Item
1.01 Entry into a Material Definitive Agreement
On
February 21, 2019, we entered into a share exchange agreement pursuant to which we agreed to acquire the 100% membership interest
in Vaxa Global, LLC, or Vaxa, from Easby Land & Cattle Company, LLC, or Easby, in exchange for 30,000,000 shares of our common
stock and an earn-out arrangement for up to 20,000,000 additional shares of our common stock.
Vaxa
owns a 100% membership interest in each of Ekstrak Labs LLC, or Ekstrak, and Gramz Holdings, LLC, or Gramz. Vaxa has been operating
since 2014. Ekstrak has been operating since 2017. Gramz has been operating since 2015.
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Vaxa
grows CBD hemp focused plants.
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Ekstrak
extracts CBD hemp oil.
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Gramz
produces and sells CBD extract in the form of both isolate and full-spectrum oil, compounds, such as Gramz Herbal Topical
and Gramz Whole Plant Matrix Sublingual Drops, which has been developed to exploit the medicinal and therapeutic benefits
of hemp.
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If
the proposed acquisition is completed, we expect Vaxa will expand their operations to grow hemp on land owned, and with water
supplied, by Two Rivers. This will provide additional hemp products to Ekstrak and Gramz.
We
will issue to Easby a total of 30,000,000 shares of common stock at closing. In addition, we may be required to issue additional
shares pursuant to an earn-out covenant in the share exchange agreement. The number of earn-out shares will equal the lesser of:
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the
quotient of (a) 10 times the consolidated earnings before income taxes, depreciation and amortization, or EBITDA, of Vaxa
(including Ekstrak and Gramz) for the year ending March 31, 2020 (or, if the parties agree to extend the required closing
date to a date not later than July 15, 2020, the year ending June 30, 2020), divided by $1.00; and
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20,000,000.
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It
is expected that the earn-out shares, if any, would be issued by May 2020 (or by August 2020, if the parties extend the closing
date as described in the preceding sentence).
The
closing must occur on or before April 15, 2019, unless otherwise agreed upon by the parties. The closing is subject to standard
conditions, as well as a requirement that we enter into an agreement with holders of outstanding preferred units of TR Capital
Partners, LLC, or TRCP, pursuant to which all of the outstanding TRCP preferred units will be exchanged for shares of our common
stock. We will seek to complete the exchange for TRCP preferred units in order to, among other things, significantly simplify
our capital structure.
We
cannot assure you that the proposed acquisition will be completed by April 15, 2019 or at all, or that we will achieve the intended
benefits from the acquisition. Among other things, we may be unable to reach an agreement with holders of TRCP preferred units
under which they agree to exchange the TRCP preferred units for common shares on terms that are acceptable to us, or at all.
The
foregoing description of the share exchange agreement is a summary and is qualified in its entirety by the terms of the share
exchange agreement, a copy of which is being filed as Exhibit 10.1 to this report.
On
February 25, 2019, we issued a press release with respect to the proposed acquisition. The full text of the press release is furnished
as Exhibit 99.1 hereto. The information contained in Exhibit 99.1 is intended to be furnished and shall not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor
shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except as expressly set forth by specific reference in such filing.
GRAMZ
is a trademark of Gramz. For convenience, this trademark appears in this report without ™ symbols, but that practice does
not mean that Gramz will not assert, to the fullest extent under applicable law, its rights to the trademark.