to practice, created, derived, developed or made by Contractor (solely or jointly) either unrelated to Contractor’s work for Company under this Agreement or prior to the Effective Date (collectively, the “Out-of-Scope Innovations”) into any of the Company Innovations, then Contractor hereby grants to Company and Company’s designees a non-exclusive, royalty-free, irrevocable, worldwide, fully paid-up license (with rights to sublicense through multiple tiers of sublicensees) to practice all patent, copyright, moral right, mask work, trade secret and other intellectual property rights relating to such Out-of-Scope Innovations. Notwithstanding the foregoing, Contractor agrees that Contractor will not incorporate, or permit to be incorporated, any Innovations conceived, reduced to practice, created, derived, developed or made by others or any Out-of-Scope Innovations into any Company Innovations without Company’s prior written consent.
Confidentiality.
8.
Definition of Confidential Information. “Confidential Information” means (a) any technical and non-technical information related to the Company’s business and current, future and proposed products and services of Company, including for example and without limitation, Company Innovations, Company Property (as defined in Section 11 (“Ownership and Return of Confidential Information and Company Property”)), and Company’s information concerning research, development, design details and specifications, financial information, procurement requirements, engineering and manufacturing information, customer lists, business forecasts, sales information and marketing plans and (b) any information that may be made known to Contractor and that Company has received from others that Company is obligated to treat as confidential or proprietary.
9.
Nondisclosure and Nonuse Obligations. Except as permitted in this Section, Contractor will not use, disseminate or in any way disclose the Confidential Information. Contractor may use the Confidential Information solely to perform Project Assignment(s) for the benefit of Company. Contractor will treat all Confidential Information with the same degree of care as Contractor accords to Contractor’s own confidential information,
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but in no case will Contractor use less than reasonable care. If Contractor is not an individual, Contractor will disclose Confidential Information only to those of Contractor’s employees who have a need to know such information. Contractor certifies that each such employee will have agreed, either as a condition of employment or in order to obtain the Confidential Information, to be bound by terms and conditions at least as protective as those terms and conditions applicable to Contractor under this Agreement. Contractor will immediately give notice to Company of any unauthorized use or disclosure of the Confidential Information. Contractor will assist Company in remedying any such unauthorized use or disclosure of the Confidential Information. Contractor agrees not to communicate any information to Company in violation of the proprietary rights of any third party.
10.
Exclusions from Nondisclosure and Nonuse Obligations. Contractor’s obligations under Section 9 (Nondisclosure and Nonuse Obligations) will not apply to any Confidential Information that Contractor can demonstrate (a) was in the public domain at or subsequent to the time such Confidential Information was communicated to Contractor by Company through no fault of Contractor; (b) was rightfully in Contractor’s possession free of any obligation of confidence at or subsequent to the time such Confidential Information was communicated to Contractor by Company; or (c) was developed by employees of Contractor independently of and without reference to any Confidential Information communicated to Contractor by Company. A disclosure of any Confidential Information by Contractor (i) in response to a valid order by a court or other governmental body or (ii) as otherwise required by law will not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes; provided, however, that Contractor will provide prompt prior written notice thereof to Company to enable Company to seek a protective order or otherwise prevent such disclosure.
11.
Ownership and Return of Confidential Information and Company Property. All Confidential Information and any materials (including, without limitation, documents, drawings, papers, diskettes, tapes, models, apparatus, sketches, designs and lists) furnished to Contractor by Company, whether delivered to Contractor by Company or made by Contractor in the performance of services under this Agreement and whether or not they contain or disclose Confidential Information (collectively, the “Company Property”), are the sole and exclusive property of Company or Company’s suppliers or customers. Contractor agrees to keep all Company Property at Contractor’s premises unless otherwise permitted in writing by Company. Within five (5) days after any request by Company, Contractor will destroy or deliver to Company, at Company’s option, (a) all Company Property and (b) all materials in Contractor’s possession or control that contain or disclose any Confidential Information. Contractor will provide Company a written certification of Contractor’s compliance with Contractor’s obligations under this Section.
12.
Observance of Company Rules. At all times while on Company’s premises, Contractor will observe Company’s rules and regulations with respect to conduct, health, safety and protection of persons and property.
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13.
No Conflict of Interest. During the term of this Agreement, Contractor will not accept work, enter into a contract or accept an obligation inconsistent or incompatible with Contractor’s obligations, or the scope of services to be rendered for Company, under this Agreement. Contractor warrants that, to the best of Contractor’s knowledge, there is no other existing contract or duty on Contractor’s part that conflicts with or is inconsistent with this Agreement. Contractor agrees to indemnify Company from any and all loss or liability incurred by reason of the alleged breach by Contractor of any services agreement with any third party.
Term and Termination.
14.
Term. This Agreement is effective as of the Effective Date set forth above and will terminate 5 years (60 months) after Effective Date.
15.
Termination by Company. Except during the term of a Project Assignment, Company may terminate this Agreement without cause at any time, with termination effective fifteen (15) days after Company’s delivery to Contractor of written notice of termination. Company also may terminate this Agreement (a) immediately upon Contractor’s breach of Section 5 (Disclosure and Assignment of Work Resulting from Project Assignments), 8 (Confidentiality) or 18 (Non Interference with Business), or
(b) immediately for a material breach by Contractor if Contractor’s material breach of any other provision under this Agreement or obligation under a Project Assignment is not cured within ten (10) days after the date of Company’s written notice of breach.
16.
Termination by Contractor. Contractor may terminate this Agreement without cause at any time, with termination effective fifteen (15) days after Contractor’s delivery to Company of written notice of termination. Contractor also may terminate this Agreement immediately for a material breach by Company if Company’s material breach of any provision of this Agreement is not cured within ten (10) days after the date of Contractor’s written notice of breach.
17.
Effect of Expiration or Termination. Upon expiration or termination of this Agreement, Company will pay Contractor for services performed under this Agreement as set forth in each then pending Project Assignment(s). The definitions contained in this Agreement and the rights and obligations contained in this Section and Sections 5 (Disclosure and Assignment of Work Resulting from Project Assignments), 8 (Confidentiality), 11 (Ownership and Return of Confidential Information and Company Property), 18 (Non Interference with Business) and 19-25 (General Provisions) will survive any termination or expiration of this Agreement.
18.
Non Interference with Business. During this Agreement, and for a period of two (2) years immediately following the termination or expiration of this Agreement,
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Contractor agrees not to solicit or induce any employee or independent contractor to terminate or breach an employment, contractual or other relationship with Company.
General Provisions.
19.
Successors and Assigns. Contractor may not subcontract or otherwise delegate Contractor’s obligations under this Agreement without Company’s prior written consent. Subject to the foregoing, this Agreement will be for the benefit of Company’s successors and assigns, and will be binding on Contractor’s assignees.
20.
Injunctive Relief. Contractor’s obligations under this Agreement are of a unique character that gives them particular value; Contractor’s breach of any of such obligations will result in irreparable and continuing damage to Company for which money damages are insufficient, and Company will be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including money damages if appropriate).
21.
Notices. Any notice required or permitted by this Agreement will be in writing and will be delivered as follows, with notice deemed given as indicated: (a) by personal delivery, when actually delivered; (b) by overnight courier, upon written verification of receipt; (c) by facsimile transmission, upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice will be sent to the addresses set forth above or to such other address as either party may provide in writing.
22.
Governing Law; Forum. This Agreement will be governed in all respects by the laws of the United States of America and by the laws of the State of Washington, as such laws are applied to agreements entered into and to be performed entirely within Washington between Washington residents. Each of the parties irrevocably consents to the exclusive personal jurisdiction of the federal and state courts located in King County, Washington, as applicable, for any matter arising out of or relating to this Agreement, except that in actions seeking to enforce any order or any judgment of such federal or state courts located in King County, Washington, such personal jurisdiction will be nonexclusive.
23.
Severability. If a court of law holds any provision of this Agreement to be illegal, invalid or unenforceable, (a) that provision will be deemed amended to achieve an economic effect that is as near as possible to that provided by the original provision and (b) the legality, validity and enforceability of the remaining provisions of this Agreement will not be affected thereby.
24.
Waiver; Modification. If Company waives any term, provision or Contractor’s breach of this Agreement, such waiver will not be effective unless it is in writing and signed by Company. No waiver by a party of a breach of this Agreement will
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constitute a waiver of any other or subsequent breach by Contractor. This Agreement may be modified only by mutual written agreement of authorized representatives of the parties.
25.
Entire Agreement. This Agreement constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or contemporaneous agreements concerning such subject matter, written or oral.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
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EXHIBIT A
PROJECT ASSIGNMENT
Title
Services:
Chief Executive Officer
Payment of Fees. Fee will be:
Ô
Monthly Consulting Fee: $10,000 per month
Ô
Vesting Stock in Company: 10,000 shares of Class B Stock per month
NOTE: This Project Assignment is governed by the terms of an Independent Contractor Services Agreement in effect between Company and Contractor. Any item in this Project Assignment that is inconsistent with such agreement is invalid.
IN WITNESS WHEREOF, the parties have executed this Project Assignment as of the later date below.
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“
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EXHIBIT 10.7
EXHIBIT A
PROJECT ASSIGNMENT
Title
Services:
President
Payment of Fees. Fee will be:
Ô
Monthly Consulting Fee: $5,000 per month. Monthly fee will be revisited based on cash flow. Any increase will be directly related to cash flow from sales.
NOTE: The Project Assignment dated
5/01/2019 is null and void. This Project Assignment supersedes the Project Assignment dated 5/01/2019. This Project Assignment is governed by the terms of an Independent Contractor Services Agreement in effect between Company and Contractor. Any item in this Project Assignment that is inconsistent with such agreement is invalid.
IN WITNESS WHEREOF, the parties have executed this Project Assignment as of the date below.
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EXHIBIT 10.8
INDEPENDENT CONTRACTOR AGREEMENT
This Agreement is made and entered into, as of 05/01/2019, (“Effective Date”), by and between Jaguaring Co. dba, CannAvolve Inc. (“Company”), having a principal place of business at 2211 Elliott Ave Suite 200, Seattle, WA 98121 and Eric Swaney, an individual, of the state of Washington, having a principal place of business at 812 N. 162nd Pl. Shoreline, WA 98133 (“Contractor”).
1.
Engagement of Services. Company may issue Project Assignments to Contractor in the form attached to this Agreement as Exhibit A (Services). A Project Assignment will become binding when both parties have signed it and once signed, Contractor will be obligated to provide the services as specified in such Project Assignment. The terms of this Agreement will govern all Project Assignments and Services undertaken by Contractor for Company. Contractor will not subcontract or otherwise delegate performance of any work to third parties (“Subcontractors”) without, in each instance, first executing an agreement with each Subcontractor that contains (a) confidentiality provisions substantially similar to Contractor’s confidentiality obligations under this Agreement, and (b) intellectual property rights provisions that, among other things, assign all Company Innovations (defined below) resulting from such Subcontractor’s work to Contractor. Company will have the right to approve the form of such confidentiality and assignment agreements between Contractor and Subcontractors, or to provide its own form of agreement for execution by Subcontractors. Upon request by Company, Contractor will provide copies of all confidentiality and proprietary rights assignment agreements executed by Subcontractors performing services for Company’s benefit.
2.
Compensation; Timing. Company will pay Contractor the fee set forth in each Project Assignment for the services provided as specified in such Project Assignment. If provided for in the Project Assignment, Company will reimburse Contractor’s expenses no later than thirty (30) days after Company’s receipt of Contractor’s invoice, provided that reimbursement for expenses may be delayed until such time as Contractor has furnished reasonable documentation for authorized expenses as Company may reasonably request. Upon termination of this Agreement for any reason, Contractor will be (a) paid fees on the basis stated in the Project Assignment(s) and (b) reimbursed only for expenses that are incurred prior to termination of this Agreement and which are either expressly identified in a Project Assignment or approved in advance in writing by an authorized Company manager.
3.
Independent Contractor Relationship. Contractor’s relationship with Company is that of an independent contractor, and nothing in this Agreement is intended to, or will be construed to, create a partnership, agency, joint venture, employment or similar relationship. Contractor will not be entitled to any of the benefits that Company may make available to its employees, including, but not limited to, group health or life
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insurance, profit-sharing or retirement benefits. Contractor is not authorized to make any representation, contract or commitment on behalf of Company unless specifically requested or authorized in writing to do so by a Company manager. Contractor is solely responsible for, and will file, on a timely basis, all tax returns and payments required to be filed with, or made to, any federal, state or local tax authority with respect to the performance of services and receipt of fees under this Agreement. Contractor is solely responsible for, and must maintain adequate records of, expenses incurred in the course of performing services under this Agreement. No part of Contractor’s compensation will be subject to withholding by Company for the payment of any social security, federal, state or any other employee payroll taxes. Company will regularly report amounts paid to Contractor by filing Form 1099-MISC with the Internal Revenue Service as required by law.
Disclosure and Assignment of Work Resulting from Project Assignments.
4.
“Innovations” and “Company Innovations” Definitions. “Innovations” means all discoveries, designs, developments, improvements, inventions (whether or not protectable under patent laws), works of authorship, information fixed in any tangible medium of expression (whether or not protectable under copyright laws), trade secrets, know-how, ideas (whether or not protectable under trade secret laws), mask works, trademarks, service marks, trade names and trade dress. “Company Innovations” means Innovations that Contractor, solely or jointly with others, conceives, develops or reduces to practice related to any Project Assignment.
5.
Disclosure and Assignment of Company Innovations. Contractor agrees to maintain adequate and current records of all Company Innovations, which records will be and remain the property of Company. Contractor agrees to promptly disclose and describe to Company all Company Innovations. Contractor hereby does and will assign to Company or Company’s designee all of Contractor’s right, title and interest in and to any and all Company Innovations and all associated records. To the extent any of the rights, title and interest in and to Company Innovations cannot be assigned by Contractor to Company, Contractor hereby grants to Company an exclusive, royalty-free, transferable, irrevocable, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to practice such non-assignable rights, title and interest. To the extent any of the rights, title and interest in and to the Company Innovations can neither be assigned nor licensed by Contractor to Company, Contractor hereby irrevocably waives and agrees never to assert such non-assignable and non-licensable rights, title and interest against Company or any of Company’s successors in interest.
6.
Assistance. Contractor agrees to perform, during and after the term of this Agreement, all acts that Company deems necessary or desirable to permit and assist Company, at its expense, in obtaining, perfecting and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company Innovations as provided to Company under this Agreement. If Company is unable for any reason to secure Contractor’s signature to any document required to file, prosecute, register or memorialize the assignment of any rights under any Company Innovations as provided
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under this Agreement, Contractor hereby irrevocably designates and appoints Company and Company’s duly authorized officers and agents as Contractor’s agents and attorneys-in-fact to act for and on Contractor’s behalf and instead of Contractor to take all lawfully permitted acts to further the filing, prosecution, registration, memorialization of assignment, issuance and enforcement of rights under such Company Innovations, all with the same legal force and effect as if executed by Contractor. The foregoing is deemed a power coupled with an interest and is irrevocable.
7.
Out-of-Scope Innovations. If Contractor incorporates or permits to be incorporated any Innovations relating in any way, at the time of conception, reduction to practice, creation, derivation, development or making of such Innovation, to Company’s business or actual or demonstrably anticipated research or development but which were conceived, reduced to practice, created, derived, developed or made by Contractor (solely or jointly) either unrelated to Contractor’s work for Company under this Agreement or prior to the Effective Date (collectively, the “Out-of-Scope Innovations”) into any of the Company Innovations, then Contractor hereby grants to Company and Company’s designees a non-exclusive, royalty-free, irrevocable, worldwide, fully paid-up license (with rights to sublicense through multiple tiers of sublicensees) to practice all patent, copyright, moral right, mask work, trade secret and other intellectual property rights relating to such Out-of-Scope Innovations. Notwithstanding the foregoing, Contractor agrees that Contractor will not incorporate, or permit to be incorporated, any Innovations conceived, reduced to practice, created, derived, developed or made by others or any Out-of-Scope Innovations into any Company Innovations without Company’s prior written consent.
Confidentiality.
8.
Definition of Confidential Information. “Confidential Information” means (a) any technical and non-technical information related to the Company’s business and current, future and proposed products and services of Company, including for example and without limitation, Company Innovations, Company Property (as defined in Section 11 (“Ownership and Return of Confidential Information and Company Property”)), and Company’s information concerning research, development, design details and specifications, financial information, procurement requirements, engineering and manufacturing information, customer lists, business forecasts, sales information and marketing plans and (b) any information that may be made known to Contractor and that Company has received from others that Company is obligated to treat as confidential or proprietary.
9.
Nondisclosure and Nonuse Obligations. Except as permitted in this Section, Contractor will not use, disseminate or in any way disclose the Confidential Information. Contractor may use the Confidential Information solely to perform Project Assignment(s) for the benefit of Company. Contractor will treat all Confidential Information with the same degree of care as Contractor accords to Contractor’s own confidential information,
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but in no case will Contractor use less than reasonable care. If Contractor is not an individual, Contractor will disclose Confidential Information only to those of Contractor’s employees who have a need to know such information. Contractor certifies that each such employee will have agreed, either as a condition of employment or in order to obtain the Confidential Information, to be bound by terms and conditions at least as protective as those terms and conditions applicable to Contractor under this Agreement. Contractor will immediately give notice to Company of any unauthorized use or disclosure of the Confidential Information. Contractor will assist Company in remedying any such unauthorized use or disclosure of the Confidential Information. Contractor agrees not to communicate any information to Company in violation of the proprietary rights of any third party.
10.
Exclusions from Nondisclosure and Nonuse Obligations. Contractor’s obligations under Section 9 (Nondisclosure and Nonuse Obligations) will not apply to any Confidential Information that Contractor can demonstrate (a) was in the public domain at or subsequent to the time such Confidential Information was communicated to Contractor by Company through no fault of Contractor; (b) was rightfully in Contractor’s possession free of any obligation of confidence at or subsequent to the time such Confidential Information was communicated to Contractor by Company; or (c) was developed by employees of Contractor independently of and without reference to any Confidential Information communicated to Contractor by Company. A disclosure of any Confidential Information by Contractor (i) in response to a valid order by a court or other governmental body or (ii) as otherwise required by law will not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes; provided, however, that Contractor will provide prompt prior written notice thereof to Company to enable Company to seek a protective order or otherwise prevent such disclosure.
11.
Ownership and Return of Confidential Information and Company Property. All Confidential Information and any materials (including, without limitation, documents, drawings, papers, diskettes, tapes, models, apparatus, sketches, designs and lists) furnished to Contractor by Company, whether delivered to Contractor by Company or made by Contractor in the performance of services under this Agreement and whether or not they contain or disclose Confidential Information (collectively, the “Company Property”), are the sole and exclusive property of Company or Company’s suppliers or customers. Contractor agrees to keep all Company Property at Contractor’s premises unless otherwise permitted in writing by Company. Within five (5) days after any request by Company, Contractor will destroy or deliver to Company, at Company’s option, (a) all Company Property and (b) all materials in Contractor’s possession or control that contain or disclose any Confidential Information. Contractor will provide Company a written certification of Contractor’s compliance with Contractor’s obligations under this Section.
12.
Observance of Company Rules. At all times while on Company’s premises, Contractor will observe Company’s rules and regulations with respect to conduct, health, safety and protection of persons and property.
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13.
No Conflict of Interest. During the term of this Agreement, Contractor will not accept work, enter into a contract or accept an obligation inconsistent or incompatible with Contractor’s obligations, or the scope of services to be rendered for Company, under this Agreement. Contractor warrants that, to the best of Contractor’s knowledge, there is no other existing contract or duty on Contractor’s part that conflicts with or is inconsistent with this Agreement. Contractor agrees to indemnify Company from any and all loss or liability incurred by reason of the alleged breach by Contractor of any services agreement with any third party.
Term and Termination.
14.
Term. This Agreement is effective as of the Effective Date set forth above and will terminate 5 years (60 months) after Effective Date.
15.
Termination by Company. Except during the term of a Project Assignment, Company may terminate this Agreement without cause at any time, with termination effective fifteen (15) days after Company’s delivery to Contractor of written notice of termination. Company also may terminate this Agreement (a) immediately upon Contractor’s breach of Section 5 (Disclosure and Assignment of Work Resulting from Project Assignments), 8 (Confidentiality) or 18 (Non Interference with Business), or
(b) immediately for a material breach by Contractor if Contractor’s material breach of any other provision under this Agreement or obligation under a Project Assignment is not cured within ten (10) days after the date of Company’s written notice of breach.
16.
Termination by Contractor. Contractor may terminate this Agreement without cause at any time, with termination effective fifteen (15) days after Contractor’s delivery to Company of written notice of termination. Contractor also may terminate this Agreement immediately for a material breach by Company if Company’s material breach of any provision of this Agreement is not cured within ten (10) days after the date of Contractor’s written notice of breach.
17.
Effect of Expiration or Termination. Upon expiration or termination of this Agreement, Company will pay Contractor for services performed under this Agreement as set forth in each then pending Project Assignment(s). The definitions contained in this Agreement and the rights and obligations contained in this Section and Sections 5 (Disclosure and Assignment of Work Resulting from Project Assignments), 8 (Confidentiality), 11 (Ownership and Return of Confidential Information and Company Property), 18 (Non Interference with Business) and 19-25 (General Provisions) will survive any termination or expiration of this Agreement.
18.
Non Interference with Business. During this Agreement, and for a period of two (2) years immediately following the termination or expiration of this Agreement,
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Contractor agrees not to solicit or induce any employee or independent contractor to terminate or breach an employment, contractual or other relationship with Company.
General Provisions.
19.
Successors and Assigns. Contractor may not subcontract or otherwise delegate Contractor’s obligations under this Agreement without Company’s prior written consent. Subject to the foregoing, this Agreement will be for the benefit of Company’s successors and assigns, and will be binding on Contractor’s assignees.
20.
Injunctive Relief. Contractor’s obligations under this Agreement are of a unique character that gives them particular value; Contractor’s breach of any of such obligations will result in irreparable and continuing damage to Company for which money damages are insufficient, and Company will be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including money damages if appropriate).
21.
Notices. Any notice required or permitted by this Agreement will be in writing and will be delivered as follows, with notice deemed given as indicated: (a) by personal delivery, when actually delivered; (b) by overnight courier, upon written verification of receipt; (c) by facsimile transmission, upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice will be sent to the addresses set forth above or to such other address as either party may provide in writing.
22.
Governing Law; Forum. This Agreement will be governed in all respects by the laws of the United States of America and by the laws of the State of Washington, as such laws are applied to agreements entered into and to be performed entirely within Washington between Washington residents. Each of the parties irrevocably consents to the exclusive personal jurisdiction of the federal and state courts located in King County, Washington, as applicable, for any matter arising out of or relating to this Agreement, except that in actions seeking to enforce any order or any judgment of such federal or state courts located in King County, Washington, such personal jurisdiction will be nonexclusive.
23.
Severability. If a court of law holds any provision of this Agreement to be illegal, invalid or unenforceable, (a) that provision will be deemed amended to achieve an economic effect that is as near as possible to that provided by the original provision and (b) the legality, validity and enforceability of the remaining provisions of this Agreement will not be affected thereby.
24.
Waiver; Modification. If Company waives any term, provision or Contractor’s breach of this Agreement, such waiver will not be effective unless it is in writing and signed by Company. No waiver by a party of a breach of this Agreement will
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constitute a waiver of any other or subsequent breach by Contractor. This Agreement may be modified only by mutual written agreement of authorized representatives of the parties.
25.
Entire Agreement. This Agreement constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or contemporaneous agreements concerning such subject matter, written or oral.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
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EXHIBIT A
PROJECT ASSIGNMENT
Title
Services:
Chief Operating Officer
Payment of Fees. Fee will be:
Ô
Monthly Consulting Fee: $10,000 per month
Ô
Vesting Stock in Company: 10,000 shares of Class B Stock per month
NOTE: This Project Assignment is governed by the terms of an Independent Contractor Services Agreement in effect between Company and Contractor. Any item in this Project Assignment that is inconsistent with such agreement is invalid.
IN WITNESS WHEREOF, the parties have executed this Project Assignment as of the later date below.
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EXHIBIT 10.9
EXHIBIT A
PROJECT ASSIGNMENT
Title
Services:
Chief Operating Officer
Payment of Fees. Fee will be:
Ô
Monthly Consulting Fee: $5,000 per month. Monthly fee will be revisited based on cash flow. Any increase will be directly related to cash flow from sales.
NOTE: The Project Assignment dated
5/01/2019 is null and void. This Project Assignment supersedes the Project Assignment dated 5/01/2019. This Project Assignment is governed by the terms of an Independent Contractor Services Agreement in effect between Company and Contractor. Any item in this Project Assignment that is inconsistent with such agreement is invalid.
IN WITNESS WHEREOF, the parties have executed this Project Assignment as of the later date below.
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EXHIBIT 10.10
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EXHIBIT 10.11
PROMISSORY NOTE
$200,000 | New York, NY |
| June 11, 2019 |
FOR VALUE RECEIVED, JAGUARING, INC. D/B/A CANNAVOLVE, located in Seattle, WA (“Maker”), hereby promises to pay to the order of EMIL ASSENTATO (the “Holder”), the principal sum of Two Hundred Thousand Dollars ($200,000), together with interest thereon at a rate of twelve percent (12%) per annum. Interest and principal is due on July 31, 2019 (the “Maturity Date”), at which time all outstanding principal and interest shall be due and payable.
Maker may prepay all or any part of the principal sum from time to time without penalty, provided that any such principal prepayment shall be accompanied by all interest then accrued. Interest shall accrue on the Note until the principal is paid in full.
At the option of Holder, the entire unpaid principal sum and all accrued interest shall become immediately due and payable, without notice or demand, upon the occurrence of any one or more of the following events of default: (a) Maker shall fail to make payment of principal or interest hereunder, for a period of five days from the Maturity Date; (b) Maker shall make any assignment for the benefit of creditors, or shall commence, or there shall be commenced against Maker, any case, proceeding, or other action seeking to have an order for relief entered with respect to Maker, or to adjudicate Maker, as a bankrupt or insolvent; (c) Maker shall breach any of its covenants or agreements hereunder or under the Agreement and such breach shall not be cured within 10 calendar days after the occurrence thereof; or (d) if the Maker has not completed and delivered to the Holder, on or before June 15, 2019, its signed, audited financial statements as of and for the years ended December 31, 2017 and December 31, 2018, prepared in accordance with US GAAP by a PCAOB-registered accounting firm (each, an “Event of Default”).
If the Maker defaults with respect to Event of Default (d) above, the Maker agrees that the number of shares of common stock allocated to be issued to the Maker in accordance with its Reorganization Agreement with Intelligent Buying, Inc. (“INTB”), shall, without further action on the part of the Holder or INTB, be reduced each week, beginning on June 15, 2019, by the number of shares of INTB equal to two thousand dollars ($2,000) divided by the pre-forward split offering price of common shares in INTB’s Rule 506(c) offering, which is $1.1713469 per share. By way of example, if the Maker is in default of default (d) above on June 15, 2019, then on June 21, 2019, without further action by either the Holder or INTB, the Maker’s shares to be allocated and issued in accordance with the Reorganization Agreement will be reduced by 1,707.4 shares and further compensated to the Holder. For each additional week that the Maker is in default with respect to default (d) above, the number of shares of INTB to be allocated and issued to the Maker shall be reduced by an additional amount in accordance with the same formula.
As security for the Maker’s obligation to repay this Note, the Maker hereby pledges its entire interest in and to “Green Ambrosia.” Maker warrants and represents that it is
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legally able to pledge its interest in and to Green Ambrosia to the Holder and agrees to execute appropriate documents to secure the Holder’s security interest in Green Ambrosia.
The Maker acknowledges that the Holder will be compensated by INTB for the Holder lending the principal to the Maker, such compensation to consist of 10,245 pre- forward split restricted shares of INTB, to be issued by INTB to the Holder.
Upon an Event of Default, the Holder may proceed to protect and enforce Holder’s rights either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, condition or agreement contained in this Note, or to enforce the payment of this Note. No right or remedy herein or in any other agreement or instrument conferred upon the Holder of this Note is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.
Maker hereby waives demand for payment, presentment for payment, notice of nonpayment or dishonor, protest and notice of protest, and agrees to any extension of time of payment and partial payments before, at, or after maturity. No renewal or extension of this Note, no release or surrender of any security for this Note, no release of any person liable hereon, no delay in the enforcement hereof, and no delay or omission in exercising any right or power hereunder, shall affect the liability of Maker. No delay or omission by Holder in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude any or full exercise thereof or the exercise of any other right or power. Each legal holder hereof shall have and may exercise all the rights and powers given to Holder herein.
In the event this Note is turned over to an attorney for collection, Maker agrees to pay all costs of collection, including reasonable attorneys' fees, which amounts may, at Holder's option, be added to the principal hereof. Maker and Holder hereby waive the right to jury trial in any action, proceeding or counterclaim brought by Maker or Holder against the other.
This Note shall be governed as to validity, interpretation, construction, effect and in all other respects by the laws and decisions of the State of New York. Maker, and any endorsers, sureties and guarantors, agree that the state courts located in the State of New York shall have subject matter jurisdiction to entertain any action brought to enforce or collect upon this Note and, by execution hereof, voluntarily submit to personal jurisdiction of such courts; provided, however such jurisdiction shall not be exclusive and, at its option, Holder may commence such action in any other court which otherwise has jurisdiction.
The obligations to make the payment provided for in this Note are absolute and unconditional and not subject to any defense, set-off, counterclaim, rescission, recoupment or adjustment whatsoever.
This Note may not be modified or discharged (other than by payment or exchange) except by a writing duly executed by Maker and Holder.
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The Maker may not delegate her obligations under this Note without the prior written consent of Holder. The Holder may not assign, pledge or otherwise transfer this Note without the prior written consent of the Maker, which consent shall not be unreasonably withheld. This Note inures to the benefit of Holder, her heirs, successors and assignees of this Note and binds the Maker, and her heirs, successors and assigns; and the terms “Holder” and “the Maker” herein shall be deemed and construed to include such respective heirs, successors and assigns. Any assignment or transfer made in violation of this paragraph shall be void ab initio.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Maker to the Holder and thus refunded to the Maker.
Maker hereby waives demand for payment, presentment for payment, notice of nonpayment or dishonor, protest and notice of protest, and agrees to any extension of time of payment and partial payments before, at, or after maturity. No renewal or extension of this Note, no delay in the enforcement hereof, and no delay or omission in exercising any right or power hereunder, shall affect the liability of Maker. No delay or omission by Holder in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude any or full exercise thereof or the exercise of any other right or power. Each legal holder hereof shall have and may exercise all the rights and powers given to Holder herein.
IN WITNESS WHEREOF, Maker has duly executed this Promissory Note on the date above:
JAGUARING INC. D/B/A CANNAVOLVE | |
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| Dante Jones, CEO |
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CannAvolve Holdings wiring info:
Bank Address:
12770 Gateway Dr.
Tukwila WA 98168
Bank name: BECU
Account name:
Jaguaring Co.
Routing: 325081403
Acct: XXXXXXXXXX
Address:
812 N 161st Place
Shoreline WA 98133
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EXHIBIT 10.12
PROMISSORY NOTE
$200,000 | NewYork,NY |
| June 6, 2019 |
FOR VALUE RECEIVED, JAGUARING, INC. D/B/A CANNAVOLVE, located in Seattle, WA (“Maker”), hereby promises to pay to the order of FRANK GALLO (the “Holder”), the principal sum of Two Hundred Thousand Dollars ($200,000), together with interest thereon at a rate of twelve percent (12%) per annum. Interest and principal is due on July 31, 2019 (the “Maturity Date”), at which time all outstanding principal and interest shall be due and payable.
Maker may prepay all or any part of the principal sum from time to time without penalty, provided that any such principal prepayment shall be accompanied by all interest then accrued. Interest shall accrue on the Note until the principal is paid in full.
At the option of Holder, the entire unpaid principal sum and all accrued interest shall become immediately due and payable, without notice or demand, upon the occurrence of any one or more of the following events of default: (a) Maker shall fail to make payment of principal or interest hereunder, for a period of five days from the Maturity Date; (b) Maker shall make any assignment for the benefit of creditors, or shall commence, or there shall be commenced against Maker, any case, proceeding, or other action seeking to have an order for relief entered with respect to Maker, or to adjudicate Maker, as a bankrupt or insolvent; (c) Maker shall breach any of its covenants or agreements hereunder or under the Agreement and such breach shall not be cured within 10 calendar days after the occurrence thereof; or (d) if the Maker has not completed and delivered to the Holder, on or before June 15, 2019, its signed, audited financial statements as of and for the years ended December 31, 2017 and December 31, 2018, prepared in accordance with US GAAP by a PCAOB-registered accounting firm (each, an “Event of Default”).
If the Maker defaults with respect to Event of Default (d) above, the Maker agrees that the number of shares of common stock allocated to be issued to the Maker in accordance with its Reorganization Agreement with Intelligent Buying, Inc. (“INTB”), shall, without further action on the part of the Holder or INTB, be reduced each week, beginning on June 15, 2019, by the number of shares of INTB equal to two thousand dollars ($2,000) divided by the pre-forward split offering price of common shares in INTB’s Rule 506(c) offering, which is $1.1713469 per share. By way of example, if the Maker is in default of default (d) above on June 15, 2019, then on June 21, 2019, without further action by either the Holder or INTB, the Maker’s shares to be allocated and issued in accordance with the Reorganization Agreement will be reduced by 1,707.4 shares. For each additional week that the Maker is in default with respect to default (d) above, the number of shares of INTB to be allocated and issued to the Maker shall be reduced by an additional amount in accordance with the same formula.
As security for the Maker’s obligation to repay this Note, the Maker hereby pledges its entire interest in and to “Green Ambrosia.” Maker warrants and represents that it is
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legally able to pledge its interest in and to Green Ambrosia to the Holder and agrees to execute appropriate documents to secure the Holder’s security interest in Green Ambrosia.
The Maker acknowledges that the Holder will be compensated by INTB for the Holder lending the principal to the Maker, such compensation to consist of 10,245 pre- forward split restricted shares of INTB, to be issued by INTB to the Holder.
Upon an Event of Default, the Holder may proceed to protect and enforce Holder’s rights either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, condition or agreement contained in this Note, or to enforce the payment of this Note. No right or remedy herein or in any other agreement or instrument conferred upon the Holder of this Note is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.
Maker hereby waives demand for payment, presentment for payment, notice of nonpayment or dishonor, protest and notice of protest, and agrees to any extension of time of payment and partial payments before, at, or after maturity. No renewal or extension of this Note, no release or surrender of any security for this Note, no release of any person liable hereon, no delay in the enforcement hereof, and no delay or omission in exercising any right or power hereunder, shall affect the liability of Maker. No delay or omission by Holder in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude any or full exercise thereof or the exercise of any other right or power. Each legal holder hereof shall have and may exercise all the rights and powers given to Holder herein.
In the event this Note is turned over to an attorney for collection, Maker agrees to pay all costs of collection, including reasonable attorneys' fees, which amounts may, at Holder's option, be added to the principal hereof. Maker and Holder hereby waive the right to jury trial in any action, proceeding or counterclaim brought by Maker or Holder against the other.
This Note shall be governed as to validity, interpretation, construction, effect and in all other respects by the laws and decisions of the State of New York. Maker, and any endorsers, sureties and guarantors, agree that the state courts located in the State of New York shall have subject matter jurisdiction to entertain any action brought to enforce or collect upon this Note and, by execution hereof, voluntarily submit to personal jurisdiction of such courts; provided, however such jurisdiction shall not be exclusive and, at its option, Holder may commence such action in any other court which otherwise has jurisdiction.
The obligations to make the payment provided for in this Note are absolute and unconditional and not subject to any defense, set-off, counterclaim, rescission, recoupment or adjustment whatsoever.
This Note may not be modified or discharged (other than by payment or exchange) except by a writing duly executed by Maker and Holder.
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The Maker may not delegate her obligations under this Note without the prior written consent of Holder. The Holder may not assign, pledge or otherwise transfer this Note without the prior written consent of the Maker, which consent shall not be unreasonably withheld. This Note inures to the benefit of Holder, her heirs, successors and assignees of this Note and binds the Maker, and her heirs, successors and assigns; and the terms “Holder” and “the Maker” herein shall be deemed and construed to include such respective heirs, successors and assigns. Any assignment or transfer made in violation of this paragraph shall be void ab initio.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Maker to the Holder and thus refunded to the Maker.
Maker hereby waives demand for payment, presentment for payment, notice of nonpayment or dishonor, protest and notice of protest, and agrees to any extension of time of payment and partial payments before, at, or after maturity. No renewal or extension of this Note, no delay in the enforcement hereof, and no delay or omission in exercising any right or power hereunder, shall affect the liability of Maker. No delay or omission by Holder in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude any or full exercise thereof or the exercise of any other right or power. Each legal holder hereof shall have and may exercise all the rights and powers given to Holder herein.
IN WITNESS WHEREOF, Maker has duly executed this Promissory Note on the date above:
JAGUARING INC. D/B/A CANNAVOLVE | |
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CannAvolve Holdings wiring info:
BECU business account:
Account name:
Jaguaring Co.
Routing: 325081403
Acct: XXXXXXXXXX
Address:
812 N 161st Place
Shoreline WA 98133
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EXHIBIT 10.13
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EXHIBIT 10.14
RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Purchase Agreement (this “Agreement”), dated as of January 8, 2020, is entered into by and between Intelligent Buying, Inc., a California corporation (the “Company”), and James Mansour (“Buyer”).
WHEREAS, simultaneously with the execution hereof, Buyer and the Company are entering into an executive consulting agreement (the “Consulting Agreement ”) pursuant to which Buyer will be engaged as a consultant to the Company on the terms contained therein; and
WHEREAS, in conjunction with the relationship evidenced by the Consulting Agreement, the Company has agreed to permit Buyer to purchase certain shares of the Company’s common stock, for the purchase price, and subject to the terms and conditions set forth, herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Purchase and Sale. Subject to the terms and conditions set forth herein, simultaneously with the execution of this Agreement (the “Closing”), the Company shall issue to Buyer, and Buyer shall purchase from the Company, an aggregate amount of 718,403 restricted shares of the Company’s common stock, $0.01 par value per share (the “Shares”), which such Shares shall be issued in accordance with a vesting schedule as set forth below in Section 3. The purchase price for each Share shall be $0.01186 (the “Per Share Purchase Price”), which will result in an aggregate purchase price for all of the Shares of Eight Thousand Five Hundred Twenty Dollars and Twenty-Six Cents ($8,520.26) (the “Purchase Price”).
2.
Closing. Subject to the terms and conditions contained in this Agreement, the purchase and sale of the Shares contemplated hereby shall take place at the Closing on the date hereof (the “Closing Date”) by electronic exchange of executed documents and a wire transfer of the funds comprising the Purchase Price. At the Closing, the Company shall issue to Buyer the Shares, free and clear of all Encumbrances (as defined herein), subject to the terms and conditions of this Agreement and the applicable securities laws and regulations, and Buyer shall deliver to the Company the Purchase Price by wire transfer of immediately available funds to an account designated by the Company.
3.
Vesting; Repurchase Rights; Other.
(a)
Vesting Schedule. 359,201 of the Shares shall vest immediately upon the execution of this Agreement by the parties, and the remaining 359,202 Shares shall vest in 12
equal installments of 29,933 Shares each, on the last day of each fiscal quarter ending after the date hereof (except that the final vesting period shall be one day prior to the third anniversary of the date hereof and shall include all remainder shares such that a total of 718,403 Shares shall have vested), such that all of the Shares shall have vested in full one day before the third anniversary of the date hereof. All vesting is dependent on the continuation of the Buyer’s Business Relationship (as defined below) with the Company on the applicable vesting date as provided herein. Unvested Shares (as defined below) and Vested Shares are subject to certain transfer restrictions set forth herein. If the Buyer has continuously maintained a Business Relationship with the Company through the vesting dates specified in this Section 3(a), as reasonably determined in good faith by the Board of Directors of the Company (the “Board”), Unvested Shares shall become Vested Shares (or shall “vest”) on such dates and in an amount equal to that which is set forth in this Section 3(a). Shares that have been so earned by continuity of the Buyer’s Business Relationship with the Company during the applicable period shall be regarded as “Vested Shares” and Shares that have not been so earned by continuity of the Buyer’s Business Relationship with the Company during the applicable period shall be regarded as “Unvested Shares.” If the Buyer’s Business Relationship with the Company ceases, voluntarily or involuntarily, with or without cause, no Unvested Shares shall become Vested Shares thereafter with respect to the Buyer. Any determination under this Agreement as to the status of a Business Relationship or other matters referred to above shall be made reasonably and in good faith by the Board of Directors. The Board of Directors, in its discretion, may accelerate any vesting dates or waive any of the requirements for vesting. “Business Relationship” means service to the Company or its successor in the capacity of a consultant, employee, officer or director, as determined by the Board of Directors.
(b)
Termination of Business Relationship. For purposes hereof, the Buyer’s Business Relationship with the Company shall not be considered as having terminated during any leave of absence if such leave of absence has been approved in writing by the Board of Directors and if such written approval contractually obligates the Company to continue the Buyer’s Business Relationship with the Company after the approved period of absence; in the event of such an approved leave of absence, vesting of Unvested Shares shall be suspended (and the period of the leave of absence shall be added to all vesting dates) unless otherwise provided in the Board of Director’s written approval of the leave of absence or other waiver. For purposes hereof, a termination of the Buyer’s Business Relationship followed by another Business Relationship shall be deemed a termination of the Business Relationship with all vesting to cease unless the Company, with the approval of the Board of Directors, enters into a written agreement related to such other Business Relationship in which it is specifically stated that there is no termination of the Business Relationship under this Agreement. This Agreement shall not be affected by any change of Business Relationship within or among the Company and its subsidiaries so long as the Buyer continuously remains a consultant, employee, officer or director of the Company or any subsidiary of the Company.
(c)
Transfers. The Buyer may not sell, assign, transfer, pledge, hypothecate, gift, mortgage or otherwise encumber or dispose of (“Transfer”) all or any of the Unvested Shares, or
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any interest therein, except to the Company (or any successor to the Company) pursuant to this Section 3.
(d)
Repurchase Option. If Buyer’s Business Relationship with the Company terminates for any reason, the Company shall have an irrevocable, exclusive right and option (the “Unvested Share Purchase Option”) for a period of 120 days from the effective date of such termination (the “Termination Date”) to purchase all or any portion of the Unvested Shares held by Buyer as of Termination Date. If Buyer’s Business Relationship with the Company is terminated for any reason (including as a result of Buyer’s death or disability) then the purchase price (the “Original Repurchase Price”) of such Unvested Shares (the “Repurchased Unvested Shares”) shall be the lesser of the Per Share Purchase Price applicable to the Unvested Shares and the Fair Market Value (as defined below) of the Unvested Shares. Such sale shall be effected by the delivery by the Escrow Holder (as defined below) to the Company of a certificate or certificates evidencing the Repurchased Unvested Shares, each duly endorsed for transfer to the Company. Within 120 days following receipt thereof, the Company shall mail a check for the Original Repurchase Price to the Buyer or shall cancel indebtedness owed to the Company by the Buyer by written notice mailed to the Buyer, or both. Upon the mailing of a check in payment of the purchase price in accordance with the terms hereof or cancellation of indebtedness as aforesaid, the Company shall become the legal and beneficial owner of the Unvested Shares being repurchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name or cancel the number of Unvested Shares being repurchased by the Company.
(e)
Transfer Restrictions; Right of First Refusal.
The Buyer may not at any time Transfer any Vested Shares to any individual, corporation, partnership or other entity that engages in any business activity that is in competition, directly or indirectly, with the products or services being developed, manufactured or sold by the Company. The determination of whether any proposed transferee engages in any business activity that is in competition with those of the Company shall be made by the Board of Directors in good faith. This prohibition shall be applicable in addition to and separately from the other provisions hereof.
Other than with respect to a Permitted Transfer (as defined below), before any Vested Shares held by Buyer or any transferee of Buyer (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Holder must provide the Company or its assignee(s) with a right of first refusal to purchase the Vested Shares on the terms and conditions set forth in this Section 3(d) (the “Right of First Refusal”) and the Company shall have the right to exercise, or not exercise, the Right of First Refusal, in its sole and absolute discretion. If the Holder would like to Transfer any Vested Shares the Company may either (1) exercise its Right of First Refusal and purchase the Vested Shares as forth in this Section 3(d) or, (2) reject to exercise its Right of First Refusal and permit the Transfer of the Vested Shares to the Proposed Transferee (as defined below). As used herein, the term “Permitted Transfer” shall mean a Transfer of Vested Shares by the Buyer to any spouse, sibling, lineal ancestor or descendant, natural or adopted, or to a trust, including the trust of Buyer’s daughter, or other estate planning entity for the benefit of the Buyer or any of such persons.
The Holder of the Vested Shares shall deliver to the Company a written notice (the “Notice”) stating: (A) the Holder’s intention to sell or otherwise Transfer such Vested Shares; (B) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (C) the
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number of Vested Shares to be transferred to each Proposed Transferee; (D) the terms and conditions of each proposed sale or Transfer, including (without limitation) the purchase price for such Vested Shares (the “Transfer Purchase Price”); and (E) the Holder’s offer shall offer to the Company or its assignee(s) to purchase the Vested Shares at the Transfer Purchase Price and upon the same terms (or terms as similar as reasonably possible).
At any time within 30 days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase any or all of the Vested Shares proposed to be transferred to any one or more of the Proposed Transferees, at the Transfer Purchase Price, provided that if the Transfer Purchase Price consists of no legal consideration (as, for example, in the case of a transfer by gift), the purchase price will be the fair market value of the Shares as determined in good faith by the Company. If the Transfer Purchase Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Company in good faith.
Payment of the Transfer Purchase Price shall be made, at the election of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness or by any combination thereof within 60 days after receipt of the Notice or in the manner and at the times mutually agreed to by the Company (or its assignee(s)) and the Holder.
(f)
Change of Control. Upon the occurrence of an acquisition of a controlling interest in the Company or a change of control of the Company, all Unvested Shares shall automatically vest in full as of immediately prior to such occurrence.
(g)
Fair Market Value. As used in this Section 3, the term “Fair Market Value” shall mean: (i) if the Unvested Shares are admitted to trading on a national securities exchange, the closing sale price reported on the date immediately preceding the determination date, or if no shares were traded on such date, on the last preceding date for which there was a sale of a share of stock on such exchange; (ii) if the Unvested Shares are traded in an over-the-counter market, such as OTC Markets, the average of the closing bid and asked prices for such share in such over-the- counter market for the last preceding date on which there was a sale of such share in such market; and (iii) if the Unvested Shares are not so traded, the fair market value as reasonably determined in good faith by the Company’s board of directors, without any discount for a non-controlling interest. Prior to exercising its Unvested Share Purchase Option to repurchase any Unvested Shares, the Company shall provide to Buyer its determination of Fair Market Value of the Unvested Shares, along with reasonable documentation evidencing the basis of its determination. In the event that Buyer does not agree with such determination, and that Buyer and the Company cannot mutually agree upon such valuation, Fair Market Value shall be determined by an independent, third party appraiser, mutually agreed upon by the Company and Buyer, whose fees and expenses shall be borne equally by the Company and Buyer.
(h)
Rights as a Stockholder. Subject to the terms of Section 3(h) of this Agreement, the Buyer shall have the rights of a stockholder with respect to the voting of the Shares and dividends. The Buyer shall be considered the record owner of and shall be entitled to vote the Shares if and to the extent such Shares are entitled to voting rights. The Buyer shall be entitled to receive all dividends and any other distributions declared on the Shares; provided, however, that
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the Company is under no duty to declare any such dividends or to make any such distribution and provided, further, that any such dividends or other distributions paid on Unvested Shares shall be held in escrow until such time, if ever, as such shares become Vested Shares.
(i)
Escrow of Shares. All Unvested Shares shall be held in escrow by the Company, as escrow holder (“Escrow Holder”).
The Escrow Holder is hereby directed to transfer the Unvested Shares in accordance with this Agreement or instructions signed by both the Buyer and the Company. If the Company or any assignee exercises its repurchase rights hereunder, the Escrow Holder, upon receipt of written notice of such exercise from the Company or such assignee, shall take all steps necessary to accomplish such transfer. The Buyer hereby grants the Escrow Holder an irrevocable power of attorney coupled with an interest to take any and all actions required to effect such transfer.
The Escrow Holder may act in reliance upon advice of counsel in reference to any matter(s) connected with this Agreement, and shall not be liable for any mistake of fact or error of judgment, or for any acts or omissions of any kind, unless caused by its willful misconduct or gross negligence.
With respect to any Unvested Shares that become Vested Shares, the Company may, at its option, issue a new certificate for the number of shares which have become Vested Shares and shall deliver such certificate to the Buyer and shall deliver to the Escrow Holder a new certificate for the remaining Unvested Shares in exchange for the certificate then being held by the Escrow Holder.
If, from time to time while the Escrow Holder is holding Unvested Shares, there is any stock dividend, stock split or other change in or respecting such shares, any and all new, substituted or additional securities to which the Buyer is entitled by reason of his or her ownership of the Unvested Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and included thereafter as “Unvested Shares” for purposes of this Agreement and the repurchase rights of the Company.
(j)
Failure to Deliver Shares. If the Buyer (or his or her legal representative) who has become obligated to sell Shares hereunder shall fail to deliver such Shares to the Company in accordance with the terms of this Agreement, the Company may, at its option, in addition to all other remedies it may have, mail to the Buyer the purchase price for such Shares as is herein specified. Thereupon, the Company: (i) shall cancel on its books the certificate or certificates representing such Shares to be sold; and (ii) shall issue, in lieu thereof, a new certificate or certificates in the name of the Company representing such Shares (or cancel such Shares), and thereupon all of such Buyer’s rights in and to such Shares shall terminate.
4.
Representations and Warranties of the Company. The Company hereby represents and warrants to Buyer as follows:
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(a)
The Company has all requisite power and authority to execute and deliver this Agreement, to carry out its obligations hereunder, and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and (assuming due execution and delivery by Buyer) constitutes the Company’s legal, valid and binding obligation, enforceable against the Company in accordance with its terms.
(b)
Upon issuance of the Shares to Buyer, the Shares will be fully and validly issued, and non-assessable, and Buyer will beneficially own the Shares free and clear of all liens, pledges, security interests, charges, claims, encumbrances, agreements, options, voting trusts, proxies and other arrangements or restrictions of any kind (“Encumbrances”), subject to the terms and conditions of this Agreement, including, but not limited to Section 3 of this Agreement; provided, however, that the Shares shall bear a restrictive legend substantially similar to the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
(c)
The execution, delivery and performance by the Company of this Agreement do not conflict with, violate or result in the breach of, or create any Encumbrance on the Shares pursuant to the Company’s organizational documents or any other agreement, instrument, order, judgment, decree, law or governmental regulation to which the Company is a party or is subject or by which the Shares are bound.
(d)
No governmental, administrative or other third party consents or approvals are required by or with respect to the Company in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.
(e)
There are no actions, suits, claims, investigations or other legal proceedings pending or, to the knowledge of the Company, threatened against or by the Company that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
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(f)
No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.
(g)
The Company has determined that the Purchase Price is fair and reasonable and constitutes the fair market value of the Shares. The Company has had access to all necessary financial and other information of any nature required to make the foregoing determination.
5.
Representation and Warranties of Buyer.
(a)
The Buyer represents, warrants and acknowledges that the Buyer: (i) has had an opportunity to ask questions of and receive answers from a Company representative concerning the terms and conditions of this investment; (ii) is acquiring the Shares with the Buyer’s own funds, for the Buyer’s own account for the purpose of investment, and not with a view to any resale or other distribution thereof in violation of the Securities Act of 1933, as amended (the “Securities Act”); (iii) is a sophisticated investor with such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the Shares and that the Buyer is able to and must bear the economic risk of the investment in the Shares for an indefinite period of time because the Shares have not been registered under the Securities Act, and therefore, cannot be offered or sold unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Furthermore, the Company may place legends on any stock certificate representing the Shares with the securities laws and contractual restrictions thereon and issue related stop transfer instructions.
(b)
The Buyer acknowledges and understands that the Shares have not been registered under the Securities Act, nor registered pursuant to the provisions of the securities laws or other laws of any other applicable jurisdictions, in reliance on exemptions for private offerings contained in Section 4(2) of the Securities Act and in the laws of such jurisdictions. The Buyer further understands that the Company has no intention and is under no obligation to register the Shares under the Securities Act or to comply with the requirements for any exemption that might otherwise be available, or to supply the Buyer with any information necessary to enable the Buyer to make routine sales of the Shares under Rule 144 or any other rule of the Securities and Exchange Commission.
(c)
Buyer further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Buyer further acknowledges and understands that the Company is under no obligation to register the securities.
(d)
Buyer is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Buyer understands that the Company provides no assurances as to whether he or she will be able to
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resell any or all of the Shares pursuant to Rule 144, which rule requires, among other things, that the Company be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this Section 5(d), Buyer acknowledges and agrees to the restrictions set forth in Section 5(e) below.
(e)
Buyer further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.
(f)
Buyer understands that Buyer may suffer adverse tax consequences as a result of Buyer’s purchase or disposition of the Shares. Buyer represents that Buyer has consulted any tax consultants Buyer deems advisable in connection with the purchase or disposition of the Shares and that Buyer is not relying on the Company for any tax advice.
(g)
Buyer has all requisite power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by Buyer of this Agreement, the performance by Buyer of its obligations hereunder and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by all requisite action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer and (assuming due execution and delivery by the Company) this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms.
(h)
Buyer is acquiring the Shares solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Shares are not registered under the Securities Act of 1933, as amended, or any state securities laws, and that the Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable. Buyer further acknowledges that the Shares shall bear a restrictive legend as set forth in Section 4(b) herein.
(i)
The Buyer understands that the Securities are being offered and sold to him in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
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understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
(j)
Accredited Investor Status . The Buyer is an “accredited investor” as that term is defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
(k)
No governmental, administrative or other third party consents or approvals are required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.
(l)
There are no actions, suits, claims, investigations or other legal proceedings pending or, to the knowledge of Buyer, threatened against or by Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
(m)
No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer.
6.
Survival. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Closing hereunder.
7.
Indemnification. The Company shall indemnify Buyer and hold Buyer harmless against and in respect of any and all losses, liabilities, damages, obligations, claims, Encumbrances, costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by Buyer resulting from any breach of any representation, warranty, covenant or agreement made by the Company herein. Buyer shall indemnify the Company and hold the Company harmless against and in respect of any and all losses, liabilities, damages, obligations, claims, encumbrances, costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by the Company resulting from any breach of any representation, warranty, covenant or agreement made by Buyer herein.
8.
83(b) Election. Buyer acknowledges that the issuance of the Shares pursuant to this Agreement may have federal and state income tax consequences. If Buyer makes a Section 83(b) election pursuant to Treasury Regulation 1.83-2 with respect to any Shares, Buyer hereby covenants and agrees to furnish the Company within thirty (30) days after the date hereof a copy of the election form filed and with evidence that such election has been filed in a timely manner. Buyer acknowledges that it is the sole responsibility of Buyer, and not the Company, to file a timely election under Section 83(b) of the Code even if Buyer requests the Company or its representatives to make such filing on behalf of Buyer.
9.
Further Assurances. Following the Closing, each of the parties hereto shall execute and deliver such additional documents, instruments, conveyances and assurances, and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.
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10.
Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
11.
Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder (each, a “Notice”) shall be in writing and addressed to the Company at: Intelligent Buying, Inc., 400 Seventh Avenue, Brooklyn, NY 11215, Attn: President, with a copy (which shall not constitute notice) to Costaldo Law Group P.C., 30 Wall Street, 8th Floor, New York, NY 10005, Attn: Evan J. Costaldo, Esq., and to Buyer at 11 Sylvia Street, Newburgh, New York 12550. All Notices shall be delivered by personal delivery, nationally recognized overnight courier (with all fees pre-paid), facsimile or e-mail of a PDF document (with confirmation of transmission) or certified or registered mail (in each case, return receipt requested, postage prepaid). Except as otherwise provided in this Agreement, a Notice is effective only (a) upon receipt by the receiving party, and (b) if the party giving the Notice has complied with the requirements of this section.
12.
Entire Agreement. This Agreement constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.
13.
Successor and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party may assign any of its rights or obligations hereunder without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld or delayed.
14.
Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
15.
Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
16.
Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually
10
acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
17.
Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction). Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States or the courts of the State of New York, in each case located in the city of New York and County of Kings, 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.
18.
Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[remainder of page left intentionally blank]
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.
| COMPANY: | |
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| INTELLIGENT BUYING, INC. | |
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| By: |
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| Name: | PHILIP ROMANZI |
| Title: | Pres. |
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| BUYER: | |
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| By: |
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| Name: | James Mansour |
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[Signature Page to Restricted Stock Purchase Agreement]
EXHIBIT 10.15
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EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Jaguaring Company
We hereby consent to the inclusion of our report dated June 28, 2019, with respect to the financial statements of Jaguaring Company as of December 31, 2018 and 2017 and for each of the two years in the period ended December 31, 2018 included in this Intelligent Buying, Inc. Current Report on Form 8-K.
/s/ PKF O’Connor Davies, LLP
New York, New York
February 14, 2020
* * * * *
EXHIBIT 99.1
JAGUARING COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2018 AND 2017
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm | 1 |
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Consolidated Balance Sheets | 3 |
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Consolidated Statements of Operations | 4 |
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Consolidated Statements of Stockholders’ Equity (Deficit | 5 |
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Consolidated Statements of Cash Flows | 6 |
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Notes to Consolidated Financial Statements | 7 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Jaguaring Company
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Jaguaring Company (the “Company”) as of December 31, 2018 and 2017, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of operations and its cash flows for each of the two years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also include evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant recurring operating losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ PKF O’Connor Davies, LLP
PKF O’Connor Davies, LLP
New York, New York
June 28, 2019
We have served as the Company’s auditor since 2019.
JAGUARING COMPANY
CONSOLIDATED BALANCE SHEETS
December 31, 2018 and 2017
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| December 31, |
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| 2018 |
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| 2017 |
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Assets |
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Current assets: |
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Cash |
| $ | 24,597 |
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| $ | 13,229 |
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Financial instruments |
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| 20,000 |
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| — |
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Total current assets |
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| 44,597 |
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| 13,229 |
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Accounts receivable, net of allowance of $37,500 and $0 |
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| 37,500 |
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| 15,000 |
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Inventory |
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| 56,196 |
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| — |
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Total assets |
| $ | 138,293 |
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| $ | 28,229 |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accrued expenses |
| $ | 107,739 |
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| $ | — |
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Loan payable |
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| 7,042 |
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| — |
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Interest payable |
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| 1,584 |
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| — |
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Noncurrent liabilities: |
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Convertible notes, net of discount |
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| 280,823 |
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| — |
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Total liabilities |
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| 397,188 |
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| — |
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Stockholders' equity (deficit): |
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Class A Common stock, $0.0001 par value, 5,000,000 and 1,000,000 shares |
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authorized issued and outstanding as of December 31, 2018 and 2017, |
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respectively |
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| 500 |
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| 100 |
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Class B Common stock, $0.0001 par value, 99,000,000 and 11,000,000 shares |
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authorized as of December 31, 2018 and 2017, respectively, and 29,684,637 |
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and 2,791,127 shares issued and outstanding as of December 31, 2018 and |
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2017, respectively |
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| 2,968 |
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| 279 |
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Additional paid-in capital |
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| 5,769,453 |
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| 4,598,559 |
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Accumulated deficit |
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| (6,031,816 | ) |
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| (4,570,709 | ) |
Total stockholders' equity (deficit) |
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| (258,895 | ) |
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| 28,229 |
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Total liabilities and stockholders' equity (deficit) |
| $ | 138,293 |
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| $ | 28,229 |
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Page 3
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2018 and 2017
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| Year Ended |
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| December 31, |
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| 2018 |
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| 2017 |
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Service revenue |
| $ | 25,000 |
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| $ | 56,889 |
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Other income |
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| 1,038 |
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| — |
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Total income |
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| 26,038 |
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| 56,889 |
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Operating expenses: |
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Management and consulting fees - related parties |
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| 1,256,853 |
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| 1,257,012 |
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Business development |
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| — |
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| 50,115 |
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Legal and professional fees |
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| 46,306 |
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| — |
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Rent, utilities and office expenses |
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| 43,753 |
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| 53,705 |
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Travel expenses |
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| 15,637 |
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| 29,113 |
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Other general and administrative |
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| 40,861 |
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| 13,828 |
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Total operating expenses |
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| 1,403,410 |
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| 1,403,773 |
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Loss from operations |
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| (1,377,372 | ) |
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| (1,346,884 | ) |
Other expense: |
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Unrealized loss on financial instrument |
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| 70,000 |
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| — |
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Interest expense, net |
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| 13,735 |
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| 5,500 |
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Net loss attributable to common shareholders |
| $ | (1,461,107 | ) |
| $ | (1,352,384 | ) |
Net loss per Class A Common share—basic and diluted |
| $ | (0.04 | ) |
| $ | (0.05 | ) |
Weighted average Class A Common shares outstanding—basic and diluted |
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| 5,000,000 |
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| 5,000,000 |
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Net loss per Class B Common share—basic and diluted |
| $ | (0.04 | ) |
| $ | (0.05 | ) |
Weighted average Class B common shares outstanding—basic and diluted |
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| 29,684,637 |
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| 22,234,251 |
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Page 4
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the Years Ended December 31, 2018 and 2017
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| Total |
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| Additional |
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| Stockholders' |
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| Class A Common Stock |
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| Class B Common Stock |
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| Paid-In |
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| Accumulated |
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| (Deficit) |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Equity |
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Balances at January 1, 2017 |
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| 1,000,000 |
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| $ | 100 |
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| 2,150,234 |
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| $ | 215 |
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| $ | 3,205,583 |
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| $ | (3,218,325 | ) |
| $ | (12,427 | ) |
Shares issued pursuant to subscription agreements |
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| — |
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| — |
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| 51,115 |
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| 5 |
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| 91,995 |
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| — |
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| 92,000 |
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Shares issued to employees and consultants |
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| — |
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|
| — |
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| 589,778 |
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|
| 59 |
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| 1,061,460 |
|
|
| — |
|
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| 1,061,519 |
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Capital contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 239,521 |
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|
| — |
|
|
| 239,521 |
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Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,352,384 | ) |
|
| (1,352,384 | ) |
Balances at December 31, 2017 |
|
| 1,000,000 |
|
|
| 100 |
|
|
| 2,791,127 |
|
|
| 279 |
|
|
| 4,598,559 |
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|
| (4,570,709 | ) |
|
| 28,229 |
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Shares issued pursuant to subscription agreements |
|
| — |
|
|
| — |
|
|
| 5,556 |
|
|
| — |
|
|
| 10,000 |
|
|
| — |
|
|
| 10,000 |
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Shares issued to employees and consultants |
|
| — |
|
|
| — |
|
|
| 501,610 |
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|
| 50 |
|
|
| 902,848 |
|
|
| — |
|
|
| 902,898 |
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Stock split |
|
| 4,000,000 |
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|
| 400 |
|
|
| 26,386,344 |
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|
| 2,639 |
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| (3,039 | ) |
|
| — |
|
|
| — |
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Capital contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 210,801 |
|
|
| — |
|
|
| 210,801 |
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Discount on conversion price of convertible notes |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
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|
| 50,284 |
|
|
| — |
|
|
| 50,284 |
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Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,461,107 | ) |
|
| (1,461,107 | ) |
Balances at December 31, 2018 |
|
| 5,000,000 |
|
| $ | 500 |
|
|
| 29,684,637 |
|
| $ | 2,968 |
|
| $ | 5,769,453 |
|
| $ | (6,031,816 | ) |
| $ | (258,895 | ) |
Page 5
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2018 and 2017
|
| Year Ended |
| |||||
|
| December 31, |
| |||||
|
| 2018 |
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| 2017 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
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Net loss |
| $ | (1,461,107 | ) |
| $ | (1,352,384 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Shares issued to employees and consultants |
|
| 902,898 |
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|
| 1,061,519 |
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Unrealized loss on financial instruments |
|
| 70,000 |
|
|
| — |
|
Amortization of discount on convertible notes |
|
| 12,207 |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
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Accounts receivable |
|
| (22,500 | ) |
|
| (15,000 | ) |
Inventory |
|
| (56,196 | ) |
|
| — |
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Accrued expenses |
|
| 107,739 |
|
|
| — |
|
Interest payable |
|
| 1,584 |
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|
| (2,500 | ) |
Net cash (provided by) used in operating activities |
|
| (445,375 | ) |
|
| (308,365 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
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Capital contributions |
|
| 120,801 |
|
|
| 239,521 |
|
Proceeds from issuance of common stock |
|
| 10,000 |
|
|
| 92,000 |
|
Proceeds from the issuance of convertible notes |
|
| 318,900 |
|
|
| — |
|
Proceeds from issuance of loans payable |
|
| 7,042 |
|
|
| 37,000 |
|
Repayments of loans payable |
|
| — |
|
|
| (47,000 | ) |
Net cash provided by financing activities |
|
| 456,743 |
|
|
| 321,521 |
|
Net increase in cash |
|
| 11,368 |
|
|
| 13,156 |
|
Cash at beginning of year |
|
| 13,229 |
|
|
| 73 |
|
Cash at end of year |
|
| 24,597 |
|
|
| 13,229 |
|
|
|
|
|
|
|
|
|
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Supplemental information: |
|
|
|
|
|
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|
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Cash paid for interest |
|
| — |
|
|
| 8,000 |
|
Non-cash equity contribution |
|
| 90,000 |
|
|
| — |
|
Page 6
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
1.
ORGANIZATION
Jaguaring Company (“Jaguaring”) was incorporated in the state of Washington on July 6, 2012. The Company provides advisory and operational services to hemp and ancillary cannabis companies, serving as a full-service business accelerator working with startups and emerging brands nationwide. Headquartered in Seattle, Jaguaring guides clients through every phase of the startup process, including business planning and forecasting, funding and investment, human resources and legal, operations and manufacturing, and sales and marketing. Jaguaring’s go-to-market strategies and program implementation processes are designed with one goal in mind: to drive innovation and position startups for sustainable momentum and growth. The Company’s name is Jaguaring Company and does business as CannAvolve Holdings.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company’s Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiary, FBF, LLC (collectively, the “Company”). The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The financial statements have been prepared on a going concern basis, which assumes the realization of assets and satisfaction of liabilities in the normal course of business. The Company has recurring losses from operations and is dependent on raising additional funds or increases in revenue in order to sustain future operations. See Note 10. Subsequent Events.
The Company’s policy is to prepare its financial statements on the accrual basis of accounting, whereby revenue is recognized when earned and expenses are recognized when incurred.
Use of Estimates
The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of commitments and contingencies. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the price is fixed and determinable and collectability is reasonably assured. The Company receives advisory fees for services performed for cannabis companies. During 2017, service revenue includes marketing services performed for one of the Company’s customers including performing target marketing analysis and mass market email campaigns.
Page 7
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Estimated allowances for doubtful accounts are reviewed periodically taking into account the customer’s recent payment history, the customer’s current financial statements and other information regarding the customer’s credit worthiness. Account balances are charged off against the allowance when it is determined the receivable will not be recovered.
Inventory
The Company purchases inventory and repackages them for online sales to customers. Inventory includes the cost of materials, which are stated at the lower of cost (determined on a weighted-average) or net realizable value. Inventory as of December 31, 2018, represents finished goods inventory.
Equity Method Investments
The Company recognizes equity method investments in companies that it determines it has a significant, but not controlling interest in. This typically occurs when the Company owns more than 20% of the voting common stock, but less than 50%. However, the Company performs an evaluation on whether a significant or controlling interest is obtained. When it is determined that the recognition of an equity method investment is appropriate, the initial measurement of the Company’s equity interest is recorded at cost. Costs include direct costs of acquiring the equity method investment, where internal costs are expensed as incurred.
The Company performs advisory services in exchange for an equity interest in its incubator investments. When it is determined that the Company has a significant, but not controlling interest in an incubator investment and equity method investment is recognized. As the initial measurement is recorded at cost, these investments generally have an initial value of zero. The Company subsequently recognizes its proportionate share of earnings and losses each period and adjusts its equity method investment. As of December 31, 2018 and 2017, the Company held an equity method investment in an incubator investment that had a zero value.
The Company may enter into additional intra-entity transactions with its incubator investments. The Company determines whether intra-entity transactions should be eliminated at the invoice level. This determination is dependent upon whether or not the transaction was at an arm’s length basis. Transactions with equity investment investments are determined to be on an arm’s length basis when the sales price approximates the fair value of the asset transferred, when the transaction has economic substance and when the sales price will be collected. Intra-entity profits and losses are eliminated in arm’s length transactions when they result in an asset that remains on the books of either party (e.g., services, fees). See Note 8. Related Party Transactions for additional information regarding intra-entity transactions during the years ended December 31, 2018 and 2017.
Risks
The Company is subject to risks incident to the hemp and ancillary cannabis industries. These include the risks associated with state and federal legislation and availability of funding. The Company’s operations are subject to a variety of local and state regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations in that specific state or local jurisdiction. While management of the Company believes that the Company is in compliance with applicable local and state regulations at December 31, 2018, medical cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties or restrictions in the future.
Page 8
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
Concentration of Credit Risk
Financial instruments that are potentially subject to credit risk include cash and accounts receivable. The Company generally maintains balances in various accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash balances and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company’s accounts receivable is unsecured, and the Company does not expect any counterparties to fail to meet their obligations.
During the year ended December 31, 2018, one customer accounted for over 90% of the Company’s revenue. During the year ended December 31, 2017, two customers accounted for all of the Company’s revenue. As of December 31, 2018 and 2017, the Company’s accounts receivable were due from one customer.
3.
COMMON STOCK
As of December 31, 2018, the Company’s Bylaws authorized the Company to issue 104,000,000 shares of $0.0001 par value common stock, including 5,000,000 Class A shares and 99,000,000 Class B shares. The rights of Class A common shareholders are identical to those of the Class B common shareholders with the addition of 12 times voting rights. During the year ended December 31, 2018, the Company issued a total of 5,556 shares (pre-split) of common stock at a price of $1.80 per share for total proceeds of $10,000. During the year ended December 31, 2018, the Company issued a total of 501,610 shares (pre-split) of common stock to employees and consultants for services performed. During the year ended December 31, 2018, the Company effected a 5-for-1 stock split of its authorized, issued and outstanding shares of Class A common stock. The Company also effected two 3-for-1 stock splits of its authorized, issued and outstanding shares of Class B common stock. The effect of the stock split is retroactively reflected in the Company’s calculation of weighted-average shares outstanding. See Note 4. Earnings Per Share for the Company’s computation of net loss per share.
As of December 31, 2017, the Company’s Bylaws authorized the Company to issue 12,000,000 shares of $0.0001 par value common stock, including 1,000,000 Class A shares and 11,000,000 Class B shares. During the year ended December 31, 2017, the Company issued a total of 51,115 shares (pre-split) of common stock at a price of $1.80 per share for total proceeds of $92,000. The Company also issued a total of 589,778 shares (pre-split) of common stock to employees and consultants for services performed.
As of December 31, 2018, no cash dividends have been declared or paid.
Page 9
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
4.
NET LOSS PER SHARE
The Company calculates net loss per share in accordance with the two-class method as follows:
|
| Year Ended |
| |||||
|
| December 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Class A Common Shares |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
| $ | (1,461,107 | ) |
| $ | (1,352,384 | ) |
Less: net loss attributable to Class B Common stockholders |
|
| 1,250,479 |
|
|
| 1,104,096 |
|
Net loss attributable to Class A Common stockholders |
| $ | (210,627 | ) |
| $ | (248,287 | ) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average Class A common shares outstanding—basic and diluted |
|
| 5,000,000 |
|
|
| 5,000,000 |
|
Net loss per share attributable to Class A common stockholders—basic and diluted |
| $ | (0.04 | ) |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
|
Class B Common Shares |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
| $ | (1,461,107 | ) |
| $ | (1,352,384 | ) |
Less: net loss attributable to Class A Common stockholders |
|
| 210,627 |
|
|
| 248,287 |
|
Net loss attributable to Class B Common stockholders |
| $ | (1,250,479 | ) |
| $ | (1,104,096 | ) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average Class B common shares outstanding—basic and diluted |
|
| 29,684,637 |
|
|
| 22,234,251 |
|
Net loss per share attributable to Class B common stockholders—basic and diluted |
| $ | (0.04 | ) |
| $ | (0.05 | ) |
For the year ended December 31, 2018, the Company’s Convertible Notes were potentially dilutive common stock equivalents. During the year ended December 31, 2017, the Company did not have any potentially dilutive common stock equivalents outstanding. See Note 5. Borrowing Arrangements for additional information regarding the Convertible Notes. Net loss per Class A common share and Net loss per Class B common share reflect the retroactive impact of the stock splits further discussed in Note 3. Common Stock.
5.
BORROWING ARRANGEMENTS
Convertible Notes
During the year ended December 31, 2018, the Company issued $243,900 in series 1 and $75,000 in series 2 notes convertible into shares of the Company’s Class B Common stock (the “Series 1 Convertible Notes” and the “Series 2 Convertible Notes”, collectively the “Convertible Notes”). The Series 2 Convertible Notes bear interest at 8% per annum. The Series 1 Convertible Notes do not bear interest, but provide for a conversion price 20% below the Series 2 Convertible Notes upon the occurrence of a financing event. The Convertible Notes are convertible upon certain equity offering and other corporate events at a conversion price determined upon conversion. See Note 10. Subsequent Events. The Company recorded a $50,284 discount included in Additional paid-in capital representing imputed interest using an interest rate of 8% per annum, which will be amortized as interest expense over a three-year period through the maturity date ending in 2021. During the year ended December 31, 2018, the Company recorded $12,207 in interest expense related to the amortization of the discount.
Page 10
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
The Company’s Convertible notes as of December 31, 2018 were comprised of the following:
|
| Series 1 |
|
| Series 2 |
|
| Total Convertible Notes |
| |||
Principal balance |
| $ | 243,900 |
|
| $ | 75,000 |
|
| $ | 318,900 |
|
Discount on conversion price |
|
| (50,284 | ) |
|
| — |
|
|
| (50,284 | ) |
Amortization of discount |
|
| 12,207 |
|
|
| — |
|
|
| 12,207 |
|
Balance, December 31, 2018 |
| $ | 205,823 |
|
| $ | 75,000 |
|
| $ | 280,823 |
|
Loans Payable
During the year ended December 31, 2017, the Company received various loans, which bear interest rates of up to 50% per annum. During the year ended December 31, 2017, the Company incurred interest expense of $5,500. As of December 31, 2017, the loans had been repaid in full.
During the year ended December 31, 2018, the Company received an initial payment of $7,042 related to a total of $235,415 in loans payable that were received during the year ending December 31, 2019. The loan matures in 2019 and bears interest at 10% per annum commencing on March 15, 2019 and is convertible into shares of INTB, as defined (see Note 10. Subsequent Events).
6.
FAIR VALUE MEASUREMENTS
Fair value as defined by GAAP is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
·
Level One — Quoted prices in active markets for identical assets or liabilities.
·
Level Two — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
·
Level Three — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s Financial instruments included on the Balance Sheet as of December 31, 2018 represent its investment in the Common stock of an incubator investment that was recorded as a capital contribution from one of the Company’s officers. The Common stock was received by the Company’s officer in exchange for consulting and advisory services and assigned to the Company. During the year ended December 31, 2018, the Company recorded $90,000 of Capital contribution, which represented the fair value on the date that the Common stock was issued. The Company recorded $70,000 included in Unrealized loss on investments during the year ended December 31, 2018 associated with the change in fair value of the Common stock. This investment is included in Level One of the fair value hierarchy as it is a publicly traded stock and prices are observable on the over the counter market.
Page 11
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
7.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. To date, the Company has not taken any uncertain tax positions or recorded any reserves, interest or penalties.
The income taxes reflected on the Company’s Statements of Operations differ from the federal statutory rate as follows:
|
| Year Ended December 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Income tax benefit at federal statutory rate |
| $ | (306,832 | ) |
| $ | (473,334 | ) |
Expenses not deducted for tax purposes |
|
| 240,055 |
|
|
| 469,688 |
|
Changes in valuation allowance |
|
| 65,136 |
|
|
| 3,646 |
|
Other |
|
| 1,641 |
|
|
| — |
|
Reported income tax benefit |
| $ | — |
|
| $ | — |
|
The Company’s Deferred tax assets, net consisted of the following:
|
| December 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
Net operating loss carryforward |
| $ | (69,239 | ) |
| $ | (4,103 | ) |
Valuation allowance |
|
| 69,239 |
|
|
| 4,103 |
|
Deferred tax assets, net |
| $ | — |
|
| $ | — |
|
The Company has $329,710 in net operating losses, $11,722 of which expire in years 2036 through 2037 and the remainder of which have no expiration but are subject to an 80% limitation.
8.
RELATED PARTY TRANSACTIONS
Common stock
During the years ended December 31, 2018 and 2017, the Company issued 501,610 (pre-split) and 589,778 (pre-split) shares of its Common stock to the founders and officers of the Company in exchange for their advisory and consulting services provided to its customers. During the years ended December 31, 2018 and 2017, the Company recognized management and consulting fees of $0.9 million and $1.1 million, respectively, associated with the issuance of stock to founders and officers in exchange for services provided to customers.
Page 12
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
During the year ended December 31, 2018, the Company sold 5,556 (pre-split) shares of Common stock for $10,000 to the Mother of one of the Company’s founders and officers.
Capital Contributions
During the years ended December 31, 2018 and 2017, the Company recorded capital contributions of $210,801 and $239,521, respectively, related to payments in the form of cash and equity that were received related to advisory services performed by the Company’s founders that did not meet the revenue recognition criteria.
Intra-entity transactions with an equity method investment
As of December 31, 2018 and 2017, the Company has 50% ownership in an entity that it recognizes as an equity method investment. The value of the equity method investment was zero, and accordingly no amounts of equity or share of loss have been recorded in the Company’s financial statements.
During the years ended December 31, 2018 and 2017, the Company recorded $2,500 and $20,889 of revenue related to services provided to an incubator company for which the Company has determined that it has a significant, but not controlling interest. These amounts were determined to have been on an arms’ length basis and no corresponding asset or liability was recorded on either company’s balance sheet, therefore, no intra-entity eliminations were recorded with respect to these amounts.
Borrowing Arrangements
The Series 1 Convertible Notes includes $6,000 issued to the step-sibling of the Company’s co-founder and Chief Operating Officer under terms identical to those issued to unrelated parties.
During the year ended December 31, 2017, the Company had loans payable of $10,000 to the Company’s Chief Executive Officer and $16,000 to the father of the Company’s Chief Operating Officer. These amounts did not bear interest and were repaid in full prior to December 31, 2017.
During the year ending December 31, 2019, the Company entered into secured promissory notes of $400,000 that bear interest at 12% per annum and mature on July 31, 2019. The Company’s indirect ownership of an incubator investment was pledged as collateral for the promissory notes.
9.
COMMITMENTS AND CONTINGENCIES
The Company has contractor agreements in place with four of its officers and consultants. Pursuant to these agreements the officers and consultants perform services and are compensated in the form of cash and equity. The obligations under the contractor agreements can be terminated by either the Company or the contractor with 15-days written notice or sooner by the Company in the event of a breach in certain provisions as provided for in the contractor agreements.
The Company’s other commitments and contingencies may include the usual obligations and litigation incurred in the normal course of business. In the opinion of management, there are no loss contingencies that are probable or reasonably possible as of December 31, 2018.
Page 13
JAGUARING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018 and 2017
10.
SUBSEQUENT EVENTS
On January 7, 2019, the Company issued an additional $2,500 of Series 1 Convertible Notes. On February 19, 2019, $77,561 of Series 2 Convertible Notes, including $2,561 of accrued interest, were converted at a rate of $0.20 per share into 387,803 shares of Class B common stock and $246,400 of Series 1 Convertible Notes were converted at a rate of $0.16 per share into 1,540,000 shares of Class B common stock.
On March 4, 2019, the Company entered into an Agreement and Plan of Reorganization with Intelligent Buying, Inc. (“INTB”), a California corporation listed on the OTC markets (the “Agreement”). Pursuant to the Agreement, INTB will issue up to 3,446,950 restricted shares of INTB common shares to acquire 100% of the issued and outstanding shares of Class A and Class B shares of Common stock.
During the year ending December 31, 2019, the Company received $228,373 in loans payable that bear interest at 10% per annum.
During the year ending December 31, 2019, the Company issued a total of 408,000 shares of Class B Common stock to employees and consultants for services rendered during the year ended December 31, 2018. Accrued expenses as of December 31, 2018 includes $81,600 in Management and consulting fees related to the stock issuance.
Page 14
EXHIBIT 99.2
JAGUARING COMPANY
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2019
(Unaudited)
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets | 1 |
|
|
Condensed Consolidated Statements of Operations | 2 |
|
|
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) | 3 |
|
|
Condensed Consolidated Statements of Cash Flows | 4 |
|
|
Notes to Condensed Consolidated Financial Statements | 5 |
JAGUARING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2019 and December 31, 2018
|
| September 30, |
|
| December 31, |
| ||
|
| 2019 |
|
| 2018 |
| ||
|
| (Unaudited) |
|
|
|
|
| |
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
| $ | 160,211 |
|
| $ | 24,597 |
|
Financial instruments |
|
| 10,000 |
|
|
| 20,000 |
|
Total current assets |
|
| 170,211 |
|
|
| 44,597 |
|
Accounts receivable, net of allowance |
|
| 67,500 |
|
|
| 37,500 |
|
Inventory |
|
| 32,449 |
|
|
| 56,196 |
|
Fixed asset |
|
| 23,778 |
|
|
| — |
|
Total assets |
| $ | 293,938 |
|
| $ | 138,293 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity (Deficit) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accrued expenses |
| $ | 30,226 |
|
| $ | 107,739 |
|
Loan payable |
|
| 635,415 |
|
|
| 7,042 |
|
Interest payable |
|
| 27,819 |
|
|
| 1,584 |
|
Noncurrent liabilities: |
|
|
|
|
|
|
|
|
Convertible notes, net of discount |
|
| — |
|
|
| 280,823 |
|
Total liabilities |
|
| 693,460 |
|
|
| 397,188 |
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit): |
|
|
|
|
|
|
|
|
Class A Common stock, $0.0001 par value, 5,000,000 shares authorized |
|
|
|
|
|
|
|
|
issued and outstanding as of September 30, 2019 and December 31, 2018 |
|
| 500 |
|
|
| 500 |
|
Class B Common stock, $0.0001 par value, 99,000,000 shares authorized |
|
|
|
|
|
|
|
|
as of September 30, 2019 and December 31, 2018 and 35,190,963 and |
|
|
|
|
|
|
|
|
29,684,637 shares issued and outstanding as of September 30, 2019 and |
|
|
|
|
|
|
|
|
December 31, 2018, respectively |
|
| 3,574 |
|
|
| 2,968 |
|
Additional paid-in capital |
|
| 6,961,860 |
|
|
| 5,769,453 |
|
Accumulated deficit |
|
| (7,365,456 | ) |
|
| (6,031,816 | ) |
Total stockholders' equity (deficit) |
|
| (399,522 | ) |
|
| (258,895 | ) |
Total liabilities and stockholders' equity (deficit) |
| $ | 293,938 |
|
| $ | 138,293 |
|
1
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2019 and 2018
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Service revenue |
| $ | 30,004 |
|
| $ | 30,000 |
|
|
|
|
|
|
|
|
|
|
Other income |
|
| 19,908 |
|
|
| — |
|
Total income |
|
| 49,912 |
|
|
| 30,000 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Management and consulting fees - related parties |
|
| 797,657 |
|
|
| 1,123,543 |
|
Business development expense |
|
| 296,826 |
|
|
| — |
|
Legal and professional fees |
|
| 96,193 |
|
|
| 6,006 |
|
Rent, utilities and office expenses |
|
| 37,900 |
|
|
| 31,860 |
|
Travel expenses |
|
| 6,063 |
|
|
| 8,133 |
|
Other general and administrative |
|
| 72,030 |
|
|
| 86,357 |
|
Total operating expenses |
|
| 1,306,669 |
|
|
| 1,255,899 |
|
Loss from operations |
|
| (1,256,757 | ) |
|
| (1,225,899 | ) |
Other expense: |
|
|
|
|
|
|
|
|
Unrealized loss on financial instrument |
|
| 10,000 |
|
|
| 60,000 |
|
Interest expense, net |
|
| 66,883 |
|
|
| 8,467 |
|
Net loss attributable to common shareholders |
| $ | (1,333,640 | ) |
| $ | (1,294,366 | ) |
Net loss per Class A Common share—basic and diluted |
| $ | (0.27 | ) |
| $ | (0.26 | ) |
Weighted average Class A Common shares outstanding—basic and diluted |
|
| 5,000,000 |
|
|
| 5,000,000 |
|
Net loss per Class B Common share—basic and diluted |
| $ | (0.04 | ) |
| $ | (0.05 | ) |
Weighted average Class B common shares outstanding—basic and diluted |
|
| 34,192,709 |
|
|
| 25,893,510 |
|
2
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the Nine Months Ended September 30, 2019
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Stockholders' |
| |||||||
|
| Class A Common Stock |
|
| Class B Common Stock |
|
| Paid-In |
|
| Accumulated |
|
| (Deficit) |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balances at January 1, 2019 |
|
| 5,000,000 |
|
| $ | 500 |
|
|
| 29,684,637 |
|
| $ | 2,968 |
|
| $ | 5,769,453 |
|
| $ | (6,031,816 | ) |
| $ | (258,895 | ) |
Shares issued pursuant to subscription agreements |
|
| — |
|
|
| — |
|
|
| 595,187 |
|
|
| 60 |
|
|
| 67,223 |
|
|
| — |
|
|
| 67,283 |
|
Shares issued to employees and consultants |
|
| — |
|
|
| — |
|
|
| 3,532,531 |
|
|
| 353 |
|
|
| 706,127 |
|
|
| — |
|
|
| 706,480 |
|
Conversion of Convertible Notes |
|
| — |
|
|
| — |
|
|
| 1,927,803 |
|
|
| 193 |
|
|
| 321,057 |
|
|
| — |
|
|
| 321,250 |
|
Capital contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 98,000 |
|
|
| — |
|
|
| 98,000 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,333,640 | ) |
|
| (1,333,640 | ) |
Balances at September 30, 2019 |
|
| 5,000,000 |
|
| $ | 500 |
|
|
| 35,740,158 |
|
| $ | 3,574 |
|
| $ | 6,961,860 |
|
| $ | (7,365,456 | ) |
| $ | (399,522 | ) |
3
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2019
(Unaudited)
|
| Nine Months Ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (1,333,640 | ) |
| $ | (1,294,366 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Shares issued to employees and consultants |
|
| 706,480 |
|
|
| 902,898 |
|
Amortization of discount on convertible notes and conversion of accrued interest |
|
| 40,425 |
|
|
| 7,924 |
|
Unrealized loss on financial instruments |
|
| 10,000 |
|
|
| 60,000 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (30,000 | ) |
|
| (30,000 | ) |
Inventory |
|
| 23,747 |
|
|
| — |
|
Accrued expenses |
|
| (77,512 | ) |
|
| — |
|
Interest payable |
|
| 26,235 |
|
|
| 599 |
|
Net cash used in operating activities |
|
| (634,265 | ) |
|
| (352,947 | ) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of fixed assets |
|
| (23,777 | ) |
|
| — |
|
|
|
| (23,777 | ) |
|
| — |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Capital contributions |
|
| 98,000 |
|
|
| 94,481 |
|
Proceeds from issuance of common stock |
|
| 67,283 |
|
|
| 10,000 |
|
Proceeds from the issuance of convertible notes |
|
| — |
|
|
| 289,900 |
|
Proceeds from issuance of loans payable |
|
| 662,373 |
|
|
| — |
|
Repayments of loans payable |
|
| (34,000 | ) |
|
| — |
|
Net cash provided by financing activities |
|
| 793,656 |
|
|
| 394,381 |
|
Net increase in cash |
|
| 135,611 |
|
|
| 41,434 |
|
Cash at beginning of period |
|
| 24,597 |
|
|
| 13,229 |
|
Cash at end of period |
| $ | 160,211 |
|
| $ | 54,663 |
|
4
The accompanying notes are an integral part of these financial statements.
JAGUARING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)
1.
GENERAL
Jaguaring Company (“Jaguaring”) was incorporated in the state of Washington on July 6, 2012. The Company provides advisory and operational services to hemp and ancillary cannabis companies, serving as a full-service business accelerator working with startups and emerging brands nationwide. Headquartered in Seattle, Jaguaring guides clients through every phase of the startup process, including business planning and forecasting, funding and investment, human resources and legal, operations and manufacturing, and sales and marketing. Jaguaring’s go-to-market strategies and program implementation processes are designed with one goal in mind: to drive innovation and position startups for sustainable momentum and growth. The Company’s name is Jaguaring Company and does business as CannAvolve Holdings.
The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted. The Condensed Consolidated Financial Statements included herein should be read in conjunction with audited financial statements and related disclosure for the years ended December 31, 2018 and 2017 available for issuance on June 28, 2019. The Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes the realization of assets and satisfaction of liabilities in the normal course of business. The Company has recurring losses from operations and is dependent on raising additional funds or increases in revenue in order to sustain future operations. See Note 2. Common Stock.
Recently Issued Accounting Pronouncements
Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP and supersedes existing revenue recognition guidance. The main principle of the standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applied the ASU and its related updates as of January 1, 2019. The adoption of the ASU did not have an impact on the consolidated financial statements; therefore, no cumulative catch-up adjustment was recorded for prior periods. See Note 7. Revenue.
Fixed Assets
Fixed assets are stated at historical cost. Depreciation of fixed assets is recorded on a straight-line basis over the estimated useful lives and begins when the asset has been placed into use. The Company capitalized a fixed asset during the nine months ended September 30, 2019, which has not yet been put to use. Accordingly, the Condensed Consolidated Financial Statements for the nine months ended September 30, 2019 does not include any Depreciation expense or Accumulated depreciation.
5
JAGUARING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)
Accounts Receivable
Accounts receivable is reflected net of $37,500 allowance for doubtful accounts. Effective January 1, 2019, revenue and the related accounts receivable are recorded at management’s estimate of the transaction price, which was less than the contractual price. See Note 7. Revenue.
2.
COMMON STOCK
On February 19, 2019, $77,560 of Series 2 convertible notes (the “Series 2 Convertible Notes”), including $2,347 of accrued interest, were converted at a rate of $0.20 per share into 387,803 shares of Class B common stock and $246,400 of Series 1 convertible notes (the “Series 1 Convertible Notes”, collectively the “Convertible Notes”) were converted at a rate of $0.16 per share into 1,540,000 shares of Class B common stock.
During the nine months ended September 30, 2019, the Company issued a total of 3,532,551 shares of common stock to employees and consultants for services performed.
During the nine months ended September 30, 2019, the Company issued 595,187 shares of its Class B common stock for $67,283 in proceeds.
On March 4, 2019, the Company entered into an Agreement and Plan of Reorganization with Intelligent Buying, Inc. (“INTB”), a California corporation listed on the OTC markets (the “Agreement”). Pursuant to the Agreement and upon completion of the Reorganization, INTB will issue up to 861,738 restricted shares of INTB common shares to acquire 100% of the Company’s issued and outstanding shares of Class A and Class B shares of Common stock.
6
JAGUARING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)
3.
NET LOSS PER SHARE
The Company calculates net loss per share in accordance with the two-class method as follows:
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Class A Common Shares |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
| $ | (1,333,640 | ) |
| $ | (1,294,366 | ) |
Less: net loss attributable to Class B Common stockholders |
|
| 1,163,501 |
|
|
| 1,084,878 |
|
Net loss attributable to Class A Common stockholders |
| $ | (170,139 | ) |
| $ | (209,488 | ) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average Class A common shares outstanding—basic and diluted |
|
| 5,000,000 |
|
|
| 5,000,000 |
|
Net loss per share attributable to Class A common stockholders—basic and diluted |
| $ | (0.03 | ) |
| $ | (0.04 | ) |
|
|
|
|
|
|
|
|
|
Class B Common Shares |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
| $ | (1,333,640 | ) |
| $ | (1,294,366 | ) |
Less: net loss attributable to Class A Common stockholders |
|
| 170,139 |
|
|
| 209,488 |
|
Net loss attributable to Class B Common stockholders |
| $ | (1,163,501 | ) |
| $ | (1,084,878 | ) |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average Class B common shares outstanding—basic and diluted |
|
| 34,192,709 |
|
|
| 25,893,510 |
|
Net loss per share attributable to Class B common stockholders—basic and diluted |
| $ | (0.03 | ) |
| $ | (0.04 | ) |
For the nine months ended September 30, 2018, the Company’s Convertible Notes were potentially dilutive common stock equivalents.
5.
BORROWING ARRANGEMENTS
Convertible Notes
On January 7, 2019, the Company issued an additional $2,500 of Series 1 Convertible Notes. During the nine months ended September 30, 2019, the Company recognized $38,077 in interest expense representing to the amortization of the discount on the Series 1 Convertible Notes.
Loans Payable
During the nine months ended September 30, 2019, the Company entered into secured promissory notes of $400,000 that bear interest at 12% per annum and mature on July 31, 2019. The Company’s indirect ownership of an incubator investment was pledged as collateral for the promissory notes.
During the nine months ended September 30, 2019, the Company received subsequent payments of $228,373 related to a total of $235,415 in loans payable that mature in July 2019 and bear interest at 10% per annum commencing on March 15, 2019. The loans payable are convertible into shares of INTB.
The loans have not been paid at maturity and accordingly, are currently in default. Upon default, certain note provisions call for an increase in the interest rate, an increase in shares allocated to the Note holder and a reduction in shares allocated to the Company’s shareholders upon the INTB merger, as defined.
7
JAGUARING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)
6.
FAIR VALUE MEASUREMENTS
Fair value as defined by GAAP is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
·
Level One — Quoted prices in active markets for identical assets or liabilities.
·
Level Two — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
·
Level Three — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s Financial instruments included on the Balance Sheet as of September 30, 2019 and December 31, 2018 represent its investment in the Common stock of an incubator investment that was recorded as a capital contribution from one of the Company’s officers. The Common stock was received by the Company’s officer in exchange for consulting and advisory services and assigned to the Company. During the nine months ended September 30, 2019 and 2018, the Company recorded $10,000 and $60,000, respectively, included in Unrealized loss on investments associated with the change in fair value of the Common stock. This investment is included in Level One of the fair value hierarchy as it is a publicly traded stock and prices are observable on the over the counter market.
7.
REVENUE
The Company provides advisory and operational services to hemp and ancillary cannabis companies, serving as a full-service business accelerator working with startups and emerging brands nationwide. The Company accelerates customer’s businesses through a proven model of funding; operations; product launches; and ongoing sales, marketing, and expansion into new markets. Each customer arrangement is unique and revenue is recognized, both over time and at a point in time, depending upon the performance obligations stated in the contract. During the nine months ended September 30, 2019, revenue was recognized related to an agreement which expired June 30, 2019 with one customer to receive monthly consulting services. The customer is billed at the fixed rate and revenue is recognized on a monthly basis as consulting services are rendered.
Effective January 1, 2019 under the provisions of ASC 606, management estimates amounts of the monthly consulting fee included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are estimated based upon management’s assessment of the amount that will ultimately be recovered and require significant judgement. For the nine months ended September 30, 2019, $30,000 in consulting revenue has been recognized.
The Company generally works with customers in the early stages, including immediately prior to considerable corporate growth, mergers, acquisitions, public offerings and other profitable exit opportunities. The Company takes into consideration whether liquidity challenges are temporary or permanent in the markets and jurisdictions that the customer is located in, as well as the progress to bringing commercial products to market when determining that collectability is reasonably assured. In the case of revenue recognized during the nine months ended September 30, 2019, the Company considered the collectability of the transaction price, given that the customer has made significant progress and began implementing customer agreements during the nine months ended September 30, 2019. However, given the financial status of this particular customer, the transaction price was reduced by 50%.
8
JAGUARING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)
8.
INCOME TAXES
During each of the nine months ended September 30, 2019 and 2018, Net loss attributable to common shareholders was $1.3 million, but the Company did not recognize an income tax benefit. The income tax benefit differed from the federal statutory rate due to an increase in the valuation allowance for deferred tax assets as a result of the Company’s history of net operating losses.
9.
RELATED PARTY TRANSACTIONS
Common stock
During the nine months ended September 30, 2019, the Company issued 3,532,551 shares of its Common stock to the founders and officers of the Company in exchange for their advisory and consulting services provided to its customers. During the nine months ended September 30, 2019 and 2018, the Company recognized management and consulting fees of $0.7 million and $0.9 million, respectively, associated with the issuance of stock to founders and officers in exchange for services provided to customers.
Capital Contributions
During the nine months ended September 30, 2019, the Company recorded capital contributions of $102,000 related to payments that were received related to advisory services performed by the Company’s founders that did not meet the revenue recognition criteria.
Borrowing Arrangements
The Series 1 Convertible Notes included $6,000 issued to the step-sibling of the Company’s co-founder and Chief Operating Officer under terms identical to those issued to unrelated parties.
Business Development Expense
During the nine months ended September 30, 2019, the Company advanced a total of $305,343 to two companies in support of the business development activities in each entity. The agreements call for the Company to be paid back these funds with interest upon the satisfaction of certain future events. As these future events are uncertain and repayment of such funds is not assured, such funding has been expensed in the Statement of Operations for the nine months ended September 30, 2019. Of the total Business development expense $234,443 was paid to an affiliated entity.
10.
SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the audited financial statements are available for issuance. The financial statements were available for issuance on November 13, 2019.
9
EXHIBIT 99.3
Intelligent Buying, Inc. and Jaguaring Company
Unaudited Pro forma Combined Balance Sheets
December 31, 2018
|
| Historical |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Intelligent Buying Inc. |
|
| Jaguaring Company |
|
| Adjustments |
|
| Notes |
|
| Pro Forma |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 53,129 |
|
| $ | 24,597 |
|
| $ | 1,093,936 |
|
|
| (1) |
|
| $ | 1,171,662 |
|
Financial Instruments |
|
| — |
|
|
| 20,000 |
|
|
| — |
|
|
|
|
|
|
| 20,000 |
|
Accounts Receivables (net) |
|
| — |
|
|
| 37,500 |
|
|
| — |
|
|
|
|
|
|
| 37,500 |
|
Inventory (net of allowance) |
|
| — |
|
|
| 56,196 |
|
|
| — |
|
|
|
|
|
|
| 56,196 |
|
Loan Receivables |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
TOTAL CURRENT ASSETS |
|
| 53,129 |
|
|
| 138,293 |
|
|
| 1,093,936 |
|
|
|
|
|
|
| 1,285,358 |
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
| 12,043 |
|
|
| — |
|
|
| (12,043 | ) |
|
| (4) |
|
|
| — |
|
Fixed Assets (net) |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
TOTAL NON-CURRENT ASSETS |
|
| 12,043 |
|
|
| — |
|
|
| (12,043 | ) |
|
|
|
|
|
| — |
|
TOTAL ASSETS |
| $ | 65,172 |
|
| $ | 138,293 |
|
| $ | 1,081,893 |
|
|
|
|
|
| $ | 1,285,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 26,662 |
|
| $ | 107,739 |
|
| $ | (12,043 | ) |
|
| (4) |
|
| $ | 122,358 |
|
Accrued Interest payable |
|
| 156,675 |
|
|
| 1,584 |
|
|
| — |
|
|
|
|
|
|
| 158,259 |
|
Loan payables - current portion |
|
| — |
|
|
| 7,042 |
|
|
| — |
|
|
|
|
|
|
| 7,042 |
|
TOTAL CURRENT LIABILITIES |
|
| 183,337 |
|
|
| 116,365 |
|
|
| (12,043 | ) |
|
|
|
|
|
| 287,659 |
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes (net of discount) |
|
| — |
|
|
| 280,823 |
|
|
| — |
|
|
|
|
|
|
| 280,823 |
|
Loans payable non current portion |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
TOTAL NON-CURRENT LIABILITIES |
|
| — |
|
|
| 280,823 |
|
|
| — |
|
|
|
|
|
|
| 280,823 |
|
TOTAL LIABILITIES |
|
| 183,337 |
|
|
| 397,188 |
|
|
| (12,043 | ) |
|
|
|
|
|
| 568,482 |
|
STOCKHOLDERS' EQUITY (DEFFICIENCY) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock Par value $.001, 25,000,000 shares authorized, 1,000,000 issued and outstanding after the merger |
|
| — |
|
|
| — |
|
|
| 1,000 |
|
|
| (2) |
|
|
| 1,000 |
|
Common stock, Par value $.001, 50,000,000 shares authorized, 8,349,968 shares issued and outstanding after the merger |
|
| 7,257 |
|
|
| 3,468 |
|
|
| (2,981 | ) |
|
| (1),(2),(3) |
|
|
| 7,744 |
|
Additional paid-in capital |
|
| 759,761 |
|
|
| 5,769,453 |
|
|
| (4,935,899 | ) |
|
| (1),(2),(3) |
|
|
| 1,593,315 |
|
Accumulated deficit |
|
| (885,183 | ) |
|
| (6,031,816 | ) |
|
| 6,053,677 |
|
|
| (3) |
|
|
| (863,322 | ) |
TOTAL STOCKHOLDERS' DEFICIENCY BEFORE NON-CONTROLLING INTEREST |
|
| (118,165 | ) |
|
| (258,895 | ) |
|
| 1,115,797 |
|
|
|
|
|
|
| 738,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interest |
|
| — |
|
|
| — |
|
|
| (21,861 | ) |
|
| (2) |
|
|
| (21,861 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' DEFICIENCY |
|
| (118,165 | ) |
|
| (258,895 | ) |
|
| 1,093,936 |
|
|
|
|
|
|
| 716,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY |
| $ | 65,172 |
|
| $ | 138,293 |
|
| $ | 1,081,893 |
|
|
|
|
|
| $ | 1,285,358 |
|
Notes:
(1)
Shares issued in private placements
(2)
Shares exchanged in reorganization agreeement
(3)
Eliminate common stock and accumulated deficit of Jaguaring Company
(4)
Eliminate intercompany balances
See accompanying notes to unaudited financial statements
Intelligent Buying, Inc. and Jaguaring Company
Pro forma Combined Statements of Operations
For the year ended December 31, 2018
(Unaudited)
|
| Historical |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Intelligent Buying Inc. |
|
| Jaguaring Company |
|
| Adjustments |
|
| Notes |
|
| Pro Forma |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
REVENUES |
| $ | — |
|
| $ | 26,038 |
|
| $ | — |
|
|
|
|
|
| $ | 26,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management and consulting fees (related parties) |
|
| — |
|
|
| 1,256,853 |
|
|
| — |
|
|
|
|
|
|
| 1,256,853 |
|
Business development expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Legal and professional fees |
|
| — |
|
|
| 46,306 |
|
|
| — |
|
|
|
|
|
|
| 46,306 |
|
Rent, utilities and office expenses |
|
| — |
|
|
| 43,753 |
|
|
| — |
|
|
|
|
|
|
| 43,753 |
|
Travel expenses |
|
| — |
|
|
| 15,637 |
|
|
| — |
|
|
|
|
|
|
| 15,637 |
|
General and administrative expenses |
|
| 94,961 |
|
|
| 40,861 |
|
|
| — |
|
|
|
|
|
|
| 135,822 |
|
Selling expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
TOTAL OPERATING EXPENSES |
|
| 94,961 |
|
|
| 1,403,410 |
|
|
| — |
|
|
|
|
|
|
| 1,498,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (94,961 | ) |
|
| (1,377,372 | ) |
|
| — |
|
|
|
|
|
|
| (1,472,333 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on financial instrument |
|
| — |
|
|
| (70,000 | ) |
|
|
|
|
|
|
|
|
|
| (70,000 | ) |
Interest expenses, net |
|
| — |
|
|
| (13,735 | ) |
|
|
|
|
|
|
|
|
|
| (13,735 | ) |
TOTAL OTHER INCOME (EXPENSES) |
|
| — |
|
|
| (83,735 | ) |
|
| — |
|
|
|
|
|
|
| (83,735 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE TAXES |
|
| (94,961 | ) |
|
| (1,461,107 | ) |
|
| — |
|
|
|
|
|
|
| (1,556,068 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAX |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
NET LOSS |
| $ | (94,961 | ) |
| $ | (1,461,107 | ) |
| $ | — |
|
|
|
|
|
| $ | (1,556,068 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE - BASIC AND DILUTED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (0.19 | ) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,349,968 |
|
See accompanying notes to unaudited financial statements
INTELLIGENT BUYING INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1.
Description of Transaction
On February 14, 2020, we entered into an Agreement and Plan of Reorganization (the “Agreement”) with Jaguaring Company d/b/a Cannavolve (“Cannavolve”) and each of the 37 shareholders of Cannavolve who executed a counterpart signature to the Agreement (the “Cannavolve Shareholders”). Pursuant to the Agreement, the Company agreed to acquire an aggregate of up to 33,674,262 shares of Cannavolve constituting up to 81.5% of the issued and outstanding shares of Cannavolve from the Cannavolve Shareholders in exchange for 702,111 shares of the Company, constituting up to 9.6% of the issued and outstanding shares of common stock, $0.001 par value per share (the “Common Stock”), of the Company.
Pursuant to the Agreement, the Company agreed to file a Certificate of Determination with the State of California, as soon as practicable after the closing of the Share Exchange (“Closing”), creating a new class of preferred stock of the Company, the Series B Preferred Stock (the “New Preferred”) , and further agreed to issue, as a post-closing covenant, 1,000,000 shares of the New Preferred to Principal Holdings, LLC (“Principal”), in consideration of Principal successfully negotiating the Agreement and performing due-diligence in connection with the Agreement.
The Share Exchange closed on February 14, 2020. At Closing, pursuant to the Agreement, we issued an aggregate of 702,111 shares of Common Stock to the Cannavolve Shareholders in exchange for 33,674,262 shares of Cannavolve common stock, constituting 81.5% of the issued and outstanding shares of Cannavolve, resulting in Cannavolve becoming our 81.5% owned subsidiary.
At the Closing, Bagel Hole returned to INTB for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole. Also at Closing, Mr. Romanzi resigned from all officer and director positions with the Company. At Closing, the following individuals were appointed to the indicated positions:
George Furlan – Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer
Dante Jones – sole director
James Mansour – Chief Marketing Officer
2.
Basis of Pro Forma Presentation
The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and is based on the historical consolidated financial statements of the Company and Cannavolve. The acquisition method of accounting is set forth in Accounting Standards Codification (“ASC”) 805, Business Combinations, and uses the fair value concepts defined in ASC 820, Fair Value Measurement. Under the acquisition method of accounting, the assets acquired, and liabilities assumed are generally recorded as of the completion of the purchase at their respective fair values and added to those of the Company. Financial statements and reported results of operations of the Company issued after completion of the purchase will reflect these fair value adjustments, but the Company’s previously issued historical financial statements will not be retroactively restated.
The unaudited pro forma combined financial information has been prepared based on the historical consolidated financial statements of the Company and Cannavolve. The unaudited pro forma combined balance sheet as of December 31, 2018 combines the historical audited balance sheets of the Company and Cannavolve as of December 31, 2018, giving effect to the purchase as if it had been consummated on December 31, 2018.
The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are: (i) directly attributable to the purchase; (ii) factually supportable; and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations. The unaudited pro forma combined financial information does not reflect the impact of possible revenue enhancements or cost savings initiatives.
INTELLIGENT BUYING INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
3.
Adjustments to Unaudited Pro Forma Combined Balance Sheet and Statements of Operations
Presented below are the Notes to the accompanying unaudited pro forma condensed combined balance sheet:
(A) Intelligent Buying Inc. Historical Balance Sheet
Amounts are derived from the historical balance sheet of Intelligent Buying Inc. as of December 31, 2018 and the historical statements of operations for the year ended December 31, 2018.
(B) Cannavolve Historical Balance Sheet
Amounts are derived from the historical balance sheet of Cannavolve as of December 31, 2018 and the historical statements of operations for the year ended December 31, 2018.
(1) Shares issued in private placement
Amount is derived as the $1,093,936 raised in private placements related to the Share Exchange/
(2) Preferred shares issuance
Amount is derived from the issuance of preferred shares exchanged in reorganization agreement.
(3) Elimination of Cannavolve Equity and Issuance of Common Stock for Purchase
Amount is derived from the elimination of Cannavolve historical common stock and accumulated deficit, offset by the shares of common stock of the Company (par value $0.001) issued to shareholders of Cannavolve and shares cancelled as part of the Share Exchange.
EXHIBIT 99.4
Intelligent Buying, Inc. and Jaguaring Company
Unaudited Pro forma Combined Sheet
September 30, 2019
|
| Historical |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Intelligent Buying Inc. |
|
| Jaguaring Company |
|
| Pro forma Adjustments |
|
| Notes |
|
| Pro Forma |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | — |
|
| $ | 160,211 |
|
| $ | 458,521 |
|
|
| (1) |
|
| $ | 618,732 |
|
Financial Instruments |
|
| — |
|
|
| 10,000 |
|
|
| — |
|
|
|
|
|
|
| 10,000 |
|
Accounts Receivables (net) |
|
| — |
|
|
| 67,500 |
|
|
| — |
|
|
|
|
|
|
| 67,500 |
|
Inventory (net of allowance) |
|
| — |
|
|
| 32,449 |
|
|
| — |
|
|
|
|
|
|
| 32,449 |
|
Loan receivables |
|
| 17,611 |
|
|
| — |
|
|
| (17,611 | ) |
|
| (4) |
|
|
| — |
|
TOTAL CURRENT ASSETS |
|
| 17,611 |
|
|
| 270,160 |
|
|
| 440,910 |
|
|
|
|
|
|
| 728,681 |
|
NON-CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
| 12,043 |
|
|
| — |
|
|
| (12,043 | ) |
|
| (4) |
|
|
| — |
|
Fixed Assets (net) |
|
| 2,801 |
|
|
| 23,778 |
|
|
| — |
|
|
|
|
|
|
| 26,579 |
|
TOTAL NON-CURRENT ASSETS |
|
| 14,844 |
|
|
| 23,778 |
|
|
| (12,043 | ) |
|
|
|
|
|
| 26,579 |
|
TOTAL ASSETS |
| $ | 32,455 |
|
| $ | 293,938 |
|
| $ | 428,867 |
|
|
|
|
|
| $ | 755,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 94,233 |
|
| $ | 30,226 |
|
| $ | (1,835 | ) |
|
| (4) |
|
| $ | 122,624 |
|
Accrued Interest payable |
|
| — |
|
|
| 27,819 |
|
|
| (27,819 | ) |
|
| (4) |
|
|
| — |
|
Loan payables - current portion |
|
| 186,675 |
|
|
| 635,415 |
|
|
| (635,415 | ) |
|
| (1),(4) |
|
|
| 186,675 |
|
TOTAL CURRENT LIABILITIES |
|
| 280,908 |
|
|
| 693,460 |
|
|
| (665,069 | ) |
|
|
|
|
|
| 309,299 |
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes (net of discount) |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Loans payable non current portion |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
TOTAL NON-CURRENT LIABILITIES |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
TOTAL LIABILITIES |
|
| 280,908 |
|
|
| 693,460 |
|
|
| (665,069 | ) |
|
|
|
|
|
| 309,299 |
|
STOCKHOLDERS' EQUITY (DEFICIENCY) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock Par value $.001, 25,000,000 shares authorized, 1,000,000 issued and outstanding after the merger |
|
| — |
|
|
| — |
|
|
| 1,000 |
|
|
| (2) |
|
|
| 1,000 |
|
Common stock, Par value $.001, 50,000,000 shares authorized, 8,349,968 shares issued and outstanding after the merger |
|
| 7,257 |
|
|
| 4,074 |
|
|
| (2,981 | ) |
|
| (1),(2),(3) |
|
|
| 8,350 |
|
Additional paid-in capital |
|
| 759,761 |
|
|
| 6,961,860 |
|
|
| (6,269,539 | ) |
|
| (1),(2),(3) |
|
|
| 1,452,082 |
|
Accumulated deficit |
|
| (1,015,471 | ) |
|
| (7,365,456 | ) |
|
| 7,411,421 |
|
|
| (3) |
|
|
| (969,507 | ) |
TOTAL STOCKHOLDERS' DEFICIENCY BEFORE NON-CONTROLLING INTEREST |
|
| (248,453 | ) |
|
| (399,522 | ) |
|
| 1,139,900 |
|
|
|
|
|
|
| 491,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interest |
|
| — |
|
|
| — |
|
|
| (45,964 | ) |
|
| (2) |
|
|
| (45,964 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' DEFICIENCY |
|
| (248,453 | ) |
|
| (399,522 | ) |
|
| 1,093,936 |
|
|
|
|
|
|
| 445,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY |
| $ | 32,455 |
|
| $ | 293,938 |
|
| $ | 428,867 |
|
|
|
|
|
| $ | 755,260 |
|
Notes:
(1)
Shares issued in private placements
(2)
Shares exchanged in reorganization agreeement
(3)
Eliminate common stock and accumulated deficit of Jaguaring Company
(4)
Eliminate intercompany balances
See accompanying notes to unaudited financial statements
Intelligent Buying, Inc. and Jaguaring Company
Pro forma Combined Statements of Operations
For the Nine Months ended September 30, 2019
(Unaudited)
|
| Historical |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Intelligent Buying Inc. |
|
| Jaguaring Company |
|
| Pro forma Adjustments |
|
| Notes |
|
| Pro Forma |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
REVENUES |
| $ | — |
|
| $ | 49,912 |
|
| $ | — |
|
|
|
|
|
| $ | 49,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management and consulting fees (related parties) |
|
| — |
|
|
| 797,657 |
|
|
| — |
|
|
|
|
|
|
| 797,657 |
|
Business development expenses |
|
| — |
|
|
| 296,826 |
|
|
| — |
|
|
|
|
|
|
| 296,826 |
|
Legal and professional fees |
|
| — |
|
|
| 96,193 |
|
|
| — |
|
|
|
|
|
|
| 96,193 |
|
Rent, utilities and office expenses |
|
| — |
|
|
| 37,900 |
|
|
| — |
|
|
|
|
|
|
| 37,900 |
|
Travel expenses |
|
| — |
|
|
| 6,063 |
|
|
| — |
|
|
|
|
|
|
| 6,063 |
|
General and administrative expenses |
|
| 44,169 |
|
|
| 72,029 |
|
|
| — |
|
|
|
|
|
|
| 116,198 |
|
Selling expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
TOTAL OPERATING EXPENSES |
|
| 44,169 |
|
|
| 1,306,668 |
|
|
| — |
|
|
|
|
|
|
| 1,350,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
| (44,169 | ) |
|
| (1,256,756 | ) |
|
| — |
|
|
|
|
|
|
| (1,300,925 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on financial instrument |
|
| — |
|
|
| (10,000 | ) |
|
| — |
|
|
|
|
|
|
| (10,000 | ) |
Interest expenses, net |
|
| — |
|
|
| (66,883 | ) |
|
| — |
|
|
|
|
|
|
| (66,883 | ) |
TOTAL OTHER INCOME (EXPENSES) |
|
| — |
|
|
| (76,883 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE TAXES |
|
| (44,169 | ) |
|
| (1,333,639 | ) |
|
| — |
|
|
|
|
|
|
| (1,300,925 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAX |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
| $ | (44,169 | ) |
| $ | (1,333,639 | ) |
| $ | — |
|
|
|
|
|
| $ | (1,300,925 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE - BASIC AND DILUTED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (0.16 | ) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,349,968 |
|
See accompanying notes to unaudited financial statements
INTELLIGENT BUYING INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1.
Description of Transaction
On February 14, 2020, we entered into an Agreement and Plan of Reorganization (the “Agreement”) with Jaguaring Company d/b/a Cannavolve (“Cannavolve”) and each of the 37 shareholders of Cannavolve who executed a counterpart signature to the Agreement (the “Cannavolve Shareholders”). Pursuant to the Agreement, the Company agreed to acquire an aggregate of up to 33,674,262 shares of Cannavolve constituting up to 81.5% of the issued and outstanding shares of Cannavolve from the Cannavolve Shareholders in exchange for 702,111 shares of the Company, constituting up to 9.6% of the issued and outstanding shares of common stock, $0.001 par value per share (the “Common Stock”), of the Company.
Pursuant to the Agreement, the Company agreed to file a Certificate of Determination with the State of California, as soon as practicable after the closing of the Share Exchange (“Closing”), creating a new class of preferred stock of the Company, the Series B Preferred Stock (the “New Preferred”) , and further agreed to issue, as a post-closing covenant, 1,000,000 shares of the New Preferred to Principal Holdings, LLC (“Principal”), in consideration of Principal successfully negotiating the Agreement and performing due-diligence in connection with the Agreement.
The Share Exchange closed on February 14, 2020. At Closing, pursuant to the Agreement, we issued an aggregate of 702,111 shares of Common Stock to the Cannavolve Shareholders in exchange for 33,674,262 shares of Cannavolve common stock, constituting 81.5% of the issued and outstanding shares of Cannavolve, resulting in Cannavolve becoming our 81.5% owned subsidiary.
At the Closing, Bagel Hole returned to INTB for cancellation and retirement, 3,446,950 shares of Common Stock owned by Bagel Hole. Also at Closing, Mr. Romanzi resigned from all officer and director positions with the Company. At Closing, the following individuals were appointed to the indicated positions:
George Furlan – Chief Operating Officer, Interim Chief Executive Officer and Interim Chief Financial Officer
Dante Jones – sole director
James Mansour – Chief Marketing Officer
2.
Basis of Pro Forma Presentation
The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and is based on the historical consolidated financial statements of the Company and Cannavolve. The acquisition method of accounting is set forth in Accounting Standards Codification (“ASC”) 805, Business Combinations, and uses the fair value concepts defined in ASC 820, Fair Value Measurement. Under the acquisition method of accounting, the assets acquired, and liabilities assumed are generally recorded as of the completion of the purchase at their respective fair values and added to those of the Company. Financial statements and reported results of operations of the Company issued after completion of the purchase will reflect these fair value adjustments, but the Company’s previously issued historical financial statements will not be retroactively restated.
The unaudited pro forma combined financial information has been prepared based on the historical consolidated financial statements of the Company and Cannavolve. The unaudited pro forma combined balance sheet as of September 30, 2019 combines the historical audited balance sheets of the Company and Cannavolve as of September 30, 2019, giving effect to the purchase as if it had been consummated on September 30, 2019.
The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are: (i) directly attributable to the purchase; (ii) factually supportable; and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations. The unaudited pro forma combined financial information does not reflect the impact of possible revenue enhancements or cost savings initiatives.
INTELLIGENT BUYING INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
3.
Adjustments to Unaudited Pro Forma Combined Balance Sheet and Statements of Operations
Presented below are the Notes to the accompanying unaudited pro forma condensed combined balance sheet:
(A) Intelligent Buying Inc. Historical Balance Sheet
Amounts are derived from the historical balance sheet of Intelligent Buying Inc. as of September 30, 2019 and the historical statements of operations for the nine months ended September 30, 2019.
(B) Cannavolve Historical Balance Sheet
Amounts are derived from the historical balance sheet of Cannavolve as of September 30, 2019 and the historical statements of operations for the nine months ended September 30, 2019.
(1) Shares issued in private placement
Amount is derived as the $1,093,936 raised in private placements related to the Share Exchange/
(2) Preferred shares issuance
Amount is derived from the issuance of preferred shares exchanged in reorganization agreement.
(3) Elimination of Cannavolve Equity and Issuance of Common Stock for Purchase
Amount is derived from the elimination of Cannavolve historical common stock and accumulated deficit, offset by the shares of common stock of the Company (par value $0.001) issued to shareholders of Cannavolve and shares cancelled as part of the Share Exchange.