UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549    

 


 

FORM 10-Q

 


 

(Mark One)

 

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended  September 30, 2018

 

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

 

 

For the transition period from __________________ to ______________

 

Commission file number: 001-14088

 

Acacia Diversified Holdings, Inc.

(Exact name of small business issuer as specified in its charter)

 

Texas

75-2095676

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

 

 

13575 58th St. North #138  Clearwater, FL

33760

(Address of principal executive offices)

(Zip Code)

 

(727) 678-4420

(Registrant’s telephone number)

 

                                                                                                                                            

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ☐

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☐

 

Smaller Reporting Company ☒

 

 

 

Emerging growth company  ☐

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒    

 

APPLICABLE ONLY TO CORPORATE ISSUERS   

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of November 2, 2018 is 21,653,625 common shares.  

 

 

 

 

TABLE OF CONTENTS

 

 

 

Page

PART I. Financial Information

 

 

 

 

Item 1.

Financial Statements

F-1

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

7

Item 4.

Controls and Procedures

7

 

 

 

PART II. Other Information

 

 

 

 

Item 1.

Legal Proceedings

8

Item 1A.

Risk Factors

8

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

8

Item 3.

Defaults Upon Senior Securities

8

Item 4.

Mine Safety Disclosures

8

Item 5.

Other Information

8

Item 6.

Exhibits

9

 

 

 

Signatures

10

 

 

 

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

 

   

September 30,

   

December 31,

 
   

2018

   

2017

 
   

(UNAUDITED)

   

(AUDITED)

 

ASSETS

               
                 

CURRENT ASSETS:

               

Cash

  $ 50,878     $ 28,417  

Accounts receivable, net of allowance for doubtful accounts of

$17,450 in 2018 and 2017

    4,895       22,820  

Inventories

    45,241       57,257  

Prepaid expenses and other current assets

    10,346       11,034  

Total Current Assets

    111,360       119,528  
                 

PROPERTY AND EQUIPMENT,

net of accumulated depreciation of $239,637 and $172,783 in 2018 and 2017, respectively

    444,831       483,931  
                 

DEPOSITS

    4,201       3,341  
                 

TOTAL ASSETS

  $ 560,392     $ 606,800  
                 

LIABILITIES AND STOCKHOLDERS' DEFICIT

               
                 

CURRENT LIABILITIES:

               

Accounts payable and accrued expenses

  $ 241,736     $ 452,710  

Current portion of long-term debt

    4,359       -  

Convertible note payable

    140,800       -  

Notes payable to related party

    742,400       558,400  

Payable to related parties

    63,500       81,058  

Total Current Liabilities

    1,192,795       1,092,168  
                 

LONG-TERM LIABILITY:

               

Long-term debt

    16,309       -  
Derivative liability     155,126       -  

Total Long-term Liability

    171,435       -  
                 

Total Liabilities

    1,364,230       1,092,168  
                 

Commitments and contingencies

    -       -  
                 

STOCKHOLDERS' DEFICIT

               

Common stock, $0.001 par value; 150,000,000 shares authorized; 21,663,625 and 17,539,982

shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively

    21,663       17,540  

Additional paid-in capital

    5,652,166       4,451,038  

Accumulated deficit

    (6,477,667 )     (4,953,946 )

Total Stockholders' Deficit

    (803,838 )     (485,368 )
                 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

  $ 560,392     $ 606,800  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2018

   

2017

   

2018

   

2017

 
                                 
                                 

REVENUE

  $ 29,931     $ 63,772     $ 134,516     $ 344,133  
                                 

COSTS OF GOODS SOLD

                               

Costs of goods sold

    49,338       700       115,451       129,338  

Depreciation expense

    18,124       18,297       54,012       54,400  
      67,462       18,997       169,463       183,738  
                                 

GROSS PROFIT (LOSS)

    (37,531 )     44,775       (34,947 )     160,395  
                                 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

                               

Employee compensation expenses

    125,024       101,941       393,802       540,902  

General and administrative expenses

    208,658       83,418       873,336       569,754  

Depreciation expense

    10,803       969       11,841       4,227  
      344,485       186,328       1,278,979       1,114,883  
                                 

LOSS FROM OPERATIONS

    (382,016 )     (141,553 )     (1,313,926 )     (954,488 )
                                 

OTHER INCOME (EXPENSE)

                               

Bad debt recovery

    7,000       -       14,000       -  

Derivative expense

    (155,126 )     -       (155,126 )     -  

Loss on sale of assets

    -       -       (12,362 )     -  

Loss on sale of equipment to related party

    -       (13,178 )     -       (4,249 )

Interest expense

    (30,294 )     -       (56,307 )     (416,311 )

Other income (expense)

    -       513       -       1,512  

TOTAL OTHER EXPENSE

    (178,420 )     (12,665 )     (209,795 )     (419,048 )
                                 

NET LOSS BEFORE INCOME TAXES

  $ (560,436 )   $ (154,218 )   $ (1,523,721 )   $ (1,373,536 )

Income taxes

    -       -       -       -  
                                 

NET LOSS

  $ (560,436 )   $ (154,218 )   $ (1,523,721 )   $ (1,373,536 )
                                 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

  $ (0.03 )   $ (0.01 )   $ (0.09 )   $ (0.08 )
                                 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED

    19,450,674       17,528,342       17,544,648       17,330,720  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

 

   

2018

   

2017

 
                 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (1,523,721 )   $ (1,373,536 )

Adjustments to reconcile net loss to net cash and cash equivalents

used by operating activities:

               

Depreciation

    65,853       58,627  

Common stock issued for services

    633,908       337,469  

Common stock issued from employee stock plan

    37,069       44,738  

Common stock issued for interest expense

    -       366,400  

Original issue discount on convertible note payable

    15,800       -  

Amortization of debt discount

    -       15,000  

Derivative expense

    155,126       -  

Loss on sale of equipment

    12,362       -  

Loss on sale of equipment to related party

    -       4,249  

(Increase) decrease in:

               

Accounts receivable

    17,925       (59,470 )

Inventories

    12,016       5,614  

Prepaid expenses and other current assets

    (172 )     46,965  

Increase (decrease) in:

               

Accounts payable and accrued expenses

    235,652       (28,889 )

Payable to related parties

    6,091       89,984  

Net cash used by operating activities

    (332,091 )     (492,849 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Payment to related party for leasehold improvement

    (6,000 )     -  

Proceeds from sale of property

    38,361       -  

Acquisition of property and equipment

    (55,683 )     (6,196 )

Net cash used by investing activities

    (23,322 )     (6,196 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from issuance of common stock

    70,000       -  

Proceeds from convertible note payable

    125,000       85,000  

Repayment on convertible note payable

    -       (100,000 )

Proceeds from payable to related party

    -       130,050  

Payment on due to related parties

    -       (28,000 )

Payment on long-term debt

    (1,126 )     -  

Proceeds from issuance of notes payable to related party

    184,000       405,000  

Net cash provided by financing activities

    377,874       492,050  
                 

Net change in cash and cash equivalents

    22,461       (6,995 )
                 

Cash and cash equivalents, beginning of the year

    28,417       43,878  
                 

Cash and cash equivalents, end of the year

  $ 50,878     $ 36,883  
                 

SUPPLEMENTAL CASH FLOW INFORMATION:

               

Cash paid for interest

  $ -     $ 5,000  

Cash paid for income taxes

  $ -     $ -  
                 

NON-CASH FINANCING AND INVESTING ACTIVITIES:

               

Common stock issued to related party for leasehold improvement

  $ 17,649          

Acquisition of equipment with long-term debt

  $ 21,794          

Common stock issued to settle related party accrued expense

  $ 446,625          

Common stock issued for acquisition of property

          $ 50,723  

Common stock issued for deferred offering cost

          $ 240,900  

Consolidation of notes payable to related party, including accrued interest

          $ 153,400  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

NOTE 1 – THE COMPANY

 

Acacia Diversified Holdings, Inc. (“Acacia” or the “Company”) has four wholly-owned subsidiaries, MariJ Pharmaceuticals, Inc. (“MariJ Pharma”), Canna-Cures Research & Development Center, Inc. (“Canna-Cures”), and Eufloria Medical of Tennessee, Inc. (“EMT”), a company incorporated in the state of Tennessee. In July 2018, the Company also announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”), complete with a current compounding pharmacy license in Florida. The Medahub acquisition allows the Company to be fully HIPAA compliant and cloud based on an HL7 platform. The Company can now offer licensing agreements for other cannabis companies wanting to be HIPAA compliant from left to right or seed to sale and Doctor to Patient.

 

The Company’s primary source of revenue is from the extraction of medicinal hemp oil, from a non-psychoactive cannabis plant. All extraction services are currently provided in states where such services are deemed legal. The Company's subsidiary EMT has been invited to be part of the hemp pilot program in Tennessee. This program provides the Company the license to grow, manufacture, and dispense organic hemp oil in Tennessee. The Company plans on participating in this pilot program through this new, wholly-owned subsidiary.

 

The Company will also begin to open its retail store in Tennessee this year. Revenue generated from retail sales is not expected to be material to the Company based on current operating model.

 

NOTE 2 – GOING CONCERN

 

The Company has not generated profit to date. The Company expects to continue to incur operating losses as it proceeds with its extraction, growing and manufacturing activities in Tennessee and research and development activities and continues to navigate through the regulatory process. The Company expects general and administrative costs to increase, as the Company adds personnel and other administrative expenses associated with its current efforts. As such, and without substantially increasing revenue or finding new sources of capital, the Company will find it difficult to continue to meet its obligations as they come due.  The Company continues to seek working capital but there can be no assurance that the Company will be successful in its efforts to raise capital, or if it were successful in raising capital, that it would be successful in meeting its business plans.  These factors raise substantial doubt as to the ability of the Company to continue as a going concern.  Management’s plans include securing additional extraction contracts and opening a retail store in Tennessee, attempting to start new businesses outside of Colorado, finding additional operational businesses to buy, and attempting to raise funds from the public through an equity offering of the Company’s common stock. Management intends to make every effort to identify and develop all these sources of funds, but there can be no assurance that Management’s plans will be successful.

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred losses for all periods presented and has a substantial accumulated deficit. As of September 30, 2018, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

BASIS OF PRESENTATION

 

The accompanying consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the financial results for these periods. The consolidated financial statements and notes thereto are presented as prescribed by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The accompanying consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended December 31, 2017 and notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission on April 2, 2018. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the entire fiscal year. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three-month and nine-month periods ended September 30, 2018 and 2017, (b) the financial position at September 30, 2018 and (c) cash flows for the nine-month periods ended September 30, 2018 and 2017.

 

PRINCIPLES OF CONSOLIDATION

 

The consolidated financial statements include the accounts of Acacia Diversified Holdings, Inc. and its wholly-owned subsidiaries, MariJ Pharmaceuticals, Inc, Canna-Cures Research & Development Center, Inc., Eufloria Medical of Tennessee, Inc., Medahub Operations Group, Inc. and Medahub, Inc. All significant intercompany accounts and transactions are eliminated in consolidation.

 

USE OF ESTIMATES

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The actual results may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

MEDAHUB ACQUISITION

 

In July 2018, the Company announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”), which includes a current compounding pharmacy license in Florida. The Medahub acquisition allows the Company to be fully HIPAA compliant and cloud based on an HL7 platform. The Company can now offer licensing agreements for other cannabis companies wanting to be HIPAA compliant from left to right or seed to sale and Doctor to Patient. The Company issued 600,000 shares of its restricted common stock to the principal of Medahub as consideration of the acquisition, valued at $126,000.

 

When determining the accounting of the acquisition, the Company concluded that the acquisition does not constitute the acquisition of a business since there was no inputs, processes or outputs within Medahub. In addition, although the Company acquired certain software and technology from Medahub, the most significant asset it acquired was Medahub's principal's commitment to provide support, guidance and direction for implementing this technology. Without the principal's commitment of his time, the Company will not be able to implement the technology and begin generating cash flows. Therefore, the Company believes that the value of the purchase is concentrated on the service provided by Medahub's principal. As a result, the Company allocated the entire purchase price to the service provided and accounted for it as professional fee expense.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

REVENUE RECOGNITION

 

In May 2014, the FASB issued ASU No. 2014-09,  Revenue from Contracts with Customers (Topic 606),  which replaces numerous requirements in U.S. GAAP, including industry specific requirements, and provides a single revenue recognition model for recognizing revenue from contracts with customers. The Company adopted this standard effective January 1, 2018.

 

The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenues from extraction activities and from retail sales are recognized at a point in time.

 

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenues.

 

The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application to accumulated deficit. Additionally, incremental footnote disclosures are required to present the 2018 revenues under the prior standard. Under the modified retrospective method, an entity may also elect to apply the standard to either (i) all contracts as of January 1, 2018, or (ii) only to contracts that are not completed as of January 1, 2018. The Company elected to adopt this guidance using the modified retrospective method at January 1, 2018 which did not result in an adjustment to accumulated deficit. Additionally, upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition.

 

DEBT DISCOUNT

 

During the nine months ended September 30, 2018, the Company incurred $12,800 of debt discount related to the issuance of a convertible promissory note, as described in Note 6. The discount was recognized in its entirety as interest expense rather than amortized over the life of the convertible promissory note. The immediate recognition did not yield materially different result.

 

DEBT ISSUANCE COST S

 

During the nine months ended September 30, 2018, the Company incurred direct costs associated with the issuance of convertible promissory note, as described in Note 6, and recorded $3,000 of debt issuance costs. The Company recognized this amount as interest expense for the nine months ended September 30, 2018.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

STOCK BASED COMPENSATION

 

The Company accounts for stock-based compensation under  Accounting Standards Codification 718 - Compensation-Stock Compensation  (“ASC 718”). ASC 718 requires that all stock-based compensation be recognized as expense in the financial statements and that such cost be measured at the fair value of the award at the grant date and recognized over the period during which an employee is required to provide services (requisite service period). An additional requirement of ASC 718 is that estimated forfeitures be considered in determining compensation expense. Estimating forfeitures did not have a material impact on the determination of compensation expense during the three and nine months ended September 30, 2018 and 2017.  

 

The Company accounts for stock based awards based on the fair market value of the instrument using a 10-day volume weighted adjusted price (VWAP) and accounts for stock options issued using the Black-Scholes option pricing model and utilizing certain assumptions including the followings:

 

Risk-free interest rate  – This is the yield on U.S. Treasury Securities posted at the date of grant (or date of modification) having a term equal to the expected life of the option. An increase in the risk-free interest rate will increase compensation expense.

 

Expected life—years  – This is the period of time over which the options granted are expected to remain outstanding. Options granted by the Company had a maximum term of ten years. An increase in the expected life will increase compensation expense.

 

Expected volatility  – Actual changes in the market value of stock are used to calculate the volatility assumption.  An increase in the expected volatility will increase compensation expense.

 

Dividend yield  – This is the annual rate of dividends per share over the exercise price of the option. An increase in the dividend yield will decrease compensation expense.  The Company does not currently pay dividends and has no immediate plans to do so in the near future.

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of  Accounting Standards Codification 505-50, Equity – Based Payments to Non-Employees .  Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.  The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete. 

 

During the nine months ended September 30, 2018, the board of directors approved issuances of the Company’s restricted common stock to consultants, employees, and directors for services rendered:

 

 

1.

2,000 shares to a consultant for services rendered, valued at $1,420.

 

2.

15,000 shares to the Company's SEC counsel for services rendered, valued at $10,650.

 

3.

1,000,000 shares to a consultant as payment on a consulting contract, valued at $485,600. In February 2018, the Company filed a Form S-8 with the SEC to register these shares.

 

4.

10,000 shares each of the three directors, total 30,000 shares for their service to the Company, valued at a total of $10,239.

 

5.

7,500 shares to employees from the restricted stock plan valued at $37,069.

 

6.

36,018 shares to a company owned by an independent director for leasehold improvements at the Tennessee store, valued at $17,649 on commitment date. The Company reduced related party payable when the shares were issued.

 

7.

600,000 shares to the principal of Medahub for services performed, valued at $126,000.

 

8.

2,233,125 shares to the Company's CEO to settle accrued salary, bonus and expenses in the amount of $446,625.

 

 

 ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

FAIR VALUE ESTIMATES  – The Company measures assets and liabilities it acquires at fair value in accordance with  Accounting Standards Codification 820 – Fair Value Measurement  (“ASC 820”). The objective of ASC 820 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 specifies a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable.

 

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions. These two types of inputs have created the following fair value hierarchy:

 

Level 1 – Quoted prices for identical instruments in active markets;

 

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and 

 

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. The Company has liability measured at fair value on a recurring basis due to the issuance of convertible note payable as described in Note 6.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

Notes Payable to Related Party

 

The Company entered into the following promissory notes payable to its CEO during the year ended December 31, 2017 and during the nine months ended September 30, 2018:

 

Note Date

 

Note Amount

   

Accrued Interest

   

Total

 

January 2017 (1)

  $ 300,000     $ 16,504     $ 316,504  

June 2017 (2)

    105,000       2,048       107,048  

June 2017 (3)

    130,050       2,564       132,614  
      535,050       21,116       556,166  

Expenses owed to related party

                    2,234  
Principle of note payable to related party after consolidation at December 31, 2017                   $ 558,400  
                         

March 2018 (4)

  $ 72,000       -       72,000  

April 2018 (5)

  $ 42,000       -       42,000  

August 2018 (6)

  $ 70,000       -       70,000  

Principle balance of notes payable to related party at September 30, 2018

    184,000       -     $ 184,000  
                         
Total principle amount of notes payable to related party at September 30, 2018                   $ 742,400  

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

(1) In January 2017, the Company entered into a note agreement in the amount of $300,000 with the Company’s CEO. The note bears interest at a rate of 8% per annum and specifies no due date. The Company accrued interest of $16,504 through September 25, 2017. Concurrently, the board of directors also approved issuance of 100,000 shares of the Company’s common stock as additional interest. These shares were accounted for as debt issuance costs, valued at $182,000. The costs were expensed at the commitment date of the note as interest expense since the note is a short term capital advance with no stated term. This note was convertible into the shares of the Company’s common stock at $0.50/share and the note holder did not exercise the conversion option.

 

(2) In June 2017, the Company entered into a note agreement in the amount of $105,000 with the Company’s CEO for short term working capital advance. The note bears interest at a rate of 8% per annum and specifies no due date. The Company accrued interest and recorded interest expense of $2,048 through September 25, 2017. This note was convertible into the shares of the Company’s common stock at $0.50/share and the note holder did not exercise the conversion option.

 

(3) In June 2017, the Company received a short term working capital advance of $130,050 from its CEO. The advance bears interest at a rate of 8% per annum and specifies no due date. The Company accrued interest and recorded interest expense of $2,564 through September 25, 2017.

 

On September 25, 2017, the board of directors approved the Company to enter into a consolidated note payable agreement with the Company’s CEO to consolidate the above notes (1) and (2) and advances (3) received from its CEO, including accrued interests on these notes. The total amount of the principle and interest consolidated was $558,400. This consolidated note payable bears 8% interest per annum and is due on demand. Interest expense on this note from September 25, 2017 to December 31, 2017 in the amount of $11,872 and for the nine months ended September 30, 2018 in the amount of $33,412 are included in accrued expenses in Note 7. This note is secured by all of the Company's assets.

  

(4) In March 2018, the Company entered into three separate unsecured promissory note agreements with its CEO and his spouse, in the amounts of $12,000, $40,000 and $20,000, totaled $72,000. Each of these promissory notes bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 60 days from the date of the note. The Company accrued interest on these notes in the amount of $2,950 for the nine months ended September 30, 2018. This amount is included in accrued expenses in Note 7.

 

(5) In April 2018, the Company entered into two separate unsecured promissory note agreements with its CEO and his spouse, in the amounts of $10,000 and $32,000, totaled $42,000. Each of these promissory notes bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 60 days from the date of the note. The Company accrued interest on these notes in the amount of $1,486 for the nine months ended September 30, 2018. This amount is included in accrued expenses in Note 7.

 

In May 2018, the board of directors approved the Company to enter into a promissory note agreement with the Company's CEO and his spouse to consolidate notes (4) and (5). The total amount of the principle consolidated was $114,000. The amount of interest accrued from the note dates to the date of the consolidation was minimal and therefore was not included in the consolidation. The promissory note accrues interest at 8% from the date of consolidation and is due within 120 days of the note date.

 

(6) In August 2018, the Company entered into three separate unsecured promissory note agreements with its CEO and his spouse, in the amounts of $25,000, $25,000, and $20,000, totaled $70,000. Each of these promissory notes bears interest at a rate of 8% per annum. The principle balance and accrued interest is due 60 days from the date of the note. The Company accrued interest on these notes in the amount of $757 for the nine months ended September 30, 2018. This amount is included in accrued expenses in Note 7.

 

As a result, the total amount of notes payable to related party was $742,400 and $558,400, at September 30, 2018 and December 31, 2017, respectively.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

Payable to Related Parties

 

Payable to related parties consisted of the followings at September 30, 2018 and December 31, 2017:

 

   

September 30,

   

December 31,

 
   

2018

   

2017

 

Short term loan from related entity (1)

  $ 61,500     $ 41,994  

Storage and corporate housing and auto allowances owed to CEO (2)

    2,000       10,000  

Amount owed to a director (3)

    -       29,064  
    $ 63,500     $ 81,058  

 

(1) In 2017, the Company received a working capital advance of $74,348 from a related entity. These advances are non-interest bearing and were intended as short term capital advances. The remaining balances have been included in payable to related parties on the consolidated balance sheet as current liabilities at September 30, 2018 and December 31, 2017. 

 

(2) On May 1, 2016, the Company entered into an employment agreement with its CEO. The term of the employment is through December 31, 2019. The agreement provides for a monthly storage and corporate housing allowance of $1,000 for a property owned by the CEO and a monthly automobile allowance of $1,000.

 

In May 2018, the board of directors approved to discontinue payment of the storage and corporate housing allowance of $1,000 per month, retroactively to January 1, 2018. As a result, expenses accrued during the three months ended March 31, 2018 was reversed during the three months ended June 30, 2018. The automobile allowance remains unchanged at $1,000 per month.

 

In July 2018, the board of directors approved issuance of 85,000 shares of the Company's restricted common stock to the Company's CEO to settle the accrued storage and corporate housing allowance and automobile allowance in the amount of $17,000. As a result, $2,000 and $10,000 remained owed to the Company’s CEO at September 30, 2018 and December 31, 2017, respectively.

 

During the three and nine months ended September 30, 2018, expenses related to the housing and automobile allowances totaled $3,000 and $9,000, respectively. During the three and nine months ended September 30, 2017, expenses related to the housing and automobile allowances totaled $6,000 and $18,000, respectively.

 

(3) During the year ended December 31, 2017, a director of the Company incurred time and expenses related to improving the retail space located in Tennessee. These costs have been recorded as leasehold improvements in the Company’s consolidated balance sheets. At December 31, 2017, the Company owed this director $29,064, of which $17,648 was paid in February 2018 through issuance of 36,018 shares of the Company’s common stock to the director and $6,000 was paid to the director. The remaining amount was paid during the three months ended September 30, 2018.

 

Other Related Party Transactions

 

In May 2018, the Company's CEO personally financed the purchase, with the Company's board of directors' approval, a piece of property in Tennessee for the benefit of the Company. The property consists of a 14 acres farm and an indoor growing area. The Company's CEO personally funded the purchase price of the property at $185,000 and closing costs. The board of directors also granted the Company the right to purchase the farm from the Company's CEO at his cost plus 6.09% interest when the Company has sufficient cash flows to do so. At the time of the filing, the Company has not exercised such right.

 

The board of directors also approved for the Company to enter into a lease to lease this property from the Company's CEO, effective June 1, 2018. The term of the lease is for one year with an automatic renewal term of one year. The lease requires the Company to pay all expenses related to the acquisition and operation of the property, including but not limited to the Company's CEO's personal incremental borrowing costs, repairs and maintenance, real estate taxes, licenses and permits, etc. For the three and nine months ended September 30, 2018, the Company incurred $9,147 and $14,158, respectively, in operating expenses for this property.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

NOTE 5 – LONG-TERM DEBT

 

In June 2018, the Company entered into a financing agreement to finance the purchase of a farm tractor. The financing agreement is secured by the tractor. The total amount financed was $21,794 at 0% interest per annum. The first monthly payment of $363 began in July 2018 and continues for 60 months. The following is the total payment amounts for the next five years:

 

Periods ending December 31,

       

2018

  $ 1,052  

2019

    4,356  

2020

    4,356  

2021

    4,356  

2022

    4,356  

2023

    2,192  
    $ 20,668  

 

The current and long-term portions of principle amounts due are as follow:

 

Amount of principle due in the next 12 months

  $ 4,359  

Long term portion of principle due

    16,309  
    $ 20,668  

 

NOTE 6 – CONVERTIBLE NOTE PAYABLE AND DERIVATIVE LIABILITY

 

On August 22, 2018, the Company issued a convertible promissory note for $140,800. The note was discounted at $128,000 and the Company received net proceeds of $125,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 8% per annum, and principal and accrued interest was due on the maturity date of August 22, 2019. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes valuation model to determine the fair value of the conversion option. At the issuance date, the Company recorded a derivative expense and derivative liability of $148,211. At September 30, 2018, the Company revalued the derivative liability and recorded additional derivative expense of $6,915. As such, the derivative liability was valued at $155,126 at September 30, 2018.

 

Liability measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2018 is as follows:

 

   

Fair Value Measurement at

 
   

September 30, 2018 (1)

 
   

Using

 
   

Level 2

   

Total

 
Liability:                
                 

Derivative liability

  $ 155,126     $ 155,126  
                 

Total liability

  $ 155,126     $ 155,126  
                 

 

(1)

The Company did not have any assets or liabilities measured at fair value using Level 1 or 3 of the fair value hierarchy as of September 30, 2018.

 

The Company’s derivative liabilities are classified within Level 2 of the fair value hierarchy. The Company utilizes the Black-Scholes valuation model to value the derivative liabilities utilizing observable inputs such as the Company’s common stock price, the conversion price of the conversion option, and expected volatility, which is based on historical volatility. The Black-Scholes valuation model employs the market approach in determining fair value.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis during the nine months ended September 30, 2018:

 

Balance at December 31, 2017

  $ -  

Variable conversion feature in convertible note payable

    148,211  

Fair value adjustment

    6,915  
         

Balance at September 30, 2018

  $ 155,126  
         

 

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the followings at September 30, 2018 and December 31, 2017:

 

   

September 30, 2018

   

December 31, 2017

 

Accounts payable to vendors

  $ 68,202     $ 95,444  

Payroll taxes payable

    33,780       24,727  

Accrued salaries and bonuses

    87,773       320,667  

Accrued interest on notes payable to related party

    51,981       11,872  
    $ 241736     $ 452,710  

 

NOTE  8 – INVENTORIES

 

The Company’s inventories consisted of the followings at September 30, 2018 and December 31, 2017:

 

   

September 30, 2018

   

December 31, 2017

 

Raw materials

  $ 27,410     $ 46,880  

Finished goods

    16,631       10,377  

Hemp clones

    1,200       -  
    $ 45,241     $ 57,257  

 

NOTE  9 – STOCKHOLDERS’ DEFICIT

 

Common Stock

 

The Company has been authorized to issue 150,000,000 shares of common stock, $.001 par value.  Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

During the nine months ended September 30, 2018, the Company issue 4,123,643 shares of its restricted common stock as follows:

 

 

1.

2,000 shares to a consultant for services rendered, valued at $1,420.

 

2.

15,000 shares to the Company's SEC counsel for services rendered, valued at $10,650.

 

3.

1,000,000 shares to a consultant as payment on a consulting contract, valued at $485,600. In February 2018, the Company filed a Form S-8 with the SEC to register these shares.

 

4.

10,000 shares each of the three directors, total 30,000 shares for their service to the Company, valued at a total of $10,239.

 

5.

7,500 shares to employees from the restricted stock plan valued at $37,069.

 

6.

36,018 shares to a company owned by an independent director for leasehold improvements at the Tennessee store, valued at $17,649 on commitment date. The Company reduced related party payable when the shares were issued.

 

7.

600,000 shares to the principal of Medahub for services performed, valued at $126,000.

 

8.

2,233,125 shares to the Company's CEO to settle accrued salary, bonus and expenses in the amount of $446,625.

 

9.

200,000 shares to a non-employee director for cash value of $70,000

 

Warrants and Options

 

At September 30, 2018, 65,000 options were outstanding and there were no warrants outstanding. The Company did not issue any common stock purchase warrants or options during the nine months ended September 30, 2018 and 2017.

 

Restricted Stock Awards to Key Employees

 

In  March 2017, the board of directors approved issuance of 100,000 shares of the Company’s restricted common stock to its key employees. The award for the employees are subject to a four or five-year vesting requirements, i.e. the requisite service period. The shares are issued as the vesting restriction lapses. The Company valued these shares at fair value on commitment date which is the date on which the employee accepted the award and recorded stock based compensation expense over the requisite service period.  During the six months ended June 30, 2017, the board of directors approved issuance of 10,000 shares of the Company’s common stock to one of the key employees as the vesting requirement was met. These shares were valued at $12,800 on commitment date.

 

Stock based compensation expense for these awards for the three and nine months ended September 30, 2017 was $17,877 and $60,501, respectively. Stock based compensation expense for these awards for the three and nine months ended September 30, 2018 was $11,040 and $37,069, respectively.

 

NOTE 10 – SUBSEQUENT EVENTS

 

On October 8, 2018, the Company issued a convertible promissory note for $58,300. The note was discounted at $53,000 and the Company received net proceeds of $50,000 after incurring $3,000 of debt issuance costs. The note bears an interest rate at 8% per annum, and principal and accrued interest was due on the maturity date of October 8, 2019. The conversion option price associated with the note has a 25% discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a ten day period prior to conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company will bifurcate the conversion option, and utilize the Black Scholes valuation model to determine the fair value of the conversion option. The Company will record a derivative expense and derivative liability on issuance date and revalue the derivative liability at December 31, 2018.

 

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018

(UNAUDITED)

 

NOTE 11 – RECENT ACCOUNTING PRONOUNCEMENTS

 

The Security and Exchange Commission ("SEC") recently amended its rules to require an analysis of changes in stockholders’ equity in the financial statements included in quarterly reports on Form 10-Q. The analysis, which can be presented as a note or separate statement, is required for the current and comparative quarter and year-to-date interim periods. The amended rules will become effective 30 days after they are published in the Federal Register. The SEC's transition guidance states that the amendments are effective for all filings made on or after the effective date; however, it also states the SEC staff would not object if a filer’s first presentation of the changes in stockholders’ equity was included in its Form 10-Q for the quarter that begins after the effective date of the amendments. The Company will continue to monitor the status of the amendments and provide financial statements in our quarterly report on Form 10-Q when they become effective.

 

Except as noted above and in our Form 10-K, the Company’s management does not believe that recent codified pronouncements by the Financial Accounting Standards Board (“FASB”) (including its EITF), the AICPA or the SEC will have a material impact on the Company’s current or future consolidated financial statements.

 

 

 

 

 

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

 

Forward-Looking Information

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements   within the meaning of the Private Litigation Reform Act of 1995 that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements.  You can identify forward-looking statements by the use of the words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “will”, “should”, “could”, “predicts”, “potential”, “proposed”, or “continue” or the negative of those terms.  These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements due to numerous factors, including, but not limited to, availability of financing for operations, successful performance of operations, impact of competition and other risks detailed below as well as those discussed elsewhere in this Form 10-Q and from time to time in the Company’s Securities and Exchange Commission filings and reports.  In addition, general economic and market conditions and growth rates could affect such statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

General

 

These unaudited interim consolidated financial statements should be read in conjunction with the annual financial statements for the Company most recently completed fiscal year ended December 31, 2017. These unaudited interim consolidated financial statements do not include all disclosures required in annual financial statements, but rather are prepared in accordance with recommendations for interim financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited interim consolidated financial statements have been prepared using the same accounting policies and methods as those used by the Company in the annual audited financial statements for the year ended December 31, 2017.

 

Discussion on the Company’s Operations and Recent Event

 

MariJ Pharmaceuticals, Inc.   ("MariJ Pharma")

 

MariJ Pharma engages in the extraction and processing of very high quality, high-CBD/low-THC content medical grade hemp oils from medical hemp plants.  MariJ Pharma specializes in utilizing organic strains of the hemp plant, setting itself apart from the general producers of non-organic products.  In addition, MariJ Pharma has the technical expertise and capability to process and formulate the oils and to employ them in its compounding operations.  MariJ Pharma will seek to become engaged as owner or co-owner of a grow facility such as to produce its own plants for processing. The Company intends to acquire, through its MariJ Pharma subsidiary, portions or complete ownership of licenses and grow operations in one or more states and seeks to cultivate, organically extract and process its medicinal hemp crops year around in indoor facilities.  The acquisition of these licenses is anticipated to provide the Company with the opportunity to compound medicinal products using mixtures of high cannabinoid profile oils that have very little hallucinogenic properties but have significantly improved medicinal properties. This GeoTraking Technology is designed to provide a full-channel patient care tracking system that is fully compliant under today’s strict HIPAA regulations that require privacy and security of the patient’s information. Beginning with RFID labeling and tracking of every single seed employed in the grow program and continuing through the sale of medicinal products in a sophisticated retail Point of Sale delivery system.

 

 

MariJ Pharma’s revenues are anticipated to be generated primarily from several activities, including but not limited to the following:

 

 

a.  

Hemp oil extraction and processing. MariJ Pharma has a unique mobile hemp oil processing and extraction unit designed into a heavy-duty trucks.  That unit has already begun performing extractions and processing of medical hemp oils at various sites and is currently developing additional contracts for services.

 

b.  

Wholesale sale of raw and processed medical hemp oils.

 

c.  

Compounding and manufacturing.  MariJ Pharma has begun construction of a mobile laboratory and testing unit, also on a heavy-duty truck chassis, intended to address the growing demand for these services in the medical cannabis industry.

 

d.  

Licensing and support of the Company’s GeoTraking Technology systems

 

e.  

Processing and compounding services for medical grade hemp oils

 

On September 28, 2016, MariJ Pharmaceuticals, Inc. received an Organic Certification under the U.S. National Organic Program (7 CFR Part 205) for its proprietary CO2 mobile oil extraction process and handling from OneCert, Inc., the issuing authority for that certification. As such, MariJ is now authorized to process directly for certified organic farms and is able to produce certified organic oils.

 

The Company is preparing to seek additional investments and financing to pay the costs of building its second mobile oil extraction and processing unit, to finance final construction of its mobile compounding and manufacturing unit for the same industry, and to complete the roll-out of its GeoTraking Technology system. There can be no assurance the Company will be successful in its plans to generate the required capital.

 

Canna-Cures Research and Development Center, Inc.   ("Canna-Cures")

 

The Company acquired the assets and the business of Canna-Cures Research & Development Center, LLC, a Florida limited liability company, on January 15, 2016.  The Company utilizes this subsidiary to engage in research and development activities as well as retail and wholesale distribution of medicinal hemp products and dietary supplements in the state of Colorado, depending upon our ability to comply in each instance with FDA rules and other regulations.  Canna-Cures closed its retail operations in 2017 and began to focus its efforts in its development activities in Tennessee.

 

Eufloria Medical of Tennessee, Inc.   ("EMT")

 

In addition to our current extraction operations, the Company has been invited to be part of the hemp pilot program in Tennessee. This program provides the Company the license to grow, manufacture, and dispense USDA organic hemp oil in Tennessee and represents the first step in moving its operations to the east coast of the United States. The Company plans on participating in this pilot program through this new, wholly-owned subsidiary.

 

In July 2018, the Company announced that its wholly-owned subsidiary, Eufloria Medical of Tennessee, Inc. (“EMT”), an entity focused on the growing and distribution of new and proprietary medicinal hemp products for patients. EMT intends to utilize MariJ Pharma's USDA certified organic mobile processing and handling solutions for its customers, and technology solutions for the expanding physician market, has leased a 14-acre farm with 32,000 square feet of indoor growing area in southern Tennessee.  EMT also acquired an option to purchase the farm upon favorable terms, which option, EMT intends to exercise as soon as possible.  The farm will provide the Company’s first grow facility, allowing for improved efficiencies through growing, processing and manufacturing the Company’s own product line and building sales through dedicated distributors.  The Company will grow its own plant material, process that plant material through another wholly owned subsidiary, MariJ Pharmaceuticals, Inc. (“MariJ”) and manufacture consumer products with the “EUFLORIA” branding for the dedicated distribution channels.

 

 

EMT will seek to align itself with institutions of higher learning in working to develop new products and to identify and develop additional uses for its medical hemp products. It is anticipated that EMT could generate revenues from the following activities:

 

1)

EMT will seek to enter into product development projects with institutions of higher learning in efforts to develop new and better strains of medical hemp related products for dispensing as medications, nutraceuticals, cosmeceuticals, and probably dietary supplements.  EMT anticipates participating in state and federal grants in conjunction with one or more universities as a means to defray part of its costs in these efforts.

2)

Private label packaging services - the Company has obtained a majority of the equipment required to engage in the business of packaging and labeling of medical hemp oils, oil-infused products, and related items.

3)

Retail sales of medical hemp oils, oil-infused products, and other merchandise through its web-based portal or retail dispensaries planned for that purpose.  These activities are dependent in large part upon meeting FDA regulations and criteria relating to the sale and distribution of hemp-infused products, and the Company is currently in the process of determining the status of those criteria.

4)

Retail and wholesale sales of cosmeceutical and nutraceutical products and dietary supplements containing its high-quality hemp oil extracts, subject to compliance with FDA and other regulations.

5)

Growing high quality hemp plants and extracting oil for sale or for manufacturing of oil-infused products.

 

The Company will require additional capital to execute these plans and there can be no assurance that the Company will be successful in its plans to generate that capital.

 

Medahub, Inc. ("Medahub")

 

In July 2018, the Company announced the completion of its acquisition of Medahub Operations Group, Inc. and Medahub, Inc., technology companies (“Medahub”), complete with a current compounding pharmacy license in Florida. The Medahub acquisition allows the Company to be fully HIPAA compliant and cloud based on an HL7 platform. The Company can now offer licensing agreements for other cannabis companies wanting to be HIPAA compliant from left to right or seed to sale and Doctor to Patient. The Company is continuing to develop the capabilities of this technology ahead of marketing this platform to users.

 

Operating results for the three months ended September 30, 2018 and 2017:

 

For the three months ended September 30, 2018, the Company generated revenues of $29,931 from operations, compared to $63,772 for the three months ended September 30, 2017, a decrease of $33,841 or 53%. In 2017, revenues were primarily generated from extraction contracts.  Revenues from 2018 were primarily from extraction services performed and sales of the Company's products. The decrease in revenues was due to having fewer extraction contracts and more competitive industry condition in the extraction space driving processing pricing down in 2018. Average revenue per pound of processed flower decreased by 40% compared to 2017.  The Company will be making every effort possible to acquire extraction contracts on the east coast going forward where markets are unsaturated. The Company began employing a sales force of distributors to market and sell its products and plans on expanding its sales force in the near future. It also plans on opening its retail location in Tennessee to generate additional revenues from retail sales.

 

For the three months ended September 30, 2018, costs of goods sold was $67,462, compared to $18,997 for the three months ended September 30, 2017, an increase of $48,465, or 255%. Costs of goods sold was lower during the three months ended September 30, 2017 primarily due to the reversal of approximately $24,000 stock based compensation on unvested stock awards granted to an employee. Costs of goods sold in the three months ended September 30, 2018 also included costs related to sale of raw oil which did not exist last year.

 

As a result of the changes in revenues and costs of goods sold discussed above, the Company’s gross profit decreased from $44,775, or 70% of revenue for the three months ended September 30, 2017 to $(37,531), or (125)% of revenue for the three months ended September 30, 2018.

 

 

For the three months ended September 30, 2018, selling, general and administrative expenses were $344,485, compared to $186,328 during the three months ended September 30, 2017, an increase of $158,157, or 85%. The increase in these expenses are attributable to (1) an increase in travel and operating expenses related to our operations in Tennessee, (2) hiring additional personnel for our Tennessee operations, and (3) higher professional fees during the current period, especially from the Medahub acquisition.

 

During the three months ended September 30, 2018, the Company incurred interest expense of $30,294, compared to $0 for the three months ended September 30, 2017, an increase of $30,294. During the three months ended September 30, 2018, interest expense was primarily related to the notes payable to related party and on convertible note payable. At September 30, 2017, the Company consolidated all outstanding notes payable and the related accrued interest to the Company's CEO, resulting in no interest expense for the three months ended September 30, 2017.

 

As a result of the changes in revenues, costs and expenses, the Company incurred a net loss of $560,436 for the three months ended September 30, 2018, compared to a net loss of $154,218 for the three months ended September 30, 2017, an increase of $406,218, or 263%.

 

The future trends of all expenses are expected to be primarily driven by the Company’s ability to execute its business plans and the future outcome of its application to obtain operating licenses in other states. As the industry grows, additional expenses are anticipated to be incurred in complying with various state and federal regulatory requirements. The Company’s ability to continue to fund operating expenses will depend on its ability to raise additional capital. There can be no assurance that the Company will be successful in doing so.

 

Operating results for the nine months ended September 30, 2018 and 2017:

 

For the nine months ended September 30, 2018, the Company generated revenues of $134,516 from operations, compared to $344,133 for the nine months ended September 30, 2017, a decrease of $209,617, or 61%.  The decrease in revenues was due to having fewer extraction contracts and more competitive industry condition in the extraction space driving processing pricing down in 2018. Average revenue per pound of processed flower decreased by 40% compared to 2017.  The Company will be making every effort possible to acquire extraction contracts on the east coast going forward where markets are unsaturated. The Company began employing a sales force of distributors to market and sell its products and plans on expanding its sales force in the near future. It also plans on opening its retail location in Tennessee to generate additional revenues from retail sales.

 

For the nine months ended September 30, 2018, costs of goods sold was $169,463, compared to $183,738 for the nine months ended September 30, 2017, a decrease of $14,275, or 8%. The decrease in our costs is primarily related to lower stock based compensation and commissions paid and as a result of completing fewer extraction contracts during the nine months ended September 30, 2018.

 

As a result of the changes in revenues and costs of goods sold discussed above, the Company’s gross profit decreased from $160,395, or 47% of revenues, for the nine months ended September 30, 2017 to $(34,947), or (26%) of revenues, for the nine months ended September 30, 2018.

 

For the nine months ended September 30, 2018, selling, general and administrative expenses were $1,278,979, compared to $1,114,883 during the nine months ended September 30, 2017, an increase of $164,096, or 15%. The increase in these expenses are attributable to (1) an increase in travel and operating expenses related to our operations in Tennessee, (2) hiring additional personnel for our Tennessee operations, and (3) higher professional fees during the current period, especially from the Medahub acquisition.

 

During the nine months ended September 30, 2018, the Company incurred interest expense of $56,307, compared to $416,311 for the nine months ended September 30, 2017, a decrease of $360,004, or 86%. During the nine months ended September 30, 2018, the Company accrued interest on its notes payable to related party and its convertible notes payable in the amount of $43,507 and incurred a debt discount in the amount of $12,800 related to its convertible note payable. During the nine months ended September 30, 2017, the Company incurred interest on its notes payable to related party and to a convertible note holder in the amount of $28,962, issued common stock valued at $340,000 as interest on notes payable to related party, and amortized $47,350 of debt discount. 

 

 

As a result of the changes in revenues, costs and expenses, the Company incurred a net loss of $1,523,721 for the nine months ended September 30, 2018, compared to a net loss of $1,373,536 for the nine months ended September 30, 2017.

 

The future trends of all expenses are expected to be primarily driven by the Company’s ability to execute its business plans and the future outcome of its application to obtain operating licenses in other states. As the industry grows, additional expenses are anticipated to be incurred in complying with various state and federal regulatory requirements. The Company’s ability to continue to fund operating expenses will depend on its ability to raise additional capital. There can be no assurance that the Company will be successful in doing so.

 

Liquidity and Capital Resources

 

The Company’s cash position at September 30, 2018 increased by $22,461 to $50,878, as compared to a balance of $28,417, as of December 31, 2017. The net increase in cash for the nine months ended September 30, 2018 was attributable to net cash used in operating activities of $332,091, net cash used by investing activities of $23,322, offset by net cash provided by financing activities of $377,874.

 

As of September 30, 2018, the Company had negative working capital of $1,081,435 compared to negative working capital of $972,640, at December 31, 2017, a decrease of $108,795, attributable primarily to issuance of notes payable to its CEO, and issuance of a convertible note payable and its related derivative liability as a result of a variable conversion.

 

Net cash used in operating activities of $322,091 during the nine months ended September 30, 2018, was lower compared to the prior period of $492,849, primarily due to better collection from accounts receivable and settling accrued salary, bonus and expenses with the Company's CEO in the current period.

 

Net cash used by investing activities of $23,322 for the nine months ended September 30, 2018 was higher compared to $6,196 of cash used by investing activities for the nine months ended September 30, 2017. This is primarily attributable to the renovation of the Company's retail space in Tennessee.

 

Net cash provided by financing activities of $377,874 during the nine months ended September 30, 2018 decreased by $114,176 compared to $492,050 during the nine months ended September 30, 2017. In the current period, the Company's plan of operations required a smaller amount of financing compared to the prior period.

 

During the nine months ended September 30, 2018, the Company issued shares of its common stock valued at $17,649 to settle a related party liability, financed the purchase of a tractor in the amount of $21,794 and issue shares of its common stock to settle accrued expenses with its CEO in the amount of $446,625. During the nine months ended September 30, 2017, the Company issued shares of its common stock as costs directly related to entering into the equity purchase agreement with an investor. These shares were valued at $240,900. In addition, the Company also issued shares of its common stock to acquire property, valued at $50,723 and consolidated various notes payable, including accrued interest, with its CEO.

 

As reported in the accompanying consolidated financial statements, for the nine months ended September 30, 2018 and 2017, the Company incurred net losses of $1,523,721 and $1,373,536, respectively. The Company did not produce significant revenues in the periods presented and has sustained operating losses since inception. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital, successfully generate cash flows from its operations in Tennessee and achieve a level of profitability. Until recently where the Company obtained working capital from convertible notes financing and equity purchase agreement with an outside investor, the Company has financed its activities principally from working capital advances from related parties and issuing notes payable to its CEO. It intends to finance its future operating activities and its working capital needs largely from proceeds from the sale of equity securities, if any, combined with additional funding from its CEO. The sale of equity and convertible notes financing agreements may result in dilution to stockholders and those securities may have rights senior to those of common shares. If the Company raises additional funds through the issuance of convertible notes or other debt financing, these activities or other debt could contain covenants that would restrict the Company’s operations. Any other third-party funding arrangements could require the Company to relinquish valuable rights. The Company will require additional capital beyond its currently anticipated needs. Additional capital, if available, may not be available on reasonable terms or at all.

 

 

The Company has not generated significant revenue to date, and will not generate significant revenue in the foreseeable future. The Company expects to continue to incur operating losses as it proceeds with its pursuit of operating licenses in various states. The future trends of all expenses are expected to be primarily driven by the Company’s ability to execute its business plans and the future outcome of its application to obtain operating licenses in other states. As the industry grows, additional expenses are anticipated to be incurred in complying with various regulatory requirements. The Company’s ability to continue to fund operating expenses will depend on its ability to raise additional capital. There can be no assurance that the Company will be successful in doing so.

 

Financial Condition

 

The Company’s total assets at September 30, 2018 and December 31, 2017 were $560,392 and $606,800, respectively, a decrease of $46,408, or 8%. Total liabilities at September 30, 2018 and December 31, 2017 were $1,364,230 and $1,092,168, respectively, an increase of $272,062, or 25%. The significant change in the Company’s financial condition is attributable to (i) issuance of notes payable to a related party, (ii) issuance of a convertible note payable that gave rise to a derivative liability due to its variable conversion option, (iii) financing on the purchase of equipment, offset by (iv) settling accrued salary, bonus and expenses with its CEO by issuing common stock. As a result of these transactions, the Company’s cash position increased from $28,417 to $50,878 during the nine months ended September 30, 2018.

 

Off-Balance Sheet Arrangements

 

We have made no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

 

Item 3. Quantitativ e and Qualitative Disclosures About Market Risk.

 

We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2018. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2018, the Company’s disclosure controls and procedures were not effective. The controls were determined to be ineffective due to the lack of segregation of duties. In January 2017, the Company hired a part-time financial controller to assist with technical accounting issues and the preparation of the filings. However, until the Company begins generating sufficient revenues, it is unable to remediate the weakness. Despite the existence of material weaknesses, management believes the financial information presented herein is materially correct and fairly presents the financial position and operating results of the three months ended September 30, 2018, in accordance with U.S. GAAP.

 

Changes in Internal Control Over Financial Reporting

 

No change in the Company’s internal control over financial reporting occurred during the three months ended September 30, 2018, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

PART II. OTHER INFORMATION

 

Item 1.  Lega l Proceedings.

 

None.

 

Item 1A.  Ris k Factors

 

The Company is a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

 

Item 2.  Unregist ered Sales of Equity Securities and Use of Proceeds.

 

During the nine months ended September 30, 2018, the Company issue 4,123,643 shares of its restricted common stock as follows:

 

 

1.

2,000 shares to a consultant for services rendered, valued at $1,420.

 

2.

15,000 shares to the Company's SEC counsel for services rendered, valued at $10,650.

 

3.

1,000,000 shares to a consultant as payment on a consulting contract, valued at $485,600. In February 2018, the Company filed a Form S-8 with the SEC to register these shares.

 

4.

10,000 shares each of the three directors, total 30,000 shares for their service to the Company, valued at a total of $10,239.

 

5.

7,500 shares to employees from the restricted stock plan valued at $37,069.

 

6.

36,018 shares to a company owned by an independent director for leasehold improvements at the Tennessee store, valued at $17,649 on commitment date. The Company reduced related party payable when the shares were issued.

 

7.

600,000 shares to the principal of Medahub for services performed, valued at $126,000.

 

8.

2,233,125 shares to the Company's CEO to settle accrued salary, bonus and expenses in the amount of $446,625.

 

9.

200,000 shares to a non-employee director for cash value of $70,000.

 

The shares of our common stock were issued pursuant to an exemption from registration in Section 4(a)(2) of the Securities Act of 1933.  These shares of our common stock qualified for exemption under Section 4(a)(2) of the Securities Act of 1933 since the issuance of shares by us did not involve a public offering.  The offering was not a “public offering” as defined in Section 4(a)(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered.  We did not undertake an offering in which we sold a high number of shares to a high number of investors.  In addition, these shareholders had necessary investment intent as required by Section 4(a)(2) since they agreed to receive share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Act.  This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.”  All shareholders are “sophisticated investors” and are business acquaintances of our officers and directors.  Based on an analysis of the above factors, we believe we have met the requirements to qualify for exemption under section 4(a)(2) of the Securities Act of 1933 for this transaction.

 

Item 3.  Def aults Upon Senior Securities

 

None.

 

Item 4.  Min e Safety Disclosures

 

Not applicable.

 

Item 5. Oth er Information.

 

None.

 

 

Item 6. E xhibits

 

Exhibits required by Item 601, Regulation S-K;

 

Exhibit Number and Description 

 

Location Reference

 

 

 

 

 

 

(3.0)

Articles of Incorporation

 

 

 

 

(3.1)

Articles Of Amendment And Restated Articles Of Incorporation of Acacia Diversified Holdings, Inc. dated June 9, 2015

 

See Exhibit Key

 

 

(3.2)

Restated Bylaws Of Acacia Diversified Holdings, Inc. dated June 29, 2015

 

See Exhibit Key

 

(9.0)

Voting Proxy Agreement between Rick Pertile and Steven L. Sample

 

See Exhibit Key

 

(10.1)

Consolidated Loan Agreement

 

See Exhibit Key

 

(10.2)

Consolidated Promissory Note

 

See Exhibit Key

 

(10.3)

Security Agreement – Acacia Diversified Holdings, Inc.

 

See Exhibit Key

 

(10.4)

Security Agreement -- Marij Agriculture, Inc.

 

See Exhibit Key

 

(10.5)

Security Agreement – Marij Pharmaceuticals, Inc.

 

See Exhibit Key

 

(10.6)

Security Agreement – CannaCures Research & Development Center, Inc.

 

See Exhibit Key

  (10.7) Definitive Asset Purchase Agreement between Acacia Diversified Holdings, Inc. and the Medahub Companies   Filed herewith

 

(14.0)

Code of Ethics

 

See Exhibit Key

 

(21.0)

List of Subsidiaries

 

See Exhibit Key

 

(31.1)

Certificate of Chief Executive Officer And Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Filed herewith

 

(32.1)

Certification of Chief Executive Officer And Chief Financial Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Filed herewith

 

101.INS

XBRL Instance Document

 

 

 

101.SCH

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

Exhibit Key

3.1 Incorporated by reference herein from the Company’s Form 8-K filed on July 16, 2015.

3.2 Incorporated by reference herein from the Company’s Form 8-K filed on July 16, 2015.

9.0 Incorporated by reference herein from the Company’s Form 10-K filed on April 2, 2018.

10.1 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.

10.2 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.

10.3 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.

10.4 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.

10.5 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.

10.6 Incorporated by reference herein from the Company’s Form 8-K filed on November 3, 2017.

14.0 Incorporated by reference herein from the Company’s Form 10-Q filed on November 13, 2017.

21.0 Incorporated by reference herein from the Company’s Form 10-Q filed on August 7, 2017.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned.

 

 

Acacia Diversified Holdings, Inc.

 

 

 

 

 

Date: November 5, 2018

By:

/s/ Richard K. Pertile            

 

 

 

Richard K. Pertile

 

 

 

Principal Executive Officer

 

 

 

Principal Financial Officer

Principle Accounting Officer

 

 

 

 

 

 

10
 

 

 

 

 

Exhibit 10.7

 

 

DEFINITIVE ASSET PURCHASE AGREEMENT

 

by and between

 

 

 

 

 

 

 

 

 

ACACIA DIVERSIFIED HOLDINGS, INC. (ADH)

 

(the “ BUYER ”)

 

 

and

 

 

MEDAHUB OPERATIONS GROUP, INC.,

and

MEDAHUB, INC.

 

(Individually, Collectively And Jointly the “ MEDAHUB COMPANIES ” or the “ SELLER ”)

 

 

 

 

 

 

 

 

 

 

July 29, 2017

 

(With an Effective Date of July 3, 2017)

 

 

 

 

 

TABLE OF CONTENTS

 

This Table of Contents does not constitute a part of this Agreement or have

any bearing upon the interpretation of any of its terms or provisions.

                                        

     

Page

       

RECITALS

5

   

PROVISIONS

5

   

1

Definitions.

6

     

2

Basic Transaction.

6

     
 

a.

Purchase and Sale of Assets.

6

 

b.

Excluded Assets.

7

 

c.

Method of Conveyance.

7

 

d.

Purchase Price.

7

 

e.

The Closing.

8

 

f.

Allocation.

8

 

g.

Bulk Sales Laws; Liabilities.

8

 

h.          

Assumed Liabilities; Excluded Liabilities

9

 

i.           

Seller's Continuing Access to Data

9

       

3

Representations and Warranties of the Seller.

9

     
 

a.

Organization, Qualification and Corporate Power.

10

 

b.

Authorization of Transaction.

10

 

c.

Noncontravention.

10

 

d.

Title to Purchased Assets; Condition.

10

 

e.

Seller's Notices, Disclaimers, Disclosures

11

       

4

Representations and Warranties of the Buyer.

11

     
 

a.

Organization of the Buyer.

11

 

b.

Authorization of Transaction.

11

 

c.

Non-contravention.

11

 

d.          

Buyer's Notices, Disclaimers, and Disclosures

12

       

5

Pre-Closing Covenants.

13

     
 

a.

General.

13

 

b.

Due Diligence.

13

 

c.

Employees.

14

 

d.

Buyer's Employment Agreement with Executive

14

 

e.

Leases.

15

 

f.

Non-Competition Agreement.

15

 

g.

Impositions.

15

 

h.

Resignation and Appointment of Officers and Directors.

15

       

 

ii

 

 

6

Post-Closing Covenants.

15

     
 

a.

Trademarks, Trade Names, Servicemarks.

15

 

b.

Financial Statements.

16

       

7

Closing Covenants.

16

     
 

a.

Buyer Covenants.

16

 

b.

Seller Covenants.

16

       

8

Conditions Precedent to Obligation to Close.

17

     
 

a.

Conditions to Obligation of the Buyer.

17

 

b.

Conditions to Obligation of the Seller.

17

       

9

Remedies for Breaches of this Agreement.

18

     
 

a.

Survival of Representations and Warranties.

18

 

b.

Indemnification Provisions for Benefit of the Buyer.

18

 

c.

Indemnification Provisions for Benefit of the Seller.

18

 

d.

Claims; Assumption of Defense.

19

 

e.

Other Indemnification Provisions.

19

       

10

Termination.

20

     
 

a.

Termination of Agreement.

20

 

b.

Effect of Termination.

21

       

11

Miscellaneous.

21

     
 

a.

Entire Agreement.

21

 

b.

Assignment.

21

 

c.

Applicable Law; Venue.

21

 

d.

Waiver.

22

 

e.

Captions.

22

 

f.

Counterparts.

22

 

g.

Further Acts.

22

 

h.

Third Party Beneficiaries.

22

 

i.

Severability.

22

 

j.

Confidentiality.

23

 

k.

Notices.

23

 

iii

 

 

 

Exhibits

     
       

Exhibit A

-

Definitions

Exhibit B

-

Form of Bill of Sale

Exhibit C

-

Form of Intangible Asset Assignment

Exhibit E        

-

Form of Non-Competition Agreement

Exhibit F

-

Form of License and Permit Transfer Documents 

       

Disclosure Schedules

 
       

Exhibit M

-

Section  2(a)

Purchased Assets

Exhibit N

-

Section  2(a)

Schedule of Contracts and Agreements

Exhibit O

-

Section  2(b)

Excluded Assets   

Exhibit P

-

Section  2(d)

Listing of Seller Shareholders and shares of ADH to be issued to each

Exhibit Q

-

Section  2(f)

Buyer’s Purchase Price Allocation

Exhibit R

-

Section  2(g)

Schedule of Liabilities to be Assumed by Buyer

Exhibit S

-

Section  3(d)

Security Interests  

Exhibit T

-

Section  5(c)

Schedule of Issues   

Exhibit U   

-

Section 6 

Sale and Assignment of Invention

 

 

 

 

 

iv

 

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of July 29, 2017, is entered into by and between Acacia Diversified Holdings, Inc., a Texas corporation (“ ADH ”); and MEDAHUB Operations Group, Inc. (“ MEDAHUB Operations ”) and MEDAHUB INC (“MEDAHUB, INC.), (individually, collectively and jointly the “ Seller Businesses ”). ADH is referred to herein as the “ Buyer ” or the “ Company ”. MEDAHUB Operations and MEDAHUB Inc. , are individually, jointly and collectively referred to herein as the “ MEDAHUB ” or the “ Seller ”. The Buyer and the Seller are referred to collectively herein as the " Parties ," and individually as a " Party ."

 

RECITALS

 

WHEREAS, Seller, in pursuit of the acquisition of its assets and businesses by the Buyer, holds good and valuable title to the various assets (the “ Assets ”) relating to the operations of its various Businesses and Business Operations (collectively the " Seller Businesses ," and individually a " Seller Business ") from facilities located at and in the vicinities as follows:

 

 

1.

8370 Whispering Oaks Way, West Palm Beach, Florida 33411 (the " MEDAHUB Operations ") known as “MEDAHUB Operations Group, Inc.” and sometimes utilizing the trade name “MEDAHUB,” including the business related thereto (the “ MEDAHUB Operations Business ”) and the business operations associated therewith (the “ MEDAHUB Operations Business ”);

 

 

2.

8370 Whispering Oaks Way, West Palm Beach, Florida 33411 (the MEDAHUB, Inc.") known as “MEDAHUB Inc.” and sometimes utilizing the trade name “MEDAHUB”, including the business related thereto (the “ MEDAHUB, Inc. Business ”) and the business operations associated therewith (the “ MEDAHUN, Inc. Business Operations ”);

 

WHEREAS, Buyer is a public holding company in the business of acquiring assets and businesses and operating them as revenue-producing subsidiaries and desires to acquire the Seller Assets and Seller Businesses.

 

WHEREAS, Seller wishes to sell and convey to Buyer or a wholly owned subsidiary of the Buyer, and Buyer for itself or its wholly owned subsidiary wishes to purchase and assume from Seller, the rights, title, and interests of Seller to the Purchased Companies and Assets, subject to the terms and conditions set forth herein.

 

WHEREAS, the Parties desire this transaction to be effective at 12:01 Eastern Time on July 3, 2017 (the “ Effective Date ”), such as to encompass the entire business year 2017 in the purchase and sale of the Purchased Assets.

 

PROVISIONS

 

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:

 

 

5

 

 

 

1.

Definitions.

 

Certain terms used in this Agreement shall have the meanings set forth in Exhibit A “Definitions ”. For ease of identification only, such terms are identified by initial capitals; provided, however, the inadvertent absence of such identifying characteristic shall be ignored in the construction of this Agreement.

 

 

2.

Basic Transaction.

 

 

a.

Purchase and Sale of Assets.

 

Subject to the terms and conditions set forth herein, at the Closing Seller shall sell, assign, transfer, convey and deliver to the Buyer, and Buyer shall purchase and acquire from Seller, free and clear of any mortgage, pledge, lien, charge, security interest, claim or other encumbrance (each being an “Encumbrance”), all of Seller’s right, title and interest in and to all of the assets, stock certificates, CMS License, properties, and rights (including goodwill) (the “ Assets ”) and the businesses associated with those assets (the “ Seller Businesses ”), wherever located, as described below (collectively, the “Purchased Assets”):

 

 

(i)

the Name and Purchased Assets of “MEDAHUB Operations” set forth in Exhibit M as Section 2(a) of the Disclosure Schedules as of the Effective Date;

 

 

(ii)

the Name and Purchased Assets of “MEDAHUB, Inc.” set forth in Exhibit N as Section 2(a) of the Disclosure Schedules as of the Effective Date;

 

 

(iii)

all of Seller’s Permits and Licenses, Contracts and Agreements, if any, relating to the Name and Purchased Assets, to the extent transferable or assignable to the Buyer. The Form of License and Permit Transfer Documents to be assigned, if any, are listed in Exhibit F;

 

 

(iv)

all prepaid expenses and deposits of Seller relating to the Name and Purchased Assets;

 

 

(v)

all inventory, raw materials, finished goods and work-in-progress relating to the Name and Purchased Assets;

 

 

(vi)

all data, records and information relating to the Purchased Assets, including without limitation financial records and information and data relating to technical support or operations of the Seller Businesses;

 

 

(vii)

all technical information, data, customer lists, supplier lists, price lists, process technology, plans and drawings, and all other Intellectual Property (as defined below) relating to the Name and Purchased Assets, including without limitation Seller’s patents,

 

6

 

 

patents pending and trade secrets relating to its Technology, any right to use the names of Sellers Business or their trademarks, trade names, or logos using the Sellers Businesses names; and

 

 

(viii)

all claims under warranties, indemnities or other claims or rights against third parties relating to the Name and Purchased Assets, and all insurance benefits and proceeds arising out of the Purchased Assets after the Closing.

 

 

b.

Excluded Assets.

 

The Name and Purchased Assets to be acquired by the Buyer from the Seller shall include only the Seller Assets, CMS License and Stock certificates and Seller Businesses described in Section 2(a) above and shall exclude all other assets of the Seller, including, without limitation, those listed in Exhibit O as Section 2(b) of the Disclosure Schedules (the “ Excluded Assets ”); any assets, books, records or data not used in the Business; any other tangible personal property not listed in Exhibit M . Notwithstanding the foregoing, the Purchased Assets shall not include:

 

(i) all contracts that are not included in the Purchased Assets.

 

 

c.

Method of Conveyance.

 

The sale, conveyance, assignment, transfer, and delivery by the Seller of the Name and Purchased Assets to the Buyer in accordance with Section 2(a) shall be effected at the Closing by the Seller's execution and delivery to the Buyer of a Bill of Sale (the " Bill of Sale ") in the form of Exhibit B, and an Intangible Asset Assignment (the “ Intangible Asset Assignment ”) in the form of Exhibit C , and the Purchased Assets to be conveyed at Closing shall be substantially as listed in Exhibit M, F and Exhibit N (the “ Purchased Assets ”) in accordance with Section 2(a) hereof as of the Effective Date of this Agreement, less normal wear and tear and depreciation through Closing. The assignment of the Licenses, to the extent assignable and to the extent not accomplished by the execution and delivery of the Bill of Sale, shall be accomplished by the execution at or following Closing of any reasonable necessary consent or assignment documents. The assignment of Seller's interest in the Trade Names and domain names, if any, owned by Seller; the Seller has not filed any fictitious names and has not filed for protection any names pursuant to any State or Federal statutes.

 

d. Purchase Price (the “Purchase Price” or the “Consideration”).

 

In exchange for the Company Names and Purchased Assets, Seller and CEO of Buyer agree to at Closing:

 

(i) issue to the holders of MEDAHUB Operations Group, Inc. Common shares, three hundred thousand (300,000) of Buyer’s Restricted Common stock of ADH for distribution as set forth below (the “ Primary New Equity Consideration ”) and in Exhibit P as the “ Listing of MEDAHUB Operations , the Number of New Shares of Acacia Diversified Holdings, Inc. to be Issued to Each ”; and

 

7

 

 

(ii) issue to the holders of MEDAHUB, Inc. Common shares, three hundred thousand (300,000) of Buyer’s Restricted Common stock of ADH for distribution as set forth below (the “ Primary New Equity Consideration ”) and in Exhibit P as the “ Listing of MEDAHUB, Inc. the Number of New Shares of Acacia Diversified Holdings, Inc. to be Issued to Each ”; and

 

The issuances in accordance with Sections 2(d)(i) and 2(d)(ii) will be equal to an aggregate of Six Hundred Thousand (600,000) new restricted ADH Common shares issued or made available to Michael McLaughlin (“ Mr. McLaughlin ”) or his designees outlined in Exhibit P.

 

All newly issued Acacia common shares shall bear restrictive legends except in the event Buyer shall be granted appropriate authority to issue free-trading shares in their stead. In the event ADH shall otherwise become successful in filing a subsequent registration statement of its shares, it shall endeavor to include the shares issued to Seller in an effort to remove any restrictions upon those shares, although there can be no assurance ADH will be successful in doing so.

 

 

e.

The Closing.

 

Subject to Section 10, the closing of the transactions provided for in this Agreement (the " Closing ") shall occur on or before July 29, 2017, or such earlier date as may be agreed to by the Parties and shall take place at such location as is agreed upon by the Parties, and shall have an effective date (the “ Effective Date ”) of 12:01 AM eastern standard time July 3, 2017. The final Closing date shall be agreed upon by the Parties and set forth in the Bill of Sale and the Intangible Asset Assignment, the forms of which are attached hereto as Exhibit B and Exhibit C , respectively, and shall be deemed effective for all purposes as of the Effective Date.

 

 

f.

Allocation.

 

The Parties agree that Buyer shall determine the allocation of the Purchase Price (and all other capitalizable costs) among the Purchased Assets, the Trade Name and the License for all purposes (including financial accounting and tax purposes) as it deems proper and in accordance with the “ Buyer’s Purchase Price Allocation Schedule ” attached hereto on Exhibit Q as Section 2(f) of the Disclosure Schedules.

 

 

g.

Bulk Sales Laws; Liabilities of Seller.

 

The parties hereby waive Seller’s compliance with the provisions of any applicable bulk sales laws. Seller shall hold a sufficient amount in trust to pay all its creditors as and when their claims come due, and hold and save Buyer harmless against any loss, damage or expense, including reasonable attorneys’ fees and court costs, incurred by Buyer as a result of or attributable to the parties’ failure to comply with such provisions.

 

Seller has paid or will pay or fully provide for all federal and state income and other taxes which relate to the conduct of its business through the date of Closing. There is no pending tax claim or dispute on taxes which might result in a lien against Seller’s Assets.

 

8

 

 

All of Seller’s liabilities or obligations which are either not expressly disclosed or not expressly assumed by Buyer herein or as set forth in Exhibit R as Section 2(g) of the Disclosure Schedules (the “ Schedule of Liabilities to be Assumed by Buyer ) shall remain the Seller’s responsibility.

 

h.       Assumed Liabilities; Excluded Liabilities.

 

(i) As part of the consideration for the Trade Name and Purchased Assets, subject to the terms and conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge only the liabilities and obligations arising after the Closing under the Assigned Contracts, but only to the extent that such liabilities and obligations do not relate to any breach, default or violation by Seller on or prior to the Closing (the “ Assumed Liabilities ”) as set forth in Exhibit R as Schedule 2(g) of the Disclosure Schedules.

 

(ii) Other than the Assumed Liabilities, Buyer shall not assume any liabilities or obligations of Seller or the Seller Businesses of any kind, whether known or unknown, contingent, matured or otherwise, whether currently existing or hereinafter created. Seller shall, and shall cause each of its Companies to, pay and satisfy in due course all liabilities and obligations which they are obligated to pay and satisfy. All liabilities and obligations of the Seller other than the Assumed Liabilities are sometimes referred to as the “ Excluded Liabilities .”

 

 

i.

Seller’s Continuing Access to Data.

 

Buyer shall provide to Seller at all times following the Closing and for four full calendar years thereafter complete and unhindered access to Seller’s data and related information, being all data of the Seller Businesses and the Business Operations from the inception up to and including the date of the last transactions of Seller in the winding down of Seller’s Businesses and Business Operations and information associated therewith. Buyer shall provide continuing and unfettered physical and electronic on-site access to the data and information located within Seller’s programs at all times and Buyer shall additionally provide unfettered and unlimited electronic access to Seller’s data and information via virtual private networking (“ VPN ”) or through such other media as Seller may elect to utilize for that purpose. Seller shall provide Buyer with one login and one associated password granting full access to all aspects of the programs, information, and data associated and included therewith.

 

 

3.

Representations and Warranties of the Seller.

 

The Seller represents and warrants to the Buyer that the statements contained in this Section 3 are correct and complete as of the Effective Date and will be correct and complete as of the Closing (as though the Closing were substituted for the date of this Agreement throughout this Section 4), except as set forth in the disclosure schedules delivered by the Seller to the Buyer on the date hereof and as may be updated as of the

 

9

 

 

Closing (the "Disclosure Schedules"). The Seller will give prompt written notice to the Buyer of any development causing a breach of any of the representations and warranties in Section 3.

 

Seller acknowledges the notices, disclaimers, and disclosures set forth by Seller in Section 4(d) of this Agreement.

 

This Agreement shall be, when duly executed and delivered, a legal and binding obligation of Seller, enforceable in accordance with its terms.

 

 

a.

Organization, Qualification and Corporate Power.

 

The Seller Businesses are corporations duly organized, validly existing, and in full force and effect under the laws of the State of Florida. The Seller has full entity power and authority necessary to own the Purchased Assets. The Seller is not in default under or in violation of any provision of its Articles of Incorporation or Articles of Organization, as amended.

 

 

b.

Authorization of Transaction.

 

The Seller has full power and authority (including full entity power and authority) to execute and deliver this Agreement and to perform its obligations hereunder upon approval of a majority of its Shareholders by a Written Consent and Notice to Shareholders after the Joint Written Consent reviewed by Buyer or other action of shareholders in compliance with Seller’s Articles of Incorporation and/or Articles or Organization. Without limiting the generality of the foregoing, the Board of Directors of the Seller Businesses by Joint Written Consent has duly authorized the execution, delivery, and performance of this Agreement by the Seller in with shareholder approval. Based on the Joint Written Consent and Notice to Shareholders after the Joint Written Consent reviewed by the Buyer this Agreement constitutes the valid and legally binding obligation of Seller, enforceable in accordance with its terms and conditions.

 

c. Noncontravention .

 

Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will, upon appropriate shareholder approval, violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller is subject or any provision of its Articles of Incorporation or Articles of Organization, as amended.

 

d. Title to Assets; Condition .

 

The Seller has good and transferable title to and unrestricted possession of, the Purchased Assets, free and clear of all Security Interests, except for the Security Interests listed in Exhibit S (“Security Interests”) of Section 3(d) of the Disclosure Schedule, which Security Interests shall be released at Closing. Except as expressly set forth in Section 3(e) this agreement or otherwise, the company name and assets are being transferred to the buyer "as-is" in their entirety. Seller makes no other warranties, express or implied, including, but not limited to, the warranty of merchantability, fitness for a particular purpose or that the assets sold hereunder do not infringe upon any intellectual property rights held by third parties. Seller further makes no representations or warranties as to the condition or suitability for

 

10

 

 

any particular purpose of the leased premises, including any appurtenances thereto for use of Buyer.

 

 

e.

Seller’s Notices, Disclaimers, Disclosures

 

Seller disclaims any warranty, either implied or expressed, in the assets transferred hereby except as to the condition thereof at time of sale. Seller has identified to Buyer in this agreement any known defects or deficiencies in the Purchased Assets to be conveyed hereby.

 

 

4.

Representations and Warranties of the Buyer.

 

Buyer represents and warrants to the Seller that the statements contained in this Section 4 are correct and complete as of the Effective Date and will be correct and complete as of the Closing (as though the Closing were substituted for the date of this Agreement throughout this Section 4).

 

Buyer has formed its own opinion as to the value of Seller’s Assets being purchased hereunder. The Parties agree that Seller’s warranties include only the express written warranties that are contained in this Agreement.

 

Buyer acknowledges the notices, disclaimers, and disclosures set forth by Seller in Section 3(d) and 3(e) of this Agreement.

 

This Agreement shall be, when duly executed and delivered, a legal and binding obligation of Buyer, enforceable in accordance with its terms.

 

 

a.

Organization of the Buyer.

 

The Buyer consists of a corporation that is duly organized and validly existing and in good standing under the laws of the State of Texas, and one or more subsidiary corporations organized in the State of Florida to take possession of and title to the Purchased Assets to be conveyed and transferred from Seller hereby.

 

 

b.

Authorization of Transaction. Authority to Act.

 

The Buyer represents and warrants that it has full power and authority (including full organizational power and authority if applicable) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligations of the Buyer, enforceable in accordance with its terms and conditions. The execution, delivery, and performance of this Agreement and all other agreements contemplated hereby have been duly authorized by the Buyer.

 

 

c.

Non-contravention.

 

Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its Articles of Incorporation, as amended. The Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this

 

11

 

 

Agreement except as may be required by the United States Securities and Exchange Commission and the Texas Business Organizations Code.

 

 

d.

Buyer’s and Seller’s Notices, Disclaimers, Disclosures

 

NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY

 

THIS AGREEMENT AND ANY RELATED BUS INESS PLAN, PROPOSAL, EXECUTIVE SUMMARY OR OTHER RELATED INFORMATION IS NOT A PART OF ANY PROSPECTUS OR PRIVATE PLACEMENT MEMORANDUM AND DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY. ANY OFFER IS MADE ONLY BY THE PROSPECTUS OR PRIVATE PLACEMENT MEMORANDUM. ANY INFORMATION OR STATEMENTS RELATED TO CONSIDERATION TO ENTER INTO THIS OR ANY OTHER AGREEMENT WITH BUYER IS PROVIDED FOR CONVENIENCE AND REFERENCE ONLY. SHOULD ANY CONFLICT ARISE WITH THE INFORMATION CONTAINED IN THIS AGREEMENT OR OTHER RELATED INFORMATION AND THE INFORMATION CONTAINED IN ANY PROSPECTUS OR PRIVATE PLACEMENT MEMORANDUM OF THE BUYER’S COMPANY, THE OFFEREE MUST RELY SOLELY UPON THE STATEMENTS AND FACTS CONTAINED IN THE PROSPECTUS OR MEMORANDUM IN MAKING ANY DECISIONS.

 

SAFE HARBOR STATEMENT

 

Certain statements included in these materials and/or other reference materials related to the information upon which Seller or its agents may have relied in making a decision to enter into this Agreement and related agreements, including but not limited to any references or statements incorporated therein by reference, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including information and statements regarding anticipated financial results, potential success of anticipated acquisitions, business combinations or operations, product marketing and potential market opportunities are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially from those projected, expressed or implied by such forward-looking statements. This Agreement, including any business proposals and any related presentations may include certain past and future performance results and projections based upon actual but unaudited financial information. Reliance upon this past performance information provides no assurance that future performance will not differ materially from the historical results or operating projections shown. The statements are based on assumptions about important factors, including general business conditions; market trends; competition; weather; trends in product sales and sales of other diverse offerings; business development activities, including acquisitions; economic conditions, including exchange rate and interest rate fluctuations; federal, state, and local laws; litigation developments and other risk factors. Many of these risk factors are outside of the Buyer’s

 

12

 

 

control, and as such, they involve risks which are not currently known to the Buyer that could cause actual results to differ materially from forecasted results. The forward-looking statements in any documents provided to Seller and those attached to, associated with, or related thereto are made as of the date of publication hereof, and the Company does not undertake to update its forward-looking statements.

 

NO LEGAL OR FINANCIAL ADVICE BEING GIVEN

 

Acacia Diversified Holdings, Inc. and/or its officers or directors (the "Buyer") has effected certain legal and financial research at its own expense in an attempt to facilitate certain understandings that are or appear to be relevant to any transaction proposed or effectuated hereby. The understandings gained by Buyer as a result of these investigations, including certain understandings and information provided by Seller, may be reflected in portions of this Agreement and/or any information provided to Seller, including but not limited to any proposals relative to this Agreement (the “ Information ”), but are not intended to be relied upon by Seller as accurate or to take the place of proper due diligence and legal, financial, and other professional advice ("Advice"). The Seller in this transaction is and has been advised to seek its own Advice and to satisfy itself as to any considerations contained in this Agreement or the related Information, including but not limited to the status of any of the Buyer’s tax loss carryforward.

 

Buyer takes no responsibility for legal, accounting, or other advice upon which the Seller may rely to determine the suitability of this transaction for its own purposes, and Seller agrees to hold Buyer harmless in all regards.

 

 

5.

Pre-Closing Covenants.

 

The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing:

 

 

a.

General.

 

Each of the Parties will use commercially reasonable efforts to take all actions and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 8).

 

 

b.

Due Diligence.

 

Prior to Closing and execution of this Agreement, the Seller has allowed the Buyer access to the Premises and the facilities located thereon in order that the Buyer may have a full opportunity to conduct a reasonable investigation of such Premises and facilities and the business operating records relevant to this transaction (the “Access”) during the due diligence process (the " Due Diligence Process "). Buyer hereby acknowledges that it has enjoyed full Access for the purposes of the Due Diligence Process at all reasonable times since the execution of the Revised Letter of Intent by the Parties on April 22, 2017. Buyer has conducted such Due Diligence Process Buyer felt necessary.

 

13

 

 

Similarly, prior to Closing and execution of this Agreement, the Buyer has allowed the Seller Access to the Premises and the facilities located thereon in order that the Seller may have a full opportunity to conduct a reasonable investigation of such Premises and facilities and the business operating records relevant to this transaction during the Due Diligence Process. Seller hereby acknowledges that it has enjoyed full Access for the purposes of the Due Diligence Process at all reasonable times since the execution of the Letter of Intent by the Parties on April 22, 2017. Seller has conducted such Due Diligence process Seller felt necessary.

 

 

c.

Employees.

 

Seller shall be responsible for all severance obligations (including obligations to provide health or retirement benefits), if any, related to the Seller’s employees that arise (i) as a result of Seller's actions on or before the Effective Date or (ii) as a result of the termination of employment in connection with Closing.

 

Seller has no pension, profit sharing, annuity, savings, 401(k), matching funds programs, or similar or related retirement plan for any of its employees.

 

Seller does not have any obligation under any collective bargaining agreement or any other contract with a labor union and is not a party to any executive or employees’ compensation plan or agreement or compensatory plan or agreement with any independent contractors, or its employees or agents, including, without limitation, any pension, retirement, profit sharing, stock purchase, stock option, bonus, or savings plan.

 

To the best of Seller’s knowledge, and except as expressly set forth on Exhibit T (the “ Schedule of Issues ) annexed hereto, no strike, picketing, or similar action is pending or threatened against Seller by its employees or any labor union. Seller further represents that to the best of its knowledge and belief, it is not engaged in any unfair labor practices in connection with the operation of the business. Seller will not be responsible for any violations arising or determined subsequent to Closing which have been caused by any act of, or failure to act by Buyer. Seller represents that, to its knowledge and belief, it has not had any solicitation by any labor organization within the preceding three years.

 

All of Seller’s employment-related liabilities accrued as of the date of Closing, including Seller’s accrued obligations for vacation, personal time off, sick pay, retirement benefits, employer portion of taxes, and all other benefits or obligations unsatisfied as of the date of Closing and due to or on behalf of any employee of Seller, whether or not continuing forward as an employee of Buyer, shall be the sole responsibility of Seller, and Buyer assumes no responsibility therefor. Seller shall pay or allow as a credit to Buyer any such benefits accrued to its employees at Closing.

 

 

d.

Buyer’s Employment Agreement With Executive.

 

Seller acknowledges that the CEO of Buyer, Richard K. Pertile (“ Mr. Pertile ”), has heretofore been retained under an Employment Agreement dated February 20th, 2017 and is currently retained under an Employment Agreement dated February 20, 2017, those events will be reported in their entirety by the Company on upcoming Reporting. On May 15th, 2016 the board of directors and the shareholders of the Company authorized and approved the current Employment Agreement by and

 

14

 

 

between the Company and Mr. Pertile until December 31, 2019. That extended Employment Agreement contains certain provisions that may be triggered by actions contemplated in this Agreement, and which could have a negative economic impact on the Company.

 

 

e.

Leases .

 

At Closing, Seller if allowed shall further assign any interest it holds in any equipment and/or operating leases, contracts, and/or agreements pertaining to its Business in Exhibit N (“ Schedule of Contracts and Agreements ”) insofar as Buyer shall accept the assignments thereof.

 

 

f.

Non-Competition Agreement .

 

The Buyer and the Seller will enter into a non-competition agreement (the " Non-Competition Agreement ") in the form attached hereto as Exhibit E , which will prohibit the Seller and Buyer and any of their employees, officers, directors, agents, or contractors from, directly or indirectly, engaging in the Business within 500 miles of: Tampa, Florida; for a period of three (3) years commencing from the Closing. In the event Buyer or Seller shall employ or otherwise contract Seller, Buyer or any of Seller’s or Buyer’s agents or assigns to perform services in Buyer’s business operations, Buyer shall thereupon release them as to such employment from the obligations of any Non-Competition Agreement during the period of any such employment or contract to perform services, insofar as and such that Seller, Buyer or Seller’s or Buyer’s agents or assigns may perform tasks only for Buyer without violating the terms of the Non-Competition Agreement.

 

g. Impositions

 

All taxes and assessments, general and special, and all other impositions, ordinary and extraordinary, of every kind and nature whatsoever, which may be levied, assessed, charged or imposed upon Seller for periods that extend from prior to Closing until after the Closing shall be paid by Seller.

 

 

h.

Resignation and Appointment of Officers and Directors

 

Prior to Closing, the Board of Directors of Buyer shall approve by resolution all the terms and conditions of this Agreement and may recommend the ratification thereof to the shareholders of the Company. Effective with the Closing, the remaining directors of ADH, being Mr. Richard Pertile, Neil Gholson, Gary Roberts, Jr. and Danny R. Gibbs, may appoint Michael McLaughlin and Michael McLaughlin may accept a position as a Director of the Company and Chair of a few committees of the Board of Directors. All Directors shall serve until the election and qualification of their successors. Until the expiration and fulfillment of the terms all nominees for directorships of the Company other than Mr. Pertile shall be nominated to serve for terms no less than one year.

 

 

6.

Post-Closing Covenants.

 

 

a.

Trademarks, Trade Names, Service Marks.

 

At Closing, Seller shall grant to Buyer the use of all its Trademarks, Trade Names, Service Marks, if any, and variations thereof. Within thirty (30) days following the Closing, the Seller shall change the names of its various entities making such other change or designation thereto so as not to utilize the current Trade Names or any

 

15

 

 

confusingly similar names. Any such change of name(s) of Seller shall not preclude or abridge Seller’s right to continue to wind up the affairs of its business in the most efficient and commercially reasonable manner, nor shall it preclude Buyer from using in its newly-structured business operations, in any manner as it shall deem appropriate, those same assigned names of Seller. In this regard, Seller shall provide to Buyer any affidavits, waivers, or other documentation required for the assignment of any such trade names to Buyer for its own use. Buyer shall make a best-efforts basis to assist Seller in the prompt and efficient collection of all Seller’s outstanding receivables related to the Seller Businesses, and shall regularly and promptly deposit to Buyer’s bank accounts all funds that have been collected for Seller’s accounts. The collected receivables, as Assets, shall inure to the benefit of Buyer under the various terms contained in this Agreement. Financial Statements.

 

 

b.

Financial Statements

 

Seller shall provide at Closing or within 45 days thereafter the corporate tax returns for 2015, 2016 and the stub period of January 1, 2017 to the closing date (July 3, 2017) reflecting its financial operations for all fiscal years ended since its formation. Seller shall ascertain that there have been no material changes in its financial condition since issuance of the tax return information. Pending receipt of the tax return information, Seller shall remain available to Buyer at all times to provide any and all relevant information at sellers expense, in the form presently existing, , requested by Buyer in support of the financial information relative to this transaction, including but not limited to additional financial information required of Seller by the United States Securities and Exchange Commission (the “ SEC ”).

 

 

7.

Closing Covenants.

 

a. Buyer Covenants .

 

At Closing, the Buyer shall be required to take the following actions:

 

 

(i)

deliver the Purchase Price as specified in Section 2(d) hereto

 

 

(ii)

accept the Bill of Sale;

 

 

(iii)

accept the Intangible Asset Assignment;

 

 

(iv)

accept the assignment of the Seller's interest in the Trademarks, Trade Names and patents, to the extent not accomplished by the Bill of Sale;

 

 

(v)

accept the assignment of the Seller's interest in the Licenses, to the extent assignable and to the extent not accomplished by the Bill of Sale; and,

 

 

(vi)

accept the assignment of all leases and contracts as set forth in Exhibit N .

 

 

b.

Seller Covenants.

 

At Closing, the Seller shall be required to take the following actions:

 

 

(i)

accept the delivery of the Purchase Price as specified in Section 2(d) hereof;

 

 

(ii)

execute and deliver the Bill of Sale;

 

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(iii)

execute and deliver the Intangible Asset Assignment;

 

 

(iv)

execute and deliver the Non-Competition Agreement;

 

 

(vii)

execute and deliver any reasonable necessary consent or assignment documents related to the Seller's interest in the Trademarks and Trade Names to the extent not accomplished by the execution and delivery of the Bill of Sale; and

 

 

(viii)

execute and deliver any reasonable necessary consent or assignment documents related to the Seller's interest in the Permits and Licenses, to the extent assignable and to the extent not accomplished by the execution and delivery of the Bill of Sale, the forms of which are listed in Exhibit F (the “ Forms of License and Permit Transfer Documents”).

 

 

(ix)

execute and deliver any reasonable necessary consent or assignment documents related to assignment of leases and contracts listed in Exhibit N .

 

 

8.

Conditions Precedent to Obligation to Close.

 

 

a.

Conditions to Obligation of the Buyer.

 

The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

 

 

(i)

the representations and warranties of Seller set forth in Section 3 shall be true and correct in all material respects at and as of the Closing;

 

 

(ii)

the Seller's covenants set forth in Section 8(b) shall have been performed; and

 

 

(iii)

no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would: (a) prevent consummation of any of the transactions contemplated by this Agreement; (b) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; or (c) materially and adversely affect the right of the Buyer to own the Purchased Assets (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect).

 

The Seller may waive any condition specified in this Section 8(a) if it executes a writing so stating at or prior to the Closing.

 

 

b.

Conditions to Obligation of the Seller.

 

The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

 

 

(i)

the representations and warranties of Buyer set forth in Section 4 shall be true and correct in all material respects at and as of the Closing;

 

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(ii)

the Buyer's covenants set forth in Section 8(a) shall have been performed;

 

 

(iii)

no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would: (a) prevent consummation of any of the transactions contemplated by this Agreement; or (b) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; and (c) materially and adversely affect the right of the Seller to sell, transfer, and convey the Purchased Assets (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect).

 

The Buyer may waive any condition specified in this Section 8(b) if it executes a writing so stating at or prior to the Closing.

 

 

9.

Remedies for Breaches of this Agreement.

 

 

a.

Survival of Representations and Warranties.

 

All of the representations and warranties of the Parties contained in this Agreement, and the rights to indemnity for any breach thereof, shall survive the Closing and continue in full force and effect for a period of one (1) year following Closing.

 

 

b.

Indemnification Provisions for Benefit of the Buyer.

 

The Seller shall indemnify and defend the Buyer and its officers, directors, shareholders, members, employees, agents and Affiliates (collectively, the "Buyer Indemnified Parties") against, and hold the Buyer Indemnified Parties harmless from, any and all Adverse Consequences incurred or suffered by any of them resulting from:

 

(i) any breach of any representation or warranty of the Seller in this Agreement;

 

(ii) any breach of any covenant or obligation of the Seller in this Agreement; and

 

(iii) any third party claims asserted against the Buyer Indemnified Parties arising out of the ownership of the Assets or the operation of the Business by the Seller prior to the Effective Date. Any claim for indemnification against the Seller shall be brought within one (1) year following the Closing.

 

 

c.

Indemnification Provisions for Benefit of the Seller.

 

The Buyer shall indemnify and defend the Seller and its officers, managers, shareholders, members, employees, agents and Affiliates (collectively, the " Seller Indemnified Parties ") against, and hold the Seller Indemnified Parties harmless from, any and all Adverse Consequences incurred or suffered by any of them resulting from:

 

(i) any breach of any representation or warranty made by the Buyer in this Agreement;

 

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(ii) any breach of any covenant or obligation of the Buyer in this Agreement; and

 

(iii) any third party claims asserted against the Seller Indemnified Parties arising out of the ownership of the Assets or the operation of the Business Operations by the Buyer following the Closing. Any claim for indemnification against the Seller shall be brought within one (1) year following the Closing.

 

 

d.

Claims; Assumption of Defense.

 

As soon as is reasonably practicable after becoming aware of a claim for indemnification under this Agreement (including a claim or suit by a third party), the Indemnified Party shall promptly give written notice to the Indemnifying Party of such claim, which notice shall specify in reasonable detail the facts relating to the claim. The Indemnifying Party may, at its own expense, (i) participate in the defense of any claim, suit, action or proceeding and (ii) upon notice to the Indemnified Party at any time during the course of any such claim, suit, action or proceeding, assume the defense thereof, including selecting counsel for the matter; provided, however, that counsel selected by the Indemnifying Party is reasonably satisfactory to the Indemnified Party. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party. Counsel selected by the Indemnifying Party shall have the lead role in any subsequent litigation. Whether or not the Indemnifying Party chooses to assume the defense of any such claim, suit, action or proceeding, all of the Parties hereto shall cooperate in the defense or prosecution thereof.

 

 

e.

Other Indemnification Provisions.

 

The foregoing indemnification provisions are in addition to any other remedies provided by law for a breach of any representation, warranty, or covenant contained in this Agreement or otherwise relating to the transactions contemplated by this Agreement.

 

 

10.

Termination.

 

 

a.

Termination of Agreement.

 

Certain of the Parties may terminate this Agreement as provided below:

 

 

(i)

the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing;

 

 

(ii)

the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing:

 

(a) in the event the Seller has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller in writing of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach or

 

19

 

 

(b) if the Closing shall not have occurred on or before July 29, 2017 (unless otherwise extended by mutual written consent of the Parties hereto), by reason of the failure of any condition precedent under Section 8(a) (unless the failure results primarily from the Buyer itself breaching any of its representations, warranties, or covenants contained in this Agreement or the Buyer has waived any condition specified in a writing so stating at or prior to Closing);

 

 

(iii)

the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing:

 

(a) in the event the Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer in writing of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach or

 

(b) if the Closing shall not have occurred on or before July 29, 2017 (unless otherwise extended by mutual written consent of the Parties hereto), by reason of the failure of any condition precedent under Section 8(b) (unless the failure results primarily from the Seller breaching any of its representations, warranties, or covenants contained in this Agreement, or the Seller has waived any condition specified in a writing so stating at or prior to Closing);

 

 

(iv)

the Buyer may terminate this Agreement if the Seller or any Affiliate shall

 

(a) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property,

 

(b) be unable, or admit in writing its inability, to pay its debts generally as they mature,

 

(c) make a general assignment for the benefit of its creditors or any one of them,

 

(d) be dissolved or liquidated,

 

(e) become insolvent (as such term may be defined or interpreted under any applicable statute),

 

(f) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or

 

(g) take any action for the purpose of effecting any of the foregoing; and

 

 

(v)

the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing: if the Buyer or any Affiliate shall

 

20

 

 

(a) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property,

 

(b) be unable, or admit in writing its inability, to pay its debts generally as they mature,

 

(c) make a general assignment for the benefit of its creditors or any one of them,

 

(d) be dissolved or liquidated,

 

(e) become insolvent (as such term may be defined or interpreted under any applicable statute),

 

(f) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or

 

(g) take any action for the purpose of effecting any of the foregoing.

 

 

b.

Effect of Termination.

 

If any Party terminates this Agreement pursuant to Section 10(a), all rights and obligations of the Parties shall terminate without any Liability of any Party to any other Party, except for any Liability of any Party then in breach.

 

 

11.

Miscellaneous.

 

 

a.

Entire Agreement.

 

This Agreement, together with the attached Exhibits and the Disclosure Schedules, constitute the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior negotiations, discussions, undertakings, and agreements between the Parties. This Agreement may be amended or modified only by a writing executed by the Parties. With the same formalities as this Agreement was signed.

 

 

b.

Assignment.

 

This Agreement and any of its rights, interests, and obligations hereunder may not be assigned or transferred in whole or in part by any Party. Any purported assignment without the express written consent of the other Party is void.

 

 

c.

Applicable Law; Venue.

 

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida as to all matters, including, but not limited to, matters of validity, construction, effect, and performance. Any Proceeding arising out of or relating to this Agreement or any Contemplated Transaction may be brought in the following order:

 

(i) in the courts of Pinellas County, Florida; or,

 

(ii) if it has or can acquire jurisdiction, in the United States District Court for the Southwest District of Florida in Clearwater, Florida; or,

 

21

 

 

(iii) if the United States District Court in Tampa is not available, then in the United States District Court for District of Florida in Tampa, Florida or such other venue as the Parties may agree to in writing.

 

Each of the parties irrevocably submits to the exclusive jurisdiction of each such court in the order given in any such Proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the Proceeding shall be heard and determined only in any such court, and agrees not to bring any Proceeding arising out of or relating to this Agreement or any Contemplated Transaction in any other court. The parties agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary, and bargained agreement between the parties irrevocably to waive any objections to venue or to convenience of forum. Process in any Proceeding referred to in the first sentence of this Section 10(c) may be served on any party anywhere in the world.

 

 

d.

Waiver.

 

Any waiver under this Agreement must be in writing. Any waiver of a particular default shall constitute a waiver of such default only and not of any other default by the non-waiving Party. Any waiver of a specific right or remedy under this Agreement shall constitute a waiver of such right or remedy only and not of any other right or remedy of the waiving Party.

 

 

e.

Captions.

 

The subject headings of the various sections of this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions.

 

 

f.

Counterparts.

 

This Agreement may be executed in one or more counterparts, including by facsimile or email transmission of pdf documents with request for assurance of receipt in a manner typical with respect to communications of that type, all of which shall be considered one and the same agreement, binding on all Parties, notwithstanding that all Parties are not signatories to the same counterpart.

 

 

g.

Further Acts.

 

Consistent with the terms and conditions hereof, each Party shall execute and deliver all instruments, certificates, and other documents and shall perform all other acts which any other Party may reasonably request in order to carry out this Agreement and the transactions contemplated hereby.

 

 

h.

Third Party Beneficiaries.

 

Nothing herein expressed or implied is intended or shall be construed to confer upon or give any Person other than the Parties, and their permitted successors and assigns, any rights or remedies under or by reason of this Agreement.

 

 

i.

Severability.

 

The Parties agree that if any part, term, or provision of this Agreement shall be found illegal and unenforceable by any court of law, the remaining provisions shall be severable, valid, and enforceable in accordance with their terms so long as the

 

22

 

 

legal and economic terms of this Agreement remain the same. The Parties in good faith shall attempt to replace any term found illegal and unenforceable and if they cannot, a court of competent jurisdiction shall provide a substitute term for the term found to be illegal or unenforceable.

 

 

j.

Confidentiality.

 

Except as otherwise required by law including, without exception, Federal Securities laws, the Parties agree to keep the existence and content of this Agreement and the transactions contemplated herein confidential.

 

 

k.

Notices.

 

Notice from one Party to another relating to this Agreement shall be deemed effective if made in writing and delivered to the recipient's address or facsimile number set forth below by any of the following means:

 

(i) hand delivery,

 

(ii) registered or certified mail, postage prepaid, with return receipt requested,

 

(iii) Fed Ex or like overnight courier service, or

 

(iv) facsimile, or other wire transmission with request for assurance of receipt in a manner typical with respect to communications of that type.

 

Notice made in accordance with this Section shall be deemed delivered on receipt if delivered by hand or wire transmission, upon receipt of return receipt if mailed by registered or certified mail, or the next business day after deposit with an overnight courier service if delivered for next day delivery. The Parties agree that electronic mail shall not constitute a permitted form of notice under this Section.

 

 

(i)

If to the Seller, addressed to:

 

MEDAHUB, Inc. and MEDAHUB Operations Group, Inc.

ATTN: Michael McLaughlin , President / Owner

8370 Whispering Oaks Way STE 1

West Palm Beach, FL. 33411

 

 

(ii)

If to the Buyer, addressed to:

 

Acacia Diversified Holdings, Inc.

Attn: Richard K. Pertile, CEO

13575 58 th Street North #138

Clearwater, FL. 33760

 

With a copy to:

 

Howard P. Ross, Esq., B.C.S.

Battaglia, Ross, Dicus & McQuaid, P.A.

 

23

 

 

5858 Central Avenue

St Petersburg, FL 33707

 

Any Party may, from time to time, by written notice to the other Party, designate a different address, which shall be substituted for the one specified above for such Party.

 

 

 

 

[Signature pages follows]

 

 

 

 

 

24

 

 

IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement on the date first above written.

 

 

SELLER:   

 

WITNESS AS TO MEDAHUB, INC.

 

 

 

MEDAHUB, INC. (“Michael McLaughlin”)                    

A Florida corporation

 

   /s/ Rya C. Tewis                                     

 

 

Signature

By:    /s/ Michael McLaughlin                    

 

 

Michael McLaughlin 

 

  Rya C. Tewis                                           

 

 

Printed Name

 

 

 

Its:      President and Owner                      

 

  Tallahassee, FL 32303                             

 

 

City, State, Zip

 

 

 

 

 

 

SELLER:  

 

WITNESS AS TO MEDAHUB O.G. Inc:

 

 

 

MEDAHUB Operations Group,. Inc.

(“Michael McLaughlin”)   

 

 

 

 

  /s/ Rya C. Tewis                                         

 

 

Signature

By /s/ Michael McLaughlin                    

 

 

Michael McLaughlin

 

  Rya C. Tewis                                             

 

 

Printed Name

 

 

 

Its:        President / Owner                          

 

  Tallahassee, FL 32303                               

 

 

City, State, Zip

 

 

 

 

25

 

 

EXHIBIT A

 

DEFINITIONS

 

 

" Adverse Consequences " means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, Security Interests, obligations, Taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses.

 

" Affiliate " means, with respect to any Person, any other Person controlling, controlled by, or under common control with the first Person, or, with regard to a Person who is an individual, a member of such Person's family, whether by blood or marriage. As used in this definition, the term "control" means (a) with respect to any corporation or other entity having voting shares or the equivalent and elected directors, managers, or Persons performing similar functions, the ownership or power to vote more than 50% of shares or the equivalent having the power to vote in the election of such directors, managers, or Persons performing similar functions, and (b) with respect to any other entity, the ability to direct its business and affairs.

 

" Agreement " has the meaning set forth in the preface to the Agreement.

 

Access ” has the meaning set forth in Section 5(b) of the Agreement.

 

" Assets " has the meaning set forth in the Recitals of the Agreement and in Section 2(a) and Exhibit M and M1   of the Agreement.

 

" Bill of Sale " has the meaning set forth in Section 2(c) and Exhibit B of the Agreement.

 

" Business " has the meaning set forth in the Recitals of the Agreement.

 

Business Operations ” has the meaning set forth in the Recitals of the Agreement

 

" Buyer " has the meaning set forth in the preface of the Agreement.

 

" Buyer Indemnified Parties " has the meaning set forth in Section 9(b) of the Agreement.

 

" Closing " has the meaning set forth in Section 2(e) of the Agreement.

 

" Data " has the meaning set forth in Section 2(a)(iii) of the Agreement.

 

" Disclosure Schedule " has the meaning set forth in Section 3 and Section 4 of the Agreement.

 

" Due Diligence Process " has the meaning set forth in Section 5(b) of the Agreement.

 

" Effective Date " has the meaning set forth in the preface of the Agreement and as of the date specified in the Bill of Sale and the Intangible Asset Assignment.

 

A-1

 

 

Excluded Assets ” has the meaning set forth in Section 2(b) of the Agreement and in Exhibit O of the Agreement.

 

" Indemnified Party " means the Person entitled to, or claiming a right to, indemnification under Section 9 of the Agreement.

 

" Indemnifying Party " means the Person claimed by the Indemnified Person to be obligated to provide indemnification under Section 9 of the Agreement.

 

" Intangible Asset Assignment " has the meaning set forth in Exhibit C of the Agreement.

 

" Lease " has the meanings set forth in Section 5(d) of the Agreement.

 

" Liability " means any liability or obligation of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.

 

" License " has the meaning set forth in Section 2(a)(iv) of the Agreement.

 

" Loan Documents " has the meaning set forth in Section 2(d)(ii) of the Agreement

 

" M EDAHUB, Inc . ", and MEDAHUB Operations Group, Inc.”, have the meanings set forth in the Recitals of the Agreement.

 

" Non-Competition Agreement " has the meaning set forth in Section 5(e) of the Agreement.

 

" Party " and " Parties " have the meanings set forth in the preface of the Agreement.

 

" Person " means an individual, a proprietorship, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or any other business enterprise or any governmental entity (or any department, agency or political subdivision thereof).

 

" Premises " has the meaning set forth in the Recitals of the Agreement.

 

" Purchased Assets " has the meaning set forth in the Recitals of the Agreement and in Section Exhibit M as Section 2(a) of the Disclosure Schedules of the Agreement

 

" Purchase Price " has the meaning set forth in Section 2(d) of the Agreement.

 

" Security Interests " means any mortgage, pledge, lien, encumbrance, charge, hypothecation, claim, restriction on use, or other security interest of any kind, or any rights of others, however

evidenced or created (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of any agreement to give any financing statement under the lien notice records or other similar legislation of any jurisdiction).

 

A-2

 

 

" Seller " has the meaning set forth in the preface of the Agreement.

 

" Seller Business " and " Seller Businesses " has the meaning set forth in the Recitals of the Agreement.

 

" Seller Indemnified Parties " has the meaning set forth in Section 9(c) of the Agreement.

 

Trademark ” and " Trade Name " has the meaning set forth in Section 2(a)(vii) of the Agreement.

 

 

 

 

A-3

 

 

EXHIBIT B

 

FORM OF AS-IS BILL OF SALE

 

The MEDAHUB OPERATIONS GROUP, INC. (the "Seller"), does hereby sell, transfer, assign and convey AS-IS unto Acacia Diversified Holdings, Inc. and any of its subsidiaries (the "Buyer"), the Purchased Assets, Seller's interest in the Trademarks, Company Name, Trade Names, if any, and, to the extent assignable, the License, each as defined in a certain Asset Purchase Agreement entered into by and between the Buyer and the Seller dated July 29, 2017 with an effective date of July 3, 2017 (the “ Effective Date ”) (the " Agreement "), in consideration of payment by the Buyer of the Purchase Price (as defined in the Agreement), the receipt and sufficiency of which the Seller does hereby acknowledge.

 

The terms of the Agreement, including, but not limited to, the Seller's representations, warranties, covenants, agreements and indemnities relating to the Purchased Assets, are incorporated herein by this reference.

 

The Seller hereby covenants that the Seller will do such further acts and execute and deliver all such transfers, assignments, conveyances, powers of attorney, and assurances reasonably requested by the Buyer, from time to time, for better conveying and confirming unto the Buyer the entire right, title and interest of the Seller in the Purchased Assets, the License and Seller's interest in the Company Name, and Trade Name hereby sold, transferred, assigned and conveyed to the Buyer.

 

It is understood that the Seller, contemporaneously with the execution and delivery of this Bill of Sale, may be further executing other instruments of transfer, the purpose of which is to supplement, facilitate, or otherwise implement the transfers intended hereby.

 

IN WITNESS WHEREOF, the undersigned has executed and delivered this Bill of Sale this 29th day of July, 2017, with the Effective Date of the 3rd day of July, 2017.

 

 

SELLER:

 

 

MEDAHUB, INC.

A group of Florida corporations

 

By:  /s/ Michael McLaughlin                           

       Michael McLaughlin

       Its: President, CEO, and owner

 

 

B-1

 

 

EXHIBIT C

 

FORM OF INTANGIBLE ASSET ASSIGNMENT

 

THIS INTANGIBLE ASSET ASSIGNMENT AGREEMENT (the “ Assignment ”) is made and entered into as of the 29th day of July, 2017 with an effective date of July 3, 2017 (the “ Effective Date ”) by and between MEDAHUB, a consortium of entities located in the State of Florida (“ Assignor ”) and Acacia Diversified Holdings, Inc., a Texas corporation (“ Assignee ”). This Assignment is made pursuant to the Asset Purchase Agreement (the “ Agreement ”) dated as of the date hereof by and between Assignor, Assignee, and certain other parties. Any capitalized term used but not defined in this Assignment shall have the meaning, if any, set forth in the Agreement.

 

WHEREAS, prior to the Effective Date hereof, Assignor was the sole owner, either in its own name or as the sole owner of its wholly-owned Corporations of the entire right, title and interest in and to all intangible assets designated as owned by Assignor on Schedule 1.01 of the Disclosure Schedules to the Agreement and any other intangible assets (including, without limitation, Intellectual Property) owned by Assignor which are part of the Purchased Assets under the Agreement (the “ Intangible Assets ”), and Assignor has agreed to transfer all of its right, title, and interest in and to the Intangible Assets to Assignee pursuant to the Agreement.

 

NOW, THEREFORE, as per the terms of the Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby transfers and assigns to Assignee its entire worldwide right, title and interest in and to the Intangible Assets, including all registrations and applications therefore, as well as all renewals and extensions of registrations that are or may be secured by Assignee, its successors, assigns or other legal representatives, for Assignee’s own use and enjoyment, and for the use and enjoyment of Assignee’s successors, assigns or other legal representatives.

 

Assignor agrees to take all other appropriate actions and execute any additional future documents required to implement and effectuate the assignment and transfer of the Intangible Assets to Assignee, including the rights to administer the web site associated with any domain names included in the Intangible Assets (the “ Domain Names ”). Assignor agrees to cooperate with Assignee and follow Assignee’s instructions in order to transfer the Domain Names and the related administration rights to Assignee in a timely manner. Assignor will promptly prepare and transmit the necessary documentation and/or correspond with the appropriate domain name registration authority, Internet service provider and/or governmental entities to authorize transfer of the Domain Names. Assignor further agrees to cooperate as necessary with Assignee to finalize transfer of the Domain Names.

 

This Assignment shall inure to the benefit of, and be binding upon the parties, their successors and assigns.

 

This Assignment may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same agreement. The parties may deliver an executed copy of this Assignment or any other document contemplated by this Assignment by facsimile or other electronic transmission to the other parties, and such delivery will have the same force and effect as the delivery of an original signed copy of this Assignment or such other document.

 

 

[ Signature page follows ]

 

C-1

 

 

IN WITNESS WHEREOF, the parties have executed this Assignment as of the date first above written.

 

 

Assignor:      Assignee:
     
The MEDAHUB Companies, et al    Acacia Diversified Holdings, Inc.  
     
     
By:     /s/ Michael McLaughlin                                    By:     /s/ Richard K. Pertile                          
Name: Michael McLaughlin    Name: Richard K. Pertile
Title:   President / CEO / Owner   Title:   Chief Executive Officer

                           

 

        

 

 

 

C-2

 

 

EXHIBIT E

 

FORM OF NON-COMPETITION AGREEMENT

 

 

 

 

 

 

 

[see attached on following page]

 

 

 

 

 

 

 

 

 

 

 

E-1

 

 

N on-Competition Agreement

 

This Non-Competition And Restrictive Covenant Agreement (this “ Agreement ”), is made and entered into as of July 29, 2017, with an effective date (the “ Effective Date ”) of July 3, 2017 between Acacia Diversified Holdings, Inc., a Texas corporation (together with its subsidiaries and affiliates, “ Acacia ” or the “ Company ”), and Michael McLaughlin, a Florida resident (“ McLaughlin ”).

 

WHEREAS , the execution and delivery of this Agreement by the Company and McLaughlin is a condition to the closing of the transaction contemplated by the Definitive Asset Purchase Agreement dated as of the date hereof, by and among the Company (as “ Buyer ”) and the MEDAHUB (as “ Seller ”) (the “ Purchase Agreement ”).

 

WHEREAS , McLaughlin has acquired, through his ownership and management of the MEDAHUB COMPANIES and his relationship as a director, officer, Owner and/or employee thereof, intimate knowledge regarding the business, customers, suppliers, information and processes of or relating to the Seller.

 

WHEREAS , McLaughlin will benefit from the closing of the transactions contemplated in the Purchase Agreement, which benefits constitute adequate and sufficient consideration for the covenants and obligations made in this Agreement.

 

WHEREAS , McLaughlin and the Company desire to enter into this Agreement on the terms and conditions hereafter set forth.

 

NOW THEREFORE , in consideration of the covenants and promises contained herein, and given pursuant to the Purchase Agreement, the parties hereto agree as follows:

 

1.      ACKNOWLEDGEMENT; INCORPORATION OF RECITALS . McLaughlin hereby acknowledges receipt of adequate and sufficient consideration from the Company for the covenants and agreements made in this Agreement. The recitals set forth above are, by this reference, incorporated into and deemed a part of this Agreement.

 

2.      NON-COMPETE AND NON-SOLICITATION

 

(a)      Non-Competition . During the Restricted Term, McLaughlin agrees that neither he nor any of his Related Persons will, in any manner, anywhere in the Restricted Territory, directly or indirectly, on behalf of himself or any other Person other than the Company, invest in, own, manage, operate, finance, control, advise, render services to or guarantee the obligations of any Person engaged in or planning to become engaged in the Business as hereafter defined (“ Cannabis Business ”).

 

(b)      Non-Solicitation . During the Restricted Term, McLaughlin agrees that neither he nor his Related Persons, in any manner, anywhere in the Restricted Territory, directly or indirectly, on behalf of himself or any other Person will (i) solicit the business of any Person who is a customer or demonstrably identified potential customer of the Seller or the Company (individually and collectively the “ Joint Parties ”) for the products or services then provided or sold by the Joint Parties in any manner that could be likely to result in such Person curtailing or canceling any business or contracts that such Person has or may come to have with the Joint Parties or in any way interfere with the relationship between the Joint Parties and such Person; (ii) cause, induce or attempt to cause or induce any actual or potential customer, supplier, employee, consultant or other business relation of the Joint Parties to cease doing business with the Company, to deal with any competitor of the Company, or in any way interfere with its relationship with the Company; or (iii) hire, employ, engage, retain or attempt to hire, employ, engage or retain any employee or independent contractor of the Company or in any way interfere with the relationship between the Company and any of its employees or independent contractors.

 

E-2

 

 

3.      CONFIDENTIAL INFORMATION .

 

(a)      Confidential Information; Restriction . McLaughlin recognizes and acknowledges that certain assets of the Joint Parties, including without limitation information regarding customers, pricing policies, methods of operation, proprietary computer programs, sales, products, profits, costs, markets, key personnel, formulae, product applications, technical processes, potential acquisition or joint venture candidates and trade secrets which may have been made available to McLaughlin, whether in writing, in computer form, reduced to a tangible form in any medium, or conveyed orally, and which gives the Company a competitive advantage over other individuals or companies which do not have access to this information (hereinafter called “ Confidential Information ”) are valuable, special, and unique assets of the Company. McLaughlin acknowledges that the Company is the owner of the Confidential Information and agrees not to dispute, contest or deny any such ownership rights of the Company. McLaughlin shall not use, divulge, reproduce, distribute, reverse engineer or disclose (in any way or in any manner) any Confidential Information to any person, firm, corporation, association, or any other entity for any reason or purpose whatsoever, directly or indirectly, except as may be required by law, unless and until such Confidential Information becomes publicly available other than as a consequence of the breach by McLaughlin of his confidentiality obligations hereunder. McLaughlin agrees to take all reasonable precautions to prevent the inadvertent disclosure of the Confidential Information to any unauthorized person; agrees not to transport or cause to be transported the Confidential Information outside the premises of the Company, except as necessary or desired to carry out McLaughlin’s duties as prescribed by the Company; agrees not, without the Company’s express authorization, to participate directly or indirectly in the development, marketing, sale, licensing or other exploitation of software or other products or services which embody or are derived from Confidential Information; and agrees that in the event McLaughlin becomes aware that any Person is taking or threatens to take any action which would compromise the Confidential Information or violate any of the foregoing provisions were that Person subject to the provisions of this Section 3 , promptly advise the Company of all facts concerning such action or threatened action. McLaughlin expressly agrees that the disclosures prohibited hereby include disclosure of similarities or possible similarities between the Confidential Information and the work product of another person or company.

 

(b)      Protective Order . In the event that McLaughlin is required to disclose any Confidential Information pursuant to an order, regulation, ruling, governmental request, summons or subpoena, McLaughlin shall promptly notify the Company of such pending disclosure and reasonably cooperate in assisting the Company (at the Company’s expense) in seeking a protective order or in objecting to such request, summons or subpoena with regard to the Confidential Information.

 

(c)      Cooperation . McLaughlin agrees to reasonably cooperate with the Company in the prosecution or defense of all threatened claims or actual litigation in which the Company is or may become a party, whether now pending or hereafter brought, in which McLaughlin has knowledge of relevant facts or issues. McLaughlin shall be promptly reimbursed reasonable out-of-pocket expenses incurred by him due to his cooperating with the prosecution or defense of any litigation for the Company as applicable, including but not limited to reasonable attorney’s fees incurred in the furtherance of those actions, provided that he provides the Company with reasonable documentation of such expenses.

 

4.      ASSIGNMENT . McLaughlin hereby assigns and transfers to the Company any right, title or interest in any inventions, designs, discoveries, works of authorship, creations, ideas, developments, improvements, trade secrets (including, without limitation, trade secrets relating to the POS cannabis technology and tracking systems) or software relating to the Business (collectively, “ Inventions ”), that McLaughlin may have as of the date hereof or may have acquired on or before the date hereof, in whole or in part. This obligation is limited to any Inventions that relate to the Company’s Business or demonstrably anticipated business, whether or not the Inventions were created, originated, developed or conceived of by McLaughlin solely or jointly with others and whether or not the Inventions are protected or protectable under applicable patent, trademark, service mark, copyright or trade secret laws. McLaughlin hereby

 

E-3

 

 

transfers McLaughlin’s rights in such Inventions free of all encumbrances and restrictions, and will promptly take any action, including executing and delivering any documentation, deemed necessary by the Company to effectuate the transfer or prosecution of ownership rights in the United States and any other country as the Company may request. McLaughlin acknowledges and agrees that the Inventions will be considered part of the Confidential Information.

 

5.      INJUNCTIVE RELIEF; REMEDIES . McLaughlin acknowledges and agrees that any breach or threatened breach by McLaughlin of Section 2, Section 3 or Section 4 of this Agreement will cause irreparable harm and continuing damages to the Company and that the remedy at law for any such breach or threatened breach will be inadequate. Accordingly, in addition to any other remedies that may be available to the Company at law or in equity in such event, the Company shall be entitled to seek and obtain, from any court of competent jurisdiction, an injunction or injunctions, without bond or other security and without having to show that money damages will be inadequate or impossible to determine, enjoining and restricting the breach or threatened breach. McLaughlin acknowledges, however, that no specification in this Agreement of a specific legal or equitable remedy may be construed as a waiver of or prohibition against pursuing other legal or equitable remedies in the event of a breach of this Agreement by McLaughlin.

 

6.      SEVERABILITY AND JUDICIAL MODIFICATION . If any clause, term or provision of this Agreement or the application thereof to any person or circumstance shall to any extent be held invalid or unenforceable, the remainder of this Agreement and the application of such clause, term or provision to persons or circumstances other than those to which it is invalid and unenforceable, shall not be affected thereby, and each clause, term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law. If any court of competent jurisdiction refuses to enforce any clause, term, or provision of this Agreement as written, the other clauses, terms, and provisions shall stand, and the court shall modify the clause, term, or provision at issue to the minimum extent necessary to make it enforceable under applicable law, and shall enforce it as so modified.

 

7.      GENERAL .

 

(a)      Waivers . No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. No waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing, executed by the party against whom enforcement of such waiver is sought, and any waiver so given shall be effective only in the specific instance and for the specific purpose for which given.

 

(b)      Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The parties may deliver an executed copy of this Agreement or any other document contemplated by this Agreement by facsimile or other electronic transmission to the other parties, and such delivery will have the same force and effect as the delivery of an original signed copy of this Agreement or such other document.

 

(c)      Governing Law; Waiver of Jury Trial . This Agreement shall be construed in accordance with and governed by the laws of the State of Florida applicable to agreements made and to be performed wholly within such jurisdiction, without regard to principles of conflicts of laws. Each of the parties hereto hereby irrevocably and unconditionally waives any and all right to trial by jury of any claim or cause of action in any suit arising out of or related to this Agreement or the transactions or events contemplated hereby or any course of conduct, course of dealing, statements (whether verbal or written) or actions of any party hereto. The parties hereto each agree that any and all such claims and causes of action shall be tried by the court without a jury. Each of the parties hereto further waives any

 

E-4

 

 

right to seek to consolidate any such lawsuit in which a jury trial has been waived with any other lawsuit in which a jury trial cannot or has not been waived.

 

(d)      No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by McLaughlin and the Company to express their mutual intent, and no rule of strict construction will be applied against McLaughlin or the Company.

 

(e)      Headings . The section and subsection heading of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of its provisions.

 

8.      DEFINITIONS . For purposes of this Agreement, the following definitions shall apply:

 

“Business ” means any business the same or similar to that of the Company, including but not limited to the business of growing, cultivating, managing, acquiring, processing, or selling industrial or medical grade hemp or cannabis or oils extracted therefrom; processing, combining packaging, transporting or selling the extracted oils or medications, dietary supplements, pharmaceuticals or nutraceuticals derived therefrom; transporting products, cash or persons for hire or for internal use; and all related processes, systems, POS and tracking and technology.

 

“Control” of an entity includes service as a director, officer, partner, manager, executor or trustee (or in a similar capacity) or beneficial ownership of 10% or more of the outstanding equity (or the right to vote or receive profits, dividends or distributions).

 

Person ” means an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated organization, association, joint venture or other entity or a governmental body.

 

Related Person

 

(a)     in the case of a natural person, each member of such Person’s immediate family, by blood or by marriage, including spouses, parents, step-parents, siblings, children, and step-children;

 

(b)     any Person that, directly or indirectly Controls, is Controlled by or is under common Control with, a Person.

 

Restricted Term ” means the period commencing on the date hereof and ending five (5) years thereafter.

 

Restricted Territory ” means anywhere within 300 miles of any location the Company or any of its subsidiaries does business.

 

IN WITNESS WHEREOF , and intending to be legally bound hereby, the parties hereto have caused this Non-Compete and Restrictive Covenant Agreement to be duly executed as of the date and year first above written.

 

 

 

[Signature page follows]

 

 

 

E-5

 

 

ACACIA DIVERSIFIED HOLDINGS, INC.

 


By:    /s/ Richard K. Pertile                           Date: June 23, 2017
Name: Richard K. Pertile

Its: President and CEO

 

 

Michael McLaughlin

By:    /s/ Michael McLaughlin                       Date: June 23, 2017
Name: Michael McLaughlin

Address: 8370 Whispering Oaks

West Palm Beach, FL. 33411

 

 

 

 

 

 

 

E-6

 

 

EXHIBIT F

 

 

      FORM OF LICENSE AND PERMIT TRANSFER DOCUMENTS

 

 

 

 

 

 

Acacia Needs a copy of License and transfer papers

 

 

 

 

 

 

 

 

 

 

F-1

 

 

EXHIBIT M

 

DISCLOSURE SCHEDULE

 

 

SECTION 2(a)

Purchased Assets

 

 

MEDAHUB OPERATIONS GROUP, INC.

 

 

 

 

Center for Medicare and Medicaid Services (CMS) Clinical Laboratory Improvement Amendments (CLIA) CLIA Florida Certificate since November 2011

 

 

 

o

Clinical Laboratory Improvement Amendments  (CLIA) of 1988 are United States federal regulatory standards that apply to all clinical laboratory testing performed on humans in the United States, except clinical trials and basic research.

 

o

The Clinical Laboratory Improvement Amendments ( CLIA ) regulate laboratory testing and require clinical laboratories to be certificated by their state as well as the Center for Medicare and Medicaid Services (CMS) before they can accept human samples for diagnostic testing.

 

o

 

 

HIPAA Compliancy

 

Founded in April of 2012, Debt Free and 100% owned by seller

 

 

 

 

 

 

M-1

 

 

SECTION 2(a)

 

Purchased Assets

 

 

 

MEDAHUB, INC.

 

 

 

MEDAHUB, INC (Asset Summary)

 

 

MEDAHUB Service Cloud Platform

 

o

Software Libraries

 

o

Databases

 

o

APP Front End

 

o

CORE Database

 

o

Database Core Engine

 

o

Universal APIs

 

o

UNI INDEX Engine

 

o

HL7 HIPAA Compliancy

 

o

Formulation Engine

 

o

GEOTRAC RFI

 

o

Virtual Surveillance

 

o

LAB OPEN API

 

o

MEDAHUB URLs

 

o

ASP Core UNI API Interface

 

5 Major Patent Applications to be Filed in 2017

 

Founded in October of 2011, Debt Free and 100% owned by seller

 

 

 

 

M-2

 

 

EXHIBIT N

 

DISCLOSURE SCHEDULE

 

SECTION 2(a)

Schedule of Contracts and Agreements

 

Seller represents this listing to be all contracts, services, equipment or vehicle leases, service providers and other general business obligations of the Seller Business that are to be assigned and/or transferred to Buyer.

 

Service providers and vendors:

 

Contract, Lease, or Agreement

 

Assignment Accepted by Buyer

     

The obligations created after the closing of the asset purchase transaction:

   
     

Michael McLaughlin will provide for one full year beginning the effective date, 15 hours per month (180 hours cumulative) at no additional charge and at the discretion of the Company, support, guidance and direction for implementing this technology, including sourcing. To have production platform set up and fully operational at no additional cost on production server.

 

Buyer will hold 50% - 300,000 of the restricted common shares of Acacia Diversified Holdings, Inc. until software is on production server and fully operation and a moinimum of six (6) months has past since the closing date and 90 hours of support has been exhausted.

     

Seller will present the software that will be on a final production sever to the state of Florida with the company as the companies internal fully owned software technology.

   

 

 

 

 

N-1

 

 

EXHIBIT O

 

DISCLOSURE SCHEDULE

 

Section 2(b)

EXCLUDED ASSETS

 

The following assets are specifically excluded from this sale transaction:

 

1.     Any and all assets not specifically described in Section 2(a) of the Agreement, and all assets not listed in Exhibit M as Section 2(a) of the Disclosure Schedules.

 

2.     Any assets, books, records or data not required to be used in the business.

 

3.     Any of Seller's leasehold improvements as would inure to the benefit of the landlord of the premises in the normal course.

 

 

 

 

 

 

 

 

O-1

 

 

EXHIBIT P

 

DISCLOSURE SCHEDULE

 

SECTION 2(d)

Listing of the Number of New Restricted

Shares of Acacia Diversified Holdings , Inc. to be Issued.

 

 

 

 

 

 600,000 restricted shares of Acacia Diversified Holdings, Inc. to:

 

 Michael McLaughlin

Address: 8370 Whispering Oaks Way

 West Palm Beach, FL. 33411

 

 

 

 

 

 

P-1

 

 

EXHIBIT Q

 

DISCLOSURE SCHEDULE

 

SECTION 2(f)

Buyer’s Purchase Price Allocation

 

 

 

All shares of MedaHub, Inc. and MedaHub Operations Group, Inc. shall be exchanged for six hundred thousand (600,000) new restricted common shares in Acacia Diversified Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

 

Q-1

 

 

EXHIBIT R

 

DISCLOSURE SCHEDULE

 

SECTION 2(g)

Schedule of Liabilities to be Assumed by Buyer if any?

 

 

 

 

NONE

 

 

 

 

 

 

 

 

R-1

 

 

EXHIBIT S

 

DISCLOSURE SCHEDULE

 

SECTION 3(d)

Security Interests

 

 

At Closing and thereafter, Buyer shall be responsible for assuming the following security interests or obligations on certain leases, operating agreements, vendor agreements and contracts, and other trade obligations directly related to the operation of the Seller Businesses as assigned and/or transferred from Seller to Buyer in the Schedules in Exhibit N hereof and as set forth below:

 

 

 

 

 

NONE

 

 

 

 

 

 

 

S-1

 

 

EXHIBIT T

 

DISCLOSURE SCHEDULE

 

Section 5(c)

SCHEDULE OF ISSUES

 

 

 

None are known as of this date.

July 29, 2017

 

 

 

 

 

 

T-1

 

 

EXHIBIT “U”

 

SALE AND ASS IGNMENT OF INVENTION

 

Whereas, Michael McLaughlin, a United States citizen residing at [8370 Whispering Oaks, West Palm Beach, FL. 33411] (the “Inventor”) who is the sole inventor of an invention for a computer software platform and source code for pharmaceutical production, processing, and manufacture of pharmaceuticals, including product tracking, transportation, HIPPA compliance, cyber security, revenue generation and tracking [Service point Cloud based GEOTRAK seed to sale, with POS, HIPAA compliant, software technology including all codes] (the “Invention”), and desires to sell and assign the full right, title, and interest in the Invention to Assignee by this Sale and Assignment; and

 

Whereas Michael McLaughlin will provide for one full year beginning the effective date, 15 hours per month (non-cumulative) at no additional charge and at the discretion of the Company, support, guidance and direction for implementing this technology, including sourcing and have production platform set up and fully operational at no additional cost.

 

Whereas Assignee desires to acquire the full right, title, and interest in the Invention from Inventor.

 

Therefore, for good and valuable consideration:

 

The Inventor does sell, assign, and transfer unto the Assignee the full, complete, and exclusive right, title, and interest in the Invention. This Sale and Assignment includes the transfer of all rights relating to and concerning the Invention and conveys to Assignee ownership of the Invention worldwide. This Invention Sale and Assignment is inclusive of all intellectual property rights appurtenant thereto, including the exclusive right to use, license, assign, manufacture, import and export, and offer for sale the Invention, including all those rights secured by letters patent under the laws of the United States and that of foreign countries, including the right to seek redress in law and equity, including those of the Inventor prior to this Sale and Assignment. Inventor retains no interest in the Invention unto himself. Inventor expressly warrants that Inventor is the sole inventor of the Invention and has granted no other person or entity any right or interest whatsoever as security, license, assignment, or otherwise in or to the Invention, and that Inventor holds the full lawful title and the right to transfer the Invention to Assignee. Assignee is assigned the right to record this Sale and Assignment with the appropriate governmental recording authorities as notice of Assignee’s ownership by assignment. Inventor shall execute all papers necessary for Assignee to perfect the Invention as letters patent in the United States and worldwide.

 

U-1

 

 

In the event that Inventor is unwilling or unable to execute any papers necessary for Assignee to patent the Invention, Inventor grants power of attorney to Assignee through its designated authorized representatives to execute such papers in lawful pursuit and perfection of any patents worldwide.

 

Wherefore the parties do agree.                                

Effective Date: July 3, 2017

 

 

   /s/ Michael McLaughlin                         

Signature of Inventor

Michael McLaughlin

 

SWORN TO and SUBSCRIBED before me this      23rd      day of July 2017, by Michael McLaughlin who is personally known by me or who produced identification and who took an oath that all representations herein are accurate to the best of his knowledge and belief.

 

 

   /s/ Natalie Sheffield                    

NOTARY PUBLIC

 

Seal:

 

 

 

 

U-2

 

 

EXHIBIT 31.1

 

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

 

 I, Richard K. Pertile, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Acacia Diversified Holdings, Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based upon such evaluation; and

 

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

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

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:    November 5, 2018

 

 

By:   /s/ Richard K. Pertile                               

Richard K. Pertile

Principal Executive Officer

Principal Financial Officer

Principle Accounting Officer

 

 
 

 

 

 

 

EXHIBIT 32.1

 

Certification of Chief Executive Officer and Chief Financial Officer

pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

regarding Quarterly Report on Form 10-Q for the quarter ended September 30, 2018

 

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Acacia Diversified Holdings, Inc., a Texas corporation (the "Company"), does hereby certify that:

 

1.  The Company's Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2018, (the Form 10-Q) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2.  Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

 

 

Date:  November 5, 2018

By:

/s/ Richard K. Pertile        

 

 

 

Richard K. Pertile

 

 

 

Principal Executive Officer

 

 

 

Principal Financial Officer

Principle Accounting Officer