As filed with the Securities and Exchange Commission on January 31, 2020

Registration No. ____________

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

  

 

 

GREEN HYGIENICS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

Nevada   100   26-2801338
(State or other Jurisdiction
of Incorporation)
  (Primary Standard
Classification Code)
  (IRS Employer
Identification No.)

 

13795 Blaisdell Place, Suite 202

Poway, California 92064

Tel.: (855) 802-0299

(Address and Telephone Number of Registrant’s Principal

Executive Offices and Principal Place of Business)

 

Ron Loudoun

Chief Executive Officer

GREEN HYGIENICS HOLDINGS INC.

13795 Blaisdell Place, Suite 202

Poway, California 92064

Tel.: (855) 802-0299

(Name, Address and Telephone Number of Agent for Service)

 

Copies of communications to:

 

Marc A. Indeglia, Esq.

Indeglia PC

13274 Fiji Way, Suite 250

Marina del Rey, CA 90292

Tel No.: (310) 982-2720

  

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

  

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration Statement number of the earlier effective registration statement for the same offering. ☐

  

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ☐

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company

 

 

 

 

CALCULATION OF REGISTRATION FEE

  

Title of each class of securities to be registered   Amount to be
Registered (1)
    Proposed
maximum offering
price per
share (2)
    Proposed
maximum aggregate
offering price
    Amount of
registration
fee
 
Common Stock underlying convertible notes     3,000,000     $ 3.00     $ 9,000,000     $ 1,168.20  
Common Stock underlying warrants     250,000     $ 3.00     $ 750,000     $ 97.35  
TOTAL     3,250,000     $ 3.00     $ 9,750,000     $ 1,265.55  

 

(1) On December 31, 2019, the registrant issued and sold to Triton Funds LP (i) a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the registrant’s common stock at a conversion price of $2.50 per share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the registrant’s common stock at an exercise price of $3.00 per share. The registrant is registering for resale (i) 3,000,000 shares of common stock potentially issuable upon conversion of the Note, and (ii) 250,000 shares of common stock issuable upon exercise of the Warrant. Pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends, or similar transactions affecting the shares to be offered by the selling shareholders.

 

(2) Represents the higher of (i) the price at which the warrants or rights may be exercised, (ii) the offering price of securities of the same class included in the registration statement, and (iii) the price of securities of the same class, as determined in accordance with Rule 457(c) under the Securities Act, for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the securities act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant to said section 8(a), may determine.

  

 

 

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

  

PREPRELIMINARY PROSPECTUS  SUBJECT TO COMPLETION   DATED JANUARY 31, 2020

  

Up to 3,250,000 Common Shares

 

GREEN HYGIENICS HOLDINGS INC.

 

 

 

This prospectus covers the resale of:

 

3,000,000 shares of our common stock, par value $0.001 per share, potentially issuable upon conversion of a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000; and

 

250,000 shares of our common stock issuable upon the exercise of a common stock purchase warrant (the “Warrant”).

 

All of the shares are being sold by the selling shareholder described on page 10 of this prospectus. The selling shareholder will sell its shares of common stock at prevailing market prices, at privately negotiated prices, or in any other manner allowed by law. If the selling shareholder exercised the Warrant for cash, we would receive $750,000. The selling shareholder is not obligated to exercise the Warrant, in whole or in part. Although we will receive proceeds from the exercise of the Warrant, we will not receive any of the proceeds from the sale of the common stock sold by the selling shareholders. We have agreed to pay the expenses related to the registration related to this offering.

 

The selling shareholders may be deemed underwriters of the shares of common stock, which they are offering. The selling shareholders will receive all proceeds from the sale of stock held by them in this offering. We will not receive any proceeds from the sale of shares by the selling shareholders.

 

Our common stock is quoted on the OTC Markets (QB Marketplace Tier under the symbol “GRYN”). On January 29, 2020, the reported closing sale price of our common stock on the OTC Markets was $1.87 per share.

 

Investing in our common stock involves a high degree of risk.  Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock in “Risk Factors” beginning on page 5 of this prospectus.

 

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of anyone’s investment in these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

  

The Date of This Prospectus Is:  _____________, 2020

  

 

 

 

TABLE OF CONTENTS

 

  PAGE
Forward-looking Statements ii
Prospectus Summary 1
Risk Factors 5
Use of Proceeds 10
Selling Shareholder 10
Plan of Distribution 11
Description of Business 13
Description of Property 16
Legal Proceedings 16
Security Ownership of Certain Beneficial Owners and Management 17
Directors and Executive Officers 18
Executive Compensation 21
Certain Relationships and Related Transactions and Director Independence 22
Market For Common Equity and Related Stockholder Matters 23
Description of Securities 24
Legal Matters 26
Experts 26
Available Information 27
Index to Financial Statements F-1
Management’s Discussion and Analysis of Financial Condition and Results of Operations 28
Selected Financial Data 35
Supplementary Financial Information 35
Changes in and Disagreements with Accounts on Accounting and Financial Disclosure 35
Quantitative and Qualitative Disclosures about Market Risk 35

 

i

 

  

FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements. These statements are not historical facts, but rather are based on our current expectations, estimates and projections about our industry, our beliefs and assumptions. Words including “may,” “could,” “would,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “seeks,” “estimates” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which remain beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties are described in “Risk Factors” and elsewhere in this prospectus. We caution you not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date of this prospectus. We are not obligated to update these statements or publicly release the results of any revisions to them to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

  

ii

 

 

 

PROSPECTUS SUMMARY

 

This summary highlights selected information contained elsewhere in this prospectus.  This summary does not contain all the information that you should consider before investing in the common stock.  You should carefully read the entire prospectus, including “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements, before making an investment decision.

 

Overview

 

Green Hygienics Holdings Inc. (“we” or the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources Inc. and issued 55,000 shares of common stock on June 12, 2008 (after accounting for the forward and reverse splits detailed below) for cash of $20,000.

 

During 2008, the Company staked one mineral claim located 100 km northwest of Vancouver, British Columbia and acquired a molybdenum property comprised of one mineral claim located approximately 35 kilometers north of Vancouver, British Columbia. Both properties have since been abandoned by the Company.

 

On June 30, 2010 the Company changed its name to Takedown Entertainment Inc. and forward split its issued shares of common stock on the basis of five new shares for one old share (5:1) on the same date.

 

During the years 2009 to June 3, 2012, the Company was involved in the acquisition, production, licensing, marketing and distribution of mixed martial arts (MMA) content, programming and merchandising for North American and International markets.

 

On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc. and, on the same date, reverse split both its issued and outstanding shares of common stock on a two thousand old for one new basis (1:2,000). On June 1, 2015, the company completed a reverse split on its issued shares of common stock on the basis of two hundred old for one new basis (1:200).

 

On April 16, 2015, Wilderness Custom Exteriors Ltd., a construction company from Kelowna, British Columbia, specializing in the construction of cannabis growing operations, acquired the $189,150 Promissory Note from Mr. David Harris, and acquired the $145,000 Promissory Note from Zircon Ventures Inc. (hereinafter collectively referred to as the Notes.) On June 2, 2015, the Company received instructions from Wilderness Custom Exteriors Ltd. to accept as payment in full of the Notes including accrued interest, by issuing 30,000,000 shares of common stock. On June 3, 2015, the Company issued 15,000,000 shares of common stock to Wilderness Custom Exteriors Ltd. and 15,000,000 shares of common stock to Richard Powell, a businessman located in Kelowna, British Columbia. On June 3, 2015, through the expertise of its new management, Mr. Rick Powell and Mr. Jim Loseth, we entered into the commercial indoor cultivation business specializing in the construction of cannabis cultivation facilities and the management thereof.

  

 

1

 

 

 

On June 1, 2017, the Company accepted the resignations of Rick Powell, Jim Loseth and David Ashby as Directors and Officers of the Company and the Company accepted the appointment of Ronald Loudoun as President, Secretary, Treasurer, Interim Chief Financial Officer and Director of the Company.

 

On October 30, 2018, Rick Powell transferred 13,500,000 common shares of the Company by way of a Gifting Agreement to Alita Capital Inc., a company controlled by Ronald Loudoun, and on October 30th, 2018, Wilderness Custom Exteriors Ltd. transferred 9,000,000 common shares by way of a Gifting Agreement to Alita Capital Inc.

 

On June 14, 2019 the Company secured from the County of San Diego Department of Agriculture, Weights and Measures a registration for industrial hemp cultivation as a grower. The Company intention is to be an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for the purpose of extracting cannabidiol (“CBD”).

 

We had $3,253 in cash reserves as at July 31, 2019. We anticipate that we will incur $240,000 for administrative expenses, including professional legal and accounting expenses associated with compliance with our periodic reporting requirements over the next twelve months.

 

We are contemplating raising additional capital to finance our business operations. No final decisions regarding financing have been made at this time. It is anticipated that funding for the Company will come from one or more of the following means: engaging in an offering of our stock; engaging in borrowing; locating a joint venture partner or partners.

 

Recent Developments

 

Effective April 29, 2019, the Company entered into a definitive agreement with Coastal Labs, LLC to acquire all of the assets of Coastal Labs. The total consideration for the assets would be, at the Company’s election, $3,000,000 or a total of 2,000,000 shares of the Company’s common stock issuable over five years. In addition, the Company would enter into consulting agreements with each individual member of Coastal, or such entity as each respective member may designate, that sets forth ongoing compensation to each individual member of Coastal. The parties further agreed to form a new entity or arrange for the transfer of ownership of Coastal to a wholly-owned subsidiary of the Company to hold the acquired assets, to enter into an operating agreement that governs the operation of the assets, and to establish a board of directors for the subsidiary of up to 6 members, of whom 3, or half, whichever is greater, shall be nominees of Coastal. Further, the Company would assume all of Coastal’s contracts relating to sales and distribution of the products. The acquisition of the assets of Coastal Labs has not closed, and either party may terminate the agreement at any time.

 

In June, 2019, the Company formed two wholly owned subsidiaries, Coastal Labs NC LLC and Green Hygienics NC LLC for the purpose of registering as an industrial hemp processor and cultivator in the State of North Carolina pursuant to the North Carolina Industrial Hemp Pilot Program.

 

On June 10, 2019, the Company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five-year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes. Since the issuance of the purchase order, the Company and US Tobacco De Mexico determined to renegotiate the purchase order due to several reasons, including production capacity and market price fluctuation. These negotiations are ongoing.

 

On June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures, a grower registration for industrial hemp cultivation.

  

 

2

 

 

 

On July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina. The licenses were granted to the Company’s newly formed subsidiary, Coastal Labs NC LLC, by the North Carolina Industrial Hemp Commission. The Company’s second subsidiary in the state is Green Hygienics NC LLC, which will be partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next year’s cultivation.

   

On August 26, 2019, the Company the completed the acquisition of 824 acres of land known as the Potrero Ranch Property, located near San Diego, California for a purchase price of $4 million. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses. The Company entered into an agreement payable with the seller of the property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. This debt is secured by a promissory note secured by a deed of trust on the real property. The maturity date of the debt is August 23, 2024. The Company also entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. This debt is also secured by a promissory note secured by a second charge on the deed of trust on the real property. The maturity date of this debt is August 15, 2024. To date, the Company has spent $184,342 in property and building improvements and has acquired over $300,000 worth of production equipment.

 

In October 2019, the Company entered into an agreement to purchase the real property located at 13795 Blaisdell Place, Poway, California 92064, which includes a building containing approximately 15,048 square feet of R&D space on a 0.95 acre lot, for $4,000,000, of which $2,000,000 is payable in cash or common stock of the Company, and of which $2,000,000 would be financed pursuant to a promissory note and secured by a deed of trust on the property. The Company has until April 2020 to obtain the necessary financing to consummate the transaction.

 

Corporate Information

 

Our executive offices are located at 13795 Blaisdell Place, Suite 202, Poway, California 92064. Our telephone number is (855) 802-0299 and our Internet address is www.greenhygienicsholdings.com. The information on, or that may be, accessed from our website is not part of this Prospectus.

 

The Offering

  

Company: Green Hygienics Holdings Inc.
   
Securities Offered:

3,000,000 shares of common stock underlying a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000; and

 

250,000 shares of common stock underlying of a common stock purchase warrant (the “Warrant”), exercisable at $3.00 per share.

   
Proceeds We will not receive any proceeds from the sale of the Common Stock sold by the selling shareholder hereunder. We will, however, receive proceeds upon the exercise of the Warrant which, if all such Warrant is exercised in full for cash, would be $750,000. The selling shareholder is under no obligation to exercise the Warrant, in whole or in part. Proceeds, if any, received from the exercise of the Warrant will be used for general corporate purposes.
   
Risk Factors See the section titled “Risk Factors” below.
   
OTC Markets symbol “GRYN”

 

 

3

 

 

 

Summary Financial Information

 

Summary Historical Financial Data

 

The summary financial information set forth below has been derived from the financial statements of Green Hygienics Holdings Inc., a Nevada corporation for periods presented and should be read in conjunction with the financial statements and the notes thereto included elsewhere in this Prospectus and in the information set forth in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Green Hygienics Holdings, Inc., a Nevada corporation

  

    Three Months Ended
October 31
    Years Ended
July 31,
 
    2019     2018     2019     2018  
Revenues   $ --     $ --     $ --     $ --  
Cost of Revenues   $ --     $ --     $ --     $ --  
Operating Expenses   $ 2,065,924     $ 29,409     $ 1,818,511     $ 165,989  
Other Income (Expense)   $ (128,801 )   $ (716 )   $ (25,383 )   $ 36,909  
Net Loss   $ (2,194,725 )   $ (30,125 )   $ (1,843,894 )   $ (129,080 )

  

    October 31,   July 31,  
    2019   2019     2018  
Total Assets   $ 5,103,435   $ 554,841     $ 592  
Total Liabilities   $ 6,698,522   $ 1,194,836     $ 341,202  
Accumulated Deficit   $ (44,960,867 ) $ (42,766,142 )   $ (40,992,248 )
Stockholders’ Deficit   $ (1,595,087 ) $ (639,995 )   $ (340,610 )

 

 

4

 

RISK FACTORS

 

The following is a summary of the risk factors that we believe are most relevant to our business. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

 

Business Risks:

 

We are entering into a new business, the construction of hemp growing facilities, and we expect to incur operating losses for the foreseeable future.

 

We were incorporated on June 12, 2008. We have no way to evaluate the likelihood that our business will be successful. We have earned minimal revenues as of the date of this annual report. Potential investors should be aware of the difficulties normally encountered by fledging construction companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the regulatory hurdles surrounding this new industry

 

We have yet to earn significant revenue to achieve profitability and our ability to sustain our operations is dependent on our ability to raise additional financing to complete our program if warranted. As a result, our accountant believes there is substantial doubt about our ability to continue as a going concern.

 

We have an accumulated deficit of $42,766,142 as at July 31, 2019. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development of our business. These factors raise substantial doubt that we will be able to continue as a going concern. Our independent auditors have expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. We may have to liquidate our business and you may lose your investment. You should consider our auditor’s comments when determining if an investment in our company is suitable.

 

Because of the unique difficulties and uncertainties inherent in hemp growing facility construction and management industry, we face a high risk of business failure.

 

You should be aware that the hemp growing industry is a new industry. Consequently, the likelihood that there will be a high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the regulatory environment in which we must adhere to. These potential problems include, but are not limited to, unanticipated problems relating to obtaining a building permits, licenses to grow hemp, the ability to market the hemp grown. If the results of our program do not reveal viable commercialization options, we may decide to abandon our venture into the hemp growing industry. Our ability to continue in the hemp growing industry will be dependent upon our possessing adequate capital resources when needed. If no funding is available, we may be forced to abandon our operations.

 

Because of the inherent dangers involved in hemp growing construction industry and the management of the facilities, there is a risk that we may incur liability or damages as we conduct our business.

 

The growing of hemp involves numerous hazards. As a result, we may become subject to liability for such hazards, which we cannot insure or against which we may elect not to insure. At the present time we have no insurance to cover against these hazards. The payment of such liabilities may result in our inability to complete our planned program and/or obtain additional financing to fund our program.

  

5

 

 

As we undertake the construction of hemp growing facilities, we will be subject to compliance with government regulation that may increase the anticipated cost of our program.

 

There are several governmental regulations that could materially increase the costs of managing the facilities. We will be subject to regulations and laws as we carry out our program. We will require licenses to grow and process hemp in the United States and Canada. There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our growing operations.

 

Because we have no operating history in the hemp industry, we may not succeed. 

 

We have no specific operating history in procuring, building out or leasing real estate for agricultural purposes, specifically hemp grow facilities, or with respect to any other activity in the hemp industry. Moreover, we are subject to all risks inherent in a developing a new business enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with establishing a new business and the competitive and regulatory environment in which we operate. 

 

You should further consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages. For example, unanticipated expenses, delays and or complications with build outs, zoning issues, legal disputes with neighbors, local governments, communities and or tenants. We may not successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.

 

Because our business is dependent upon continued market acceptance by consumers, any negative trends will adversely affect our business operations.

 

We are substantially dependent on continued market acceptance and proliferation of consumers of hemp. We believe that as hemp becomes more accepted consumer demand will continue to grow. And while we believe that the market and opportunity in the hemp space continues to grow, we cannot predict the future growth rate and size of the market. Any negative outlook on the hemp industry will adversely affect our business operations. 

 

Laws and regulations affecting the regulated hemp industry are constantly changing, which could detrimentally affect our proposed operations and we cannot predict the impact that future regulations may have on us.

 

Local, state and federal hemp laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on its operations. In addition, it is possible that regulations may be enacted in the future that will be directly applicable to our proposed business. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

 

FDA regulation of hemp and the possible registration of facilities where hemp is grown could negatively affect the industry which would directly affect our financial condition. 

 

The FDA may issue rules and regulations including CGMPs (certified good manufacturing practices) related to the growth, cultivation, harvesting and processing of hemp. Clinical trials may be needed to verify efficacy and safety. It is also possible that the FDA would require that facilities where hemp is grown be registered with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, we do not know what the impact would be on the hemp industry, what costs, requirements and possible prohibitions may be enforced. If we or our tenants are unable to comply with the regulations and or registration as prescribed by the FDA, we and/or our tenants may be unable to continue to operate their and our business in its current form or at all. 

  

6

 

 

Because our business model depends upon the availability of private financing, any change in our ability to raise money will adversely affect our financial condition.

 

Our ability to operate, engage in the business activities that we have planned and achieve positive financial performance depends, in large measure, on our ability to obtain financing in amounts and on terms that are favorable.

 

Because we are liable for hazardous substances on our properties, environmental liabilities are possible and can be costly.

 

Federal, state and local laws impose liability on a landowner for releases or the otherwise improper presence on the premises of hazardous substances. This liability is without regard to fault for, or knowledge of, the presence of such substances. A landowner may be held liable for hazardous materials brought onto a property before it acquired title and for hazardous materials that are not discovered until after it sells the property. Similar liability may occur under applicable state law. Sellers of properties may make only limited representations as to the absence of hazardous substances. If any hazardous materials are found within our properties in violation of law at any time, we may be liable for all cleanup costs, fines, penalties and other costs. This potential liability will continue after we sell the properties and may apply to hazardous materials present within the properties before we acquire the properties. If losses arise from hazardous substance contamination which cannot be recovered from a responsible party, the financial viability of the properties may be adversely affected. It is possible that we will purchase properties with known or unknown environmental problems which may require material expenditures for remediation. 

 

If we are found non-compliant with the Americans with Disabilities Act, we will be subject to significant liabilities.

 

If any of our properties are not in compliance with the Americans with Disabilities Act of 1990, as amended (the “ADA”), we may be required to pay for any required improvements. Under the ADA, public accommodations must meet certain federal requirements related to access and use by disabled persons. The ADA requirements could require significant expenditures and could result in the imposition of fines or an award of damages to private litigants. We cannot assure that ADA violations do not or will not exist at any of our properties.

 

Investment Risks:

 

Our issuance of additional shares may have the effect of diluting the interest of shareholders; our common stock shareholders do not have pre-emptive rights.

 

Any additional issuances of common stock by us from our authorized but unissued shares may have the effect of diluting the percentage interest of existing shareholders. The securities issued to raise funds may have rights, preferences or privileges that are senior to those of the holders of our other securities, including our common stock. The board of directors has the power to issue such shares without shareholder approval. We fully intend to issue additional common shares in order to raise capital to fund our business operations and growth objectives.

 

We do not anticipate paying dividends to our common stockholders in the foreseeable future, which makes investment in our stock speculative and risky.

 

We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. The board of directors has sole authority to declare dividends payable to our stockholders. The fact that we have not paid and do not plan to pay dividends indicates that we must use all of our funds we generate for reinvestment in our business activities. Investors also must evaluate an investment in the Company solely on the basis of anticipated capital gains.

  

7

 

 

Limited liability of our executive officers and directors may discourage shareholders from bringing a lawsuit against them.

 

Our Memorandum and Articles of Incorporation contain provisions that limit the liability of our directors for monetary damages and provide for indemnification of officers and directors. These provisions may discourage shareholders from bringing a lawsuit against officers and directors for breaches of fiduciary duty and may reduce the likelihood of derivative litigation against officers and directors even though such action, if successful, might otherwise have benefited the shareholders. In addition, a shareholder’s investment in the Company may be adversely affected to the extent that we pay costs of settlement and damage awards against officers or directors pursuant to the indemnification provisions of the bylaw. The impact on a shareholder’s investment in terms of the cost of defending a lawsuit may deter the shareholder from bringing suit against any of our officers or directors. We have been advised that the SEC takes the position that these article and bylaw provisions do not affect the liability of any director under applicable federal and state securities laws.

 

We are a development stage company and we expect to incur operating losses for the foreseeable future.

 

We were incorporated on June 12, 2008 and our business to date has been principally organizational activities. We have no way to evaluate the likelihood that our business will be successful. Potential investors should be aware of the difficulties normally encountered by start-up companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the business that we plan to undertake. These potential problems include, but are not limited to, additional costs and expenses that may exceed current estimates. We anticipate that we will incur increased operating expenses without realizing any revenues. We recognize that if business revenues are not forthcoming, we will not be able to continue business operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and if we are unsuccessful in addressing these risks, our business will most likely fail.

 

We have yet to earn continuous or sufficient revenue and our ability to sustain our operations is dependent on our ability to raise additional financing. There is substantial doubt about our ability to continue as a going concern.

 

We have accumulated net losses of $42,766,142 for the period from inception June 12, 2008 to July 31, 2019 and have not generated any revenues to date. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development of our business. These factors raise substantial doubt that we will be able to continue as a going concern. Our independent auditor has expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. We may have to liquidate our business and you may lose your investment. You should consider our auditor’s comments when determining if an investment in our company is suitable.

 

We may be unable to obtain additional capital that we may require to implement our business plan. This would restrict our ability to grow.

 

The proceeds from our financing efforts to date have provided us with a limited amount of working capital not sufficient to fund our proposed operations. We will require additional capital to continue to operate our business and our proposed operations. We may be unable to obtain additional capital as and when required.

 

Future acquisitions and future development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.

 

We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, the capital we have received to date is not sufficient to fund our operations going forward without obtaining additional capital financing.

  

8

 

 

Any additional capital raised through the sale of equity may dilute your ownership percentage. This could result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.

 

Our ability to obtain needed financing may be impaired by such factors as the capital markets generally, our status as a new enterprise without a demonstrated operating history or the retention or loss of key management. If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may be required to cease our operations.

 

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition.

 

The limited trading of our common stock may impair your ability to sell your shares. 

 

There has been no trading market for our common stock since our inception. The lack of trading of our common stock and the low volume of any future trading may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. Such factors may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration.

 

The market price of our common stock is likely to be highly volatile and subject to wide fluctuations. 

 

Assuming we are able to establish an active trading market for our common stock, the market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:

 

dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;
announcements of acquisitions or other business initiatives by our competitors;
market changes in the demand for products and services;
quarterly variations in our revenues and operating expenses;
changes in the valuation of similarly situated companies, both in our industry and in other industries;
changes in analysts’ estimates affecting us, our competitors or our industry;
additions and departures of key personnel;
fluctuations in interest rates and the availability of capital in the capital markets;

 

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and our results of operations and financial condition.

 

Our operating results may fluctuate significantly, and these fluctuations may cause our stock price to decline.

 

Our operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, costs that we incur, and other factors. If our results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline.

  

Applicable SEC rules governing the trading of “penny stocks” will limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.

 

Our common stock is presently considered to be a “penny stock” and is subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and which regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the FINRA system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such securities.

  

9

 

 

USE OF PROCEEDS

 

We will not receive any proceeds from the sale of the shares of our common stock by the selling shareholder. All proceeds from the sale of such shares will be for the account of the selling shareholder. We will pay for expenses of this offering, except that the selling shareholder will pay any broker discounts or commissions or equivalent expenses applicable to the sale of its shares. However, we will receive the sale price of any common stock we sell to the selling shareholder upon exercise of the Warrant. We expect to use the proceeds received from the exercise of the Warrant, if any, for general working capital purposes. However, the selling shareholder will be entitled to exercise the Warrant on a cashless basis if the shares of common stock underlying the Warrant are not then registered pursuant to an effective registration statement. If the selling shareholder exercises the Warrant on a cashless basis in whole or in part, then we will not receive proceeds from that exercise.

 

SELLING SHAREHOLDER

 

This prospectus relates to the offer and sale of 3,250,000 shares of our common stock by the selling shareholder identified below. The selling shareholder is and has not been an affiliate of ours.

 

The following table sets forth the name of the selling shareholder, the number of shares of common stock owned beneficially by it as of January 30, 2020, the number of shares which may be offered pursuant to this prospectus, and the number of shares and percentage of class to be owned by the selling shareholder after this offering. The selling shareholder may sell all, some or none of its shares in this offering. See “Plan of Distribution.” We will not receive any proceeds from the sale of the common stock by the selling shareholder. The selling shareholder has held any position or office or has had any other material relationship with us or any of our affiliates within the past three years other than as a result of its ownership of shares of equity securities. This information is based upon information provided by the selling shareholder. As the selling shareholder may offer all, some or none of its common stock, no definitive estimate as to the number of shares that will be held by the selling shareholder after this offering can be provided.

 

The number of shares set forth in the second column of the table represents an estimate, as of January 30, 2020, of the number of shares of common stock to be offered by the selling shareholder. The information set forth in the table assumes (i) conversion of principal amount of the Note and 10% interest for a period of six (6) months with a conversion price of $2.50 per share; and (ii) full exercise of the Warrant.

 

The actual number of shares of common stock issuable upon conversion of the Note and exercise of the Warrant is indeterminate, is subject to adjustment, and could be materially less or more than such estimated number depending on factors which cannot be predicted by us at this time, including, among other factors, the future market price of the common stock.

 

Pursuant to their terms, the Note and the Warrant are convertible or exercisable by the selling shareholder only to the extent that the number of shares of common stock thereby issuable, together with the number of shares of common stock owned by the selling shareholder and its affiliates (but not including shares of common stock underlying unconverted or unexercised options, warrants or convertible securities) would not exceed 9.99% of the then outstanding common stock as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934. Accordingly, the number of shares of common stock set forth in the table as beneficially owned by the selling shareholder before and after the offering may exceed the number of shares of common stock that it could own beneficially at any given time as a result of its ownership of the Note and the Warrant.

 

Except as set forth in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable. A person is considered the beneficial owner of securities that can be acquired within 60 days from the date of this prospectus through the exercise of any option, warrant or right. Shares of common stock subject to options, warrants or rights which are currently exercisable or exercisable within 60 days are considered outstanding for computing the ownership percentage of the person holding such options, warrants or rights, but are not considered outstanding for computing the ownership percentage of any other person.

  

10

 

 

The “Common Shares Beneficially Owned after Offering” column assumes the sale of all shares offered. The “Percentage of Common Shares Beneficially Owned after Offering” column is based on 37,482,835 shares of common stock outstanding as of January 30, 2020.

 

Name of Selling Shareholder   Shares of
Common Stock
Owned prior to
Offering
    Maximum
Number of
Shares of
Common
Stock to be
Offered
    Shares of
Common Stock
Owned after
Offering
    Percent of
Common Stock
Owned After
Offering
 
Triton Funds LP (1)(2)     3,300,000       3,250,000       0       0  

  

 

(1) The name of the natural person who has voting or investment control over the securities owned by Triton Funds LP is Ashkan Mapar.
(2)

Includes 3,000,000 shares of common stock potentially issuable upon conversion of the note, up to 250,000 shares of common stock issuable upon full exercise of the Warrant, and 50,000 shares held by Triton Funds LLC, the general partner of Triton Funds LP.

 

PLAN OF DISTRIBUTION

 

We are registering shares of our common stock, including the shares of common stock issuable upon conversion of the Note and upon exercise of the Warrant to permit resale of the shares of common stock by the holder of the Note and the Warrant from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the shares of common stock, although we may receive up to approximately $750,000 upon the full exercise of the Warrant. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

The selling shareholder may sell all or a portion of the common stock beneficially owned by it and offered hereby from time to time directly or through one or more underwriters, broker-dealers, or agents. If the common stock is sold through underwriters or broker-dealers, the selling shareholder will be responsible for underwriting discounts or commissions or agent’s commissions. The common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,

 

(1) on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale,

 

(2) in the over-the-counter market,

 

(3) in transactions otherwise than on these exchanges or systems or in the over-the-counter market,

 

(4) through the writing of options, whether such options are listed on an options exchange or otherwise, or

 

(5) through the settlement of short sales.

  

11

 

 

If the selling shareholder effects such transactions by selling shares of common stock to or through underwriters, broker-dealers, or agents, such underwriters, brokers-dealers, or agents may receive commissions in the form of discounts, concessions, or commissions from the selling shareholder or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions, or commissions as to particular underwriters, brokers-dealers, or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the common stock or otherwise, the selling shareholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the common stock in the course of hedging in positions they assume. The selling shareholder may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions, provided that the short sale is made after the registration statement is declared effective and a copy of this prospectus is delivered in connection with the short sale. The selling shareholder may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

 

The selling shareholder may pledge or grant a security interest in some or all of the shares of common stock owned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to the prospectus. The selling shareholder also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees, or other successors in interest will be the selling beneficial owners for purposes of the prospectus.

 

The selling shareholder and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commissions paid, or any discounts or concessions allowed to any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions, and other terms constituting compensation from the selling shareholder and any discounts, commissions, or concessions allowed or reallowed or paid to broker-dealers.

 

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and the selling shareholder and the company have complied with such exemption.

 

There can be no assurance that the selling shareholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

 

The selling shareholder and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling shareholder and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement estimated to be approximately $41,265 in total, including, without limitation, Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that the selling shareholder will pay all underwriting discounts and selling commissions, if any.

 

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

  

12

 

  

DESCRIPTION OF BUSINESS

 

Overview

 

Green Hygienics Holdings Inc. (“we” or the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources Inc. and issued 55,000 shares of common stock on June 12, 2008 (after accounting for the forward and reverse splits detailed below) for cash of $20,000.

 

During 2008, the Company staked one mineral claim located 100 km northwest of Vancouver, British Columbia and acquired a molybdenum property comprised of one mineral claim located approximately 35 kilometers north of Vancouver, British Columbia. Both properties have since been abandoned by the Company.

 

On June 30, 2010 the Company changed its name to Takedown Entertainment Inc and forward split its issued shares of common stock on the basis of five new shares for one old share (5:1) on the same date.

 

During the years 2009 to June 3, 2012, the Company was involved in the acquisition, production, licensing, marketing and distribution of mixed martial arts (MMA) content, programming and merchandising for North American and International markets.

 

On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc. and, on the same date, reverse split both its issued and outstanding shares of common stock on a two thousand old for one new basis (1:2,000). On June 1, 2015, the company completed a reverse split on its issued shares of common stock on the basis of two hundred old for one new basis (1:200).

 

On April 16, 2015, Wilderness Custom Exteriors Ltd., a construction company from Kelowna, British Columbia, specializing in the construction of cannabis growing operations, acquired the $189,150 Promissory Note from Mr. David Harris, and acquired the $145,000 Promissory Note from Zircon Ventures Inc. (hereinafter collectively referred to as the Notes.) On June 2, 2015, the Company received instructions from Wilderness Custom Exteriors Ltd. to accept as payment in full of the Notes including accrued interest, by issuing 30,000,000 shares of common stock. On June 3, 2015, the Company issued 15,000,000 shares of common stock to Wilderness Custom Exteriors Ltd. and 15,000,000 shares of common stock to Richard Powell, a businessman located in Kelowna, British Columbia. On June 3, 2015, through the expertise of its new management, Mr. Rick Powell and Mr. Jim Loseth, we entered into the commercial indoor cultivation business specializing in the construction of cannabis cultivation facilities and the management thereof.

 

On June 1, 2017, the Company accepted the resignations of Rick Powell, Jim Loseth and David Ashby as Directors and Officers of the Company and the Company accepted the appointment of Ronald Loudoun as President, Secretary, Treasurer, Interim Chief Financial Officer and Director of the Company.

 

On October 30, 2018, Rick Powell transferred 13,500,000 common shares of the Company by way of a Gifting Agreement to Alita Capital Inc., a company controlled by Ronald Loudoun, and on October 30th, 2018, Wilderness Custom Exteriors Ltd. transferred 9,000,000 common shares by way of a Gifting Agreement to Alita Capital Inc.

 

On June 14, 2019 the Company secured from the County of San Diego Department of Agriculture, Weights and Measures a registration for industrial hemp cultivation as a grower. The Company intention is to be an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for the purpose of extracting cannabidiol (“CBD”).

 

We had $3,253 in cash reserves as at July 31, 2019. We anticipate that we will incur $240,000 for administrative expenses, including professional legal and accounting expenses associated with compliance with our periodic reporting requirements over the next twelve months.

 

We are contemplating raising additional capital to finance our business operations. No final decisions regarding financing have been made at this time. It is anticipated that funding for the Company will come from one or more of the following means: engaging in an offering of our stock; engaging in borrowing; locating a joint venture partner or partners.

  

13

 

 

Recent Developments

 

Effective April 29, 2019, the Company entered into a definitive agreement with Coastal Labs, LLC to acquire all of the assets of Coastal Labs. The total consideration for the assets would be, at the Company’s election, $3,000,000 or a total of 2,000,000 shares of the Company’s common stock issuable over five years. In addition, the Company would enter into consulting agreements with each individual member of Coastal, or such entity as each respective member may designate, that sets forth ongoing compensation to each individual member of Coastal. The parties further agreed to form a new entity or arrange for the transfer of ownership of Coastal to a wholly-owned subsidiary of the Company to hold the acquired assets, to enter into an operating agreement that governs the operation of the assets, and to establish a board of directors for the subsidiary of up to 6 members, of whom 3, or half, whichever is greater, shall be nominees of Coastal. Further, the Company would assume all of Coastal’s contracts relating to sales and distribution of the products. The acquisition of the assets of Coastal Labs has not closed, and either party may terminate the agreement at any time.

 

In June, 2019, the Company formed two wholly owned subsidiaries, Coastal Labs NC LLC and Green Hygienics NC LLC for the purpose of registering as an industrial hemp processor and cultivator in the State of North Carolina pursuant to the North Carolina Industrial Hemp Pilot Program.

 

On June 10, 2019, the Company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five-year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes. Since the issuance of the purchase order, the Company and US Tobacco De Mexico determined to renegotiate the purchase order due to several reasons, including production capacity and market price fluctuation. These negotiations are ongoing.

 

On June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures, a grower registration for industrial hemp cultivation.

 

On July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina. The licenses were granted to the Company’s newly formed subsidiary, Coastal Labs NC LLC, by the North Carolina Industrial Hemp Commission. The Company’s second subsidiary in the state is Green Hygienics NC LLC, which will be partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next year’s cultivation.

 

On August 26, 2019, the Company the completed the acquisition of 824 acres of land known as the Potrero Ranch Property, located near San Diego, California for a purchase price of $4 million. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses. The Company entered into an agreement payable with the seller of the property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. This debt is secured by a promissory note secured by a deed of trust on the real property. The maturity date of the debt is August 23, 2024. The Company also entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. This debt is also secured by a promissory note secured by a second charge on the deed of trust on the real property. The maturity date of this debt is August 15, 2024. To date, the Company has spent $184,342 in property and building improvements and has acquired over $300,000 worth of production equipment.

 

In October 2019, the Company entered into an agreement to purchase the real property located at 13795 Blaisdell Place, Poway, California 92064, which includes a building containing approximately 15,048 square feet of R&D space on a 0.95 acre lot, for $4,000,000, of which $2,000,000 is payable in cash or common stock of the Company, and of which $2,000,000 would be financed pursuant to a promissory note and secured by a deed of trust on the property. The Company has until April 2020 to obtain the necessary financing to consummate the transaction.

  

14

 

 

Corporate Information

 

Our executive offices are located at 13795 Blaisdell Place, Suite 202, Poway, California 92064. Our telephone number is (855) 802-0299 and our Internet address is www.greenhygienicsholdings.com. The information on, or that may be, accessed from our website is not part of this Prospectus.

 

BANKRUPTCY OR SIMILAR PROCEEDINGS

 

We have not been the subject of a bankruptcy, receivership or similar proceedings.

 

PRODUCTS AND SERVICES

 

During the years 2009 to June 3, 2015, the Company was involved in the acquisition, production, licensing, marketing and distribution of mixed martial arts (MMA) content, programming and merchandising for North American and International markets. The Company was never able to close asset acquisition agreements due to a lack of funding.

 

On June 3, 2015, through the expertise of its new management, we entered into the commercial indoor cannabis cultivation industry and were never able to complete funding.

 

On June 1, 2017, new management shifted its focus to hemp cultivation and became an innovative, full-scope, science-based premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for the purpose of extracting cannabidiol (“CBD”).

 

On August 24, 2019, the Company executed a Purchase and Sale Agreement to acquire the 824 Potrero Ranch Property near San Diego, California. The Company will utilize the land and building for industrial hemp for CBD cultivation. The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products, creating trusted global consumer brands, developing valuable IP and growing rapidly through strategic acquisitions and development.

 

MARKETS AND CUSTOMERS

 

Industries as diverse as cosmetics, food and beverage and pharmaceuticals are potential clients for the sale and purchase of CBD (cannabidiol) derived from industrial hemp. Licensed dispensaries, pharmacies and general retail market which includes cafes, smoke shops, grocery stores are buyers for products containing CBD derived from industrial hemp.

 

COMPETITION

 

Competition in the hemp industry is increasing steadily. Some of the biggest names in the hemp industry expect to make their presence known in the global market.

 

REGULATORY CONSIDERATIONS

 

The Hemp Farming Act of 2018 removed hemp from the list of Schedule 1 controlled substances (defined as less than 0.3% THC), making it an ordinary agricultural commodity. There is the potential for the FDA to introduce new regulations for the industry.

 

EMPLOYEES

  

The Company currently has 50 plus part time and full-time employees and consultants, including those working at the Potrero Ranch property.

 

RESEARCH AND DEVELOPMENT EXPENDITURES

 

We have not incurred any research or development expenditures since our incorporation.

 

PATENTS AND TRADEMARKS

 

We do not own, either legally or beneficially, any patents or trademarks.

 

15

 

   

DESCRIPTION OF PROPERTY

 

We currently own 824 acres of land referred to as the Potrero Ranch Property near San Diego, California, which includes some out buildings. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses. The Company entered into an agreement payable with the seller of the property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. This debt is secured by a promissory note secured by a deed of trust on the real property. The maturity date of the debt is August 23, 2024. The Company also entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. This debt is also secured by a promissory note secured by a second charge on the deed of trust on the real property. The maturity date of this debt is August 15, 2024. To date, the Company has spent $184,342 in property and building improvements and has acquired over $300,000 worth of production equipment.

 

In October 2019, the Company entered into an agreement to purchase the real property located at 13795 Blaisdell Place, Poway, California 92064, which includes a building containing approximately 15,048 square feet of R&D space on a 0.95 acre lot, for $4,000,000, of which $2,000,000 is payable in cash or common stock of the Company, and of which $2,000,000 would be financed pursuant to a promissory note and secured by a deed of trust on the property. The Company has until April 2020 to obtain the necessary financing to consummate the transaction. The Company currently uses a portion of this facility for its corporate offices.

  

LEGAL PROCEEDINGS

 

We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.

  

16

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information as of January 30, 2020 as to each person or group who is known to us to be the beneficial owner of more than 5% of our outstanding voting securities and as to the security and percentage ownership of each of our executive officers and directors and of all of our officers and directors as a group.  As of January 30, 2020, we had 37,482,835 shares of common stock outstanding.

 

Beneficial ownership is determined under the rules of the Securities and Exchange Commission and generally includes voting or investment power over securities.  Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.

 

Shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of the date of this prospectus are considered outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

Name And Address (1)   Number Of
Shares
Beneficially
Owned
    Percentage
Owned
 
Officers and Directors:            
             
Ron Loudoun (2)     22,512,320       60.06 %
Jeff Palumbo     500,000       *  
Kyle MacKinnon (3)     100,000       *  
Hamid Rowshan DC     500,000       *  
Paymon Omidi DC     500,000       *  
Jerry Halamuda (4)     125,000       *  
John Gildea (5)     125,000       *  
William Creekmur (nominee) (6)     100,000       *  
                 
All directors (including nominees) and officers as a group (8 persons)     23,012,320       64.49 %

  

 

* Less than 1%.

(1) Unless otherwise noted, the address is c/o Green Hygienics Holdings Inc., 13795 Blaisdell Place, Suite 202, Poway, California 92064.
(2) Includes 22,512,320 shares held by Alita Capital, Inc., of which Mr. Loudoun is the controlling shareholder.

(3) Includes 100,000 shares to which Mr. MacKinnon has a right to acquire within 60 days of the date of this prospectus.
(4) Includes 125,000 shares to which Mr. Halamuda has a right to acquire within 60 days of the date of this prospectus
(5) Includes 125,000 shares to which Mr. Gildea has a right to acquire within 60 days of the date of this prospectus
(6)

Includes 100,000 shares to which Mr. Creekmur has a right to acquire within 60 days of the date of this prospectus upon appointment to the board of directors.

  

17

 

 

DIRECTORS AND EXECUTIVE OFFICERS

 

Set forth below is certain information concerning our directors and executive officers:

 

Name   Age   Position
Ronald Loudoun   56   Chief Executive Officer, President and director
Jeff Palumbo   39   Chief Technology Officer
Kyle MacKinnon    39    Chief Operating Officer
Hamid Rowshan DC   54   Chief Development Officer
Paymon Omidi DC   59   Business Development Officer
Jerry Halamuda    69    Senior Vice President, Agriculture Division
John Gildea   48   Senior Vice President, Corporate Development
William Creekmur   58   Nominee for Director

 

Ronald Loudoun

President Chief Executive Officer, Chief Financial Officer and director

 

Mr. Loudoun has served as our President, Chief Executive Officer, Chief Financial Officer and director since June 1, 2017. Mr. Loudoun is a successful business strategist with more than 25 years of experience as a real estate agent and in business administration. For the seven years prior to this, Mr. Loudoun was a founder and director of Archer Cleantech Inc., a renewable energy project company based in Canada and pursuing projects abroad. The responsibilities included sourcing and identifying renewable project opportunities and negotiating related land leases and advancing the associated business development. Prior to this time, Mr. Loudoun was a licensed realtor historically and was involved in commercial property sales and development. In addition, from December 5, 2017 through January 30, 2018, for a period of fifty-five days, Mr. Loudoun served as an officer and director of Verde Science, Inc. Mr. Loudoun graduated with a Diploma of Administrative Management from BCIT in 1983 with an elective in Real Estate. He possesses an excellent background in new business development, multi-site operations, performance/quality improvement, administration and long-term planning. He has maintained a longstanding interest in both communicating the need for and sourcing new methods for conscious minded development and growth. Recognized as an astute and persuasive negotiator, Mr. Loudoun has a reputation for honesty and integrity and has the ability to successfully balance the risks of continual change and innovation through disciplined implementation. Capitalizing on his exceptional leadership qualities, out of the box thinking and real estate development expertise, Ron continues to develop innovative ideas that add significant value to any organization in which he is involved.

 

Jeff Palumbo

Chief Technology Officer

 

Mr. Palumbo has served as our Chief Technology Officer since August 30, 2018. Mr. Palumbo is an active entrepreneur with knowledge of technology and a passion for philanthropy which has led to his success in creating multiple platforms that empower publishers and merchants and engage consumers. For the past 20 years, he has extensive experience starting companies in the areas of entertainment, live streaming, augmented reality, virtual reality, development and Internet marketing.  Mr. Palumbo is the founder of Y!RM/AMAZE, a celebrity fan engagement platform that leverages live streaming and augmented reality technologies to connect celebrities and fans together while also raising money for worthy causes. He has also developed platforms for several Fortune 1000 companies and continues to provide them with technology guidance. Mr. Palumbo is a mentor at a Top 10 U.S. technology incubator and another Virginia start-up community where he advises early-stage companies.

 

Kyle MacKinnon

Chief Operating Officer

 

Mr. MacKinnon has served as our Chief Operating Officer since November 15, 2019. Bringing to the table a multi-faceted and in-depth understanding of the CBD Industry, including vast knowledge of cannabis processing, Kyle will assist the company in all facets of day to day business operations. Previously, as the Business Development Manager for Advanced Extraction, a leader in CO2 Supercritical Fluid extraction systems, Kyle built relationships with some of the largest Cannabis companies in the world and helped to guide the company through rapid growth and regulatory challenges in the technology and processing sectors of the Cannabis industry.  Mr. MacKinnon has been a licensed realtor in Toronto and has managed a personal real estate portfolio with holdings in multiple Countries.  He has also owned his own import business, Danbury Imports.  Kyle is a graduate of St. Mary's University in Halifax, Nova Scotia, Canada.  He graduated with a Bachelor of Commerce Degree and was the recipient of the Entrepreneur of the Year Award.

 

18

 

 

Hamid Rowshan DC

Chief Development Officer

 

Dr. Rowshan has served as our Chief Development Officer since April 1, 2019. Dr. Rowshan has served as president and CEO of over numerous companies in the areas of cannabis, research, medical and chiropractic, real-estate, import and export, venture capital investments, stock market and investment, investment advisory board, capital investing, development and construction, and is a published author. Since 2014, Dr. Rowshan has participated in various verticals of the cannabis industry - including consultation, design and management of cannabis facilities, cultivation and production operations, and the production of quality oil and vapes – and continuously studies the effect of cannabis in a wide range of mental and physical ailments.

 

Paymon Omidi DC

Business Development Officer

 

Dr. Omidi has served as our Business Development Officer since April 1, 2019. Dr. Omidi is an international business consultant and business developer, an expert in new market penetration, and a retired doctor of chiropractic and nutrition. After a decade owning and operating three multi-specialty clinics, Dr. Omidi in 1996 established a food manufacturing plant in Tijuana, Mexico, along with four Japanese and Asian Fusion restaurants. Following the sale of these establishments in 2004, Dr. Omidi returned to health care as a consultant for organizations such as Pacific West Surgical Centers, where he nearly tripled the company’s annual revenue. From September 2008 to March 2013, Dr. Omidi assisted Vital Funds, a financial consulting firm, in raising funds for clients in various business sectors around the world. For the last five years, Dr. Omidi has traveled internationally, consulting on joint ventures, new market and market penetration strategies, location and site planning for major construction projects, and green energy.

 

Jerry Halamuda

Senior Vice President, Agriculture Division

 

Mr. Halamuda has served as our Senior Vice President, Agriculture Division, since November 15, 2019. Over his extensive career in the agri/horticulture space, Mr. Halamuda has founded, managed and operated multiple successful companies. The most prominent of these businesses was Color Spot Nurseries, which he founded and acted as CEO, COO and president over a span of 37 years. Color Spot operated over 6,000 acres in multiple states, including 20 million feet of greenhouses, and employed a staff of over 5,000, all of which led to a business with an annual turnover in excess of $300 million. Halamuda brings a wealth of industry and management experience; his knowledge and expertise at scaling businesses will be a key component as he leads the growth of GRYN’s Agriculture Division.

 

John Gildea

Senior Vice President, Corporate Development

 

Mr. Gildea has served as our Senior Vice President, Corporate Development, since November 15, 2019. Mr. Gildea has more than 20 years of experience in the public and private markets. His expertise includes structuring, negotiating and effecting private and public financings and mergers and acquisitions, as well as marketing, public and investor relations. Through the course of his career, Gildea established a trusted and extensive network of equity and capital partners, with whom he has maintained successful and proven relationships over the years, resulting in multiple uplistings to higher exchanges and capital raises.

 

William Creekmur MBA

Nominee for Director 

 

Mr. Creekmur is a nominee for our board of directors. Mr. Creekmur is a US Navy veteran, and he brings in excess of 25 years of investment, banking, and comprehensive wealth management experience to Green Hygienics Holdings Inc. His career focus and specialty has been the articulation and delivery of sophisticated investment, lending, risk management, and financial planning solutions to his clients, for the purpose of helping them preserve, protect and enhance their wealth. Additionally, he offers expertise in the use and understanding of alternative investments: managed futures, alternative fixed-income, venture ‎capital, and private equity participation. Mr. Creekmur has held leadership roles on Best Practices and Alternative Investments Committees, and over his career, he has served with Comerica Bank, Mutual of Omaha Bank, Charles Schwab and Co., Inc., and his own registered investment advisory firm.

 

Director Qualifications

 

We considered Mr. Loudoun’s prior experience as a successful business strategist and in real estate, including his prior experience with Archer Cleantech, Inc., other renewable project opportunities, as well as experience with other start-up businesses and real estate development as important factors in concluding that he was qualified to serve as one of our directors.

 

We considered Mr. Creekmur’s prior experience in commercial and investment banking and wealth management, including his experience with large financial institutions and in operating a registered investment advisory firm, as well as his independence as a prospective director as important factors in concluding that he was qualified to be nominated to serve as one of our directors.

 

19

 

 

Advisory Board

 

The Company has established an advisory board to advise and assist our management in pursuing the Company’s strategy to advance in the hemp industry. The advisory board consists of the following individuals:

 

Bipin Patel BSc MSc PhD MBA

 

Dr. Patel is a biotech pharma entrepreneur with over 20 years of experience and a track record for building value across early-stage drug discovery, development and commercialization. Based in Cambridge, U.K., and highly regarded for his work in international pharmaceutical business development, Dr. Patel has established an extensive global big-pharma network across the U.S., Europe, Japan and China. He specializes in surfacing and shaping opportunities, securing finance, and driving assets to conclusion. He has held senior roles including CEO, CSO, COO, strategic council and board of directors, and has driven various initiatives such as drug discovery, preclinical and clinical development in numerous fields within the biotech industry. Dr. Patel has a strong business and commercial acumen with an aptitude for deal making and partnering. 

 

Kiarash Mirkia MD MBA FACS

 

Dr. Mirkia is currently an assistant professor of surgery at Touro University Nevada, a practicing surgeon, and owner and operator of Mirkia IV PLLC, a mobile intravenous hydration company. He is a Fellow of American College of Surgeons (FACS) and is board certified by the American Board of Surgery for surgery recertified, surgical critical care and general surgery. Fluent in German and Farsi, Dr. Mirkia is a speaker and international lecturer; has contributed to seven medical publications; is a member of the American Hernia Society (AHS), the Association of Academic Surgery (AAS), and the American College of Surgeons (ACS); and has participated in the clinical research and bench research for a number of studies.

 

Edwin Stoughton

 

Mr. Stoughton has a 40-year history of proven success in sales, marketing, construction management, development and consulting to management groups. He is a skilled executive with extensive direct experience in team building, constructive conflict resolution, and consensus management, which helped him build highly successful construction and development companies. Stoughton is currently the vice president and a current principal of Demcon Concrete Contractors Inc.

 

Askhan Mapar

 

Mr. Mapar is a principal of Triton Funds LLC, the general partner of Triton Funds LP. He is a student at the University of California San Diego and a candidate for a Bachelor of Arts in International Business. He is the Head of Investments at the Student Equities Trading Club and Vice President of Research & Education at the UCSD Undergraduate Investment Society. He has previously been an investment banking analyst intern at CapTarget, LLC and a wealth management intern at UBS.

 

Involvement in Certain Legal Proceedings

 

None of our directors or executive officers has, during the past ten years:

 

has had any bankruptcy petition filed by or against any business of which he was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;

 

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

 

been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities;

 

been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

been subject or a party to or any other disclosable event required by Item 401(f) of Regulation S-K.

 

Family Relationships

 

None.

 

Stockholders can send communications to the Board of Directors by sending a certified or registered letter to the Chairman of the Board, care of the President, at our main business address set forth above. Communications that are threatening, illegal, or similarly inappropriate, and advertisements, solicitations for periodical or other subscriptions, and other similar communications will generally not be forwarded to the Chairman.

 

20

 

 

EXECUTIVE COMPENSATION

 

The following table sets forth the compensation paid to our executive officers for services rendered during the fiscal years ended July 31, 2019, and 2018.

  

    Summary Compensation Table
                    All Other        
Name and Position   Year   Salary     Bonus     Compensation (1)     Total ($)  
Ronald Loudoun   2019   $ --     $ --     $ 30,000     $ 30,000  
President, Chief Executive Officer and
Chief Financial Officer
  2018   $ --       --     $ 30,000     $ 30,000  

 

All Other Compensation

 

Mr. Loudoun earned $30,000 in consulting fees during each the fiscal years ended July 31, 2019 and 2018.

 

Outstanding Equity Awards

 

There were no outstanding equity awards as of the year ended July 31, 2019.

 

Employment Agreements

 

We have no employment agreement with Ronald Loudoun. However, on August 1, 2019, we entered into a consulting agreement with Mr. Loudoun to serve as President and Chief Executive Officer.  The agreement is for an initial six month term, to be re-evaluated after six months, and provides for (i) an annual allocation of 250,000 options (priced at $0.50 per share with a term of three years) or common shares, and (ii) a monthly base fee of $7,500 per month during the term of the agreement, subject to adjustment on a quarterly basis by the Company and Mr. Loudoun. Mr. Loudoun is eligible to receive annual bonuses, in cash or in common shares, at the discretion of the board of directors.  The agreement also provides for reimbursement for all reasonable travel and other out-of-pocket expenses incurred in connection with his services.

 

Retirement Plans

 

There are no annuity, pension or retirement benefits proposed to be paid to officers or directors or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the company or any of its subsidiaries, if any.

 

Compensation of Directors

 

Currently, directors receive no compensation for their services on our Board. All directors will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with attending board of director and committee meetings provided that we have the resources to pay these expenses.

 

Code of Ethics

 

We have adopted a code of ethics that applies to the principal executive officer and principal financial and accounting officer.  We will provide to any person without charge, upon request, a copy of our code of ethics.  Requests may be directed to our principal executive offices at 1805 SE Martin Luther King Jr. Blvd., Portland, Oregon 97214.

  

21

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

None of our directors, officers, any proposed nominee for election as a director, any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, any promoter, or any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us, except as follows:

 

(a) As at October 31, 2019, the Company owes $56,824 (July 31, 2019 - $56,824) to a company controlled by the CEO of the Company. The debt bears interest at 5% per annum, is unsecured, and is due on demand. As at October 31, 2019, accrued interest of $15,541 (July 31, 2019 - $14,825) has been included in amounts due to related parties.

 

(b) As at October 31, 2019, the Company owes $1,390,275 (July 31, 2019 - $696,074) to a company controlled by the CEO of the Company. The debt includes funds advanced to the Company for business development purposes, is non-interest bearing, unsecured, and due on demand.

 

(c) As at October 31, 2019, the Company owes $22,500 (July 31, 2019 - $nil) to the CEO of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(d) As at October 31, 2019, the Company owes $35,000 (July 31, 2019 - $27,500) to a former director of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(e) As at October 31, 2019, the Company owes $22,500 (July 31, 2019 - $15,000) to the CEO of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(f) As at October 31, 2019, the Company owes $22,500 (July 31, 2019 - $15,000) to the President of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(g) As at October 31, 2019, the Company owes $7,500 (July 31, 2019 - $nil) to the CTO of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(i) During the quarter ended October 31, 2019, the Company incurred $nil (2018 - $7,500) in consulting fees to a company controlled by the CEO of the Company.

 

(h) As at October 31, 2019, the Company owes $7,833 (July 31, 2019 - $nil) to the Chief Agricultural Operations Manager of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(j) During the quarter ended October 31, 2019, the Company incurred $22,500 (2018 - $nil) in consulting fees to the CEO of the Company.

 

(k) During the quarter ended October 31, 2019, the Company incurred $7,500 (2018 - $7,500) in consulting fees to the CTO of the Company.

 

(l) During the quarter ended October 31, 2019, the Company incurred $7,500 (2018 - $7,500) in consulting fees to a VP and Director of the Company.

 

(m) During the quarter ended October 31, 2019, the Company incurred $22,500 (2018 - $nil) in consulting fees to the President of a subsidiary of the Company.

 

(n) During the quarter ended October 31, 2019, the Company incurred $22,500 (2018 - $nil) in consulting fees to the CEO of a subsidiary of the Company.

 

(o) Imputed interest of $18,633 for the three months ended October 31, 2019 and $22,009 for the year ended July 31, 2019 has been recorded for the above related party debts.

 

Consistent with Section 78.140 of the Nevada Revised Statutes, it is our current policy that all transactions between us and our officers, directors and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are approved by vote of the stockholders, or are fair to us as a corporation as of the time it is authorized, approved, or ratified by the board. We will conduct an appropriate review of all related party transactions on an ongoing basis, and, where appropriate, we will utilize our audit committee for the review of potential conflicts of interest.

 

Director Independence

 

Our Board of Directors has determined that none of our directors are “independent” as defined under the standards set forth in Section 803 of the NYSE American LLC Company Guide.  In making this determination, the Board of Directors considered all transactions set forth under “Certain Relationships and Related Transactions” above.

  

22

 

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

 

Our common stock trades on the OTC Markets (QB Marketplace Tier) under the symbol “GRYN.” Very limited trading of our common stock has occurred during the past two years; therefore, only limited historical price information is available. The following table sets forth the high and low closing bid prices of our common stock (USD) for the last two fiscal years, as reported by OTC Markets Group Inc. and represents inter dealer quotations, without retail mark-up, mark-down or commission and may not be reflective of actual transactions:

 

We consider our stock to be “thinly traded” and any reported sale prices may not be a true market-based valuation of our stock.  Some of the bid quotations from the OTC Bulletin Board set forth below may reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

2019 (OTC Markets)   High Bid     Low Bid  
First quarter (ended October 31, 2018)   $ 0.45     $ 0.45  
Second quarter (ended January 31, 2019)     0.51       0.51  
Third quarter (ended April 30, 2019)     0.72       0.72  
Fourth quarter (ended July 31, 2019)     1.54       1.30  

 

2018 (OTC Markets)   High Bid     Low Bid  
First quarter (ended October 31, 2017)   $ 0.01     $ 0.01  
Second quarter (ended January 31, 2018)     0.03       0.03  
Third quarter (ended April 30, 2018)     0.08       0.08  
Fourth quarter (ended July 31, 2018)     0.18       0.16  

  

Shareholders

 

Our shares of common stock are issued in registered form. The registrar and transfer agent for our shares of common stock is VStock Transfer, LLC, 18 Lafayette Place, Woodmere, New York 11598 (Telephone: (212) 828-8436).

 

On January 30, 2020, the shareholders’ list of our shares of common stock showed 50 registered holders of our shares of common stock and 37,482,835 shares of common stock outstanding. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of shares of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

 

Dividend Policy

 

We have not paid cash dividends on our common stock since our inception and we do not contemplate paying dividends in the foreseeable future.

 

Securities Authorized for Issuance Under Equity Compensation Plans.

  

On September 2, 2011, our board of directors adopted the 2011 Stock Plan, which permits the Company to issue up to 15,000,000 shares of our common stock to directors, officers, employees, and consultants of the Company. The purpose of this plan is to secure for the Company and its stockholders the benefits arising from capital stock ownership by employees, officers and directors of, and consultants or advisors to, the Company and its subsidiary corporations who are expected to contribute to the Company’s future growth and success. No securities have been issued under this plan.

 

23

 

 

DESCRIPTION OF SECURITIES

 

Authorized Shares of Capital Stock

 

Our authorized capital stock consists of 375,000,000 shares of common stock, par value $0.001 per share, of which 37,482,835 shares are outstanding as of January 30, 2020.

 

Common Stock

 

We are authorized by our Articles of Incorporation to issue 375,000,000 shares of common stock, $0.001 par value.

 

As of January 30, 2020, we had issued and outstanding 37,482,835 shares of common stock. Holders of our common stock are entitled to one vote per share on all matters subject to stockholder vote. If the Board of Directors were to declare a dividend out of funds legally available therefore, all of the outstanding shares of common stock would be entitled to receive such dividend ratably. We have never declared dividends and we do not intend to declare dividends in the foreseeable future. If our business was liquidated or dissolved, holders of shares of common stock would be entitled to share ratably in assets remaining after satisfaction of our liabilities. The holders of shares of common stock have no preemptive, conversion, subscription or cumulative voting rights.

 

Convertible Promissory Note

 

On December 31, 2019, we issued a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per share. The Note is currently vested only as to an aggregate principal amount of $125,000. The remainder of the Note (as to an aggregate principal amount of $625,000) shall vest if, and only if, the Holder, Triton Funds, LP (the “Buyer”), pays the purchase price balance of $500,000 upon this registration statement being declared effective by the Securities & Exchange Commission.

 

The Note can be prepaid at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”); provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75% of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.

 

On January 8, 2020, we entered into an Amending Agreement with the Buyer, pursuant to which the parties agreed that the issue date of the Note was December 31, 2019, the maturity date of the Note is June 30, 2020, and that the deadline for the filing of the registration statement is January 31, 2020.

 

Warrant

 

On December 31, 2019, we issued a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The Warrant is currently vested only as to the right to purchase 41,667 shares. The remainder of the Warrant (as to the right to purchase up to 203,333 shares) shall vest if, and only if, the Buyer pays the purchase price balance of $500,000 upon this registration statement being declared effective by the Securities & Exchange Commission.

 

Warrant holders are not entitled to vote, receive dividends, or exercise any of the rights of a stockholder of the Company for any purpose until the Warrant have been duly exercised and payment of the purchase price has been made. The Warrants are issued in unregistered form and may be presented for transfer, exchange, or exercise at the corporate office of the Company.

 

The Warrant may be exercised on a “cashless” basis if there is not an effective registration statement for the registration of the secondary offering and resale of the shares issuable upon exercise of the Warrant at the time of exercise. If the Warrant is partially exercised, a new Warrant for the remaining number of such shares will be issued upon surrender of the Warrant. There will be no fractional share exercise.

  

24

 

 

Registration Rights

 

We agreed to file a registration statement with the Securities and Exchange Commission for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant on or before January 31, 2020 and to have the registration statement declared effective by the SEC at the earliest possible date.

 

Dividends

 

We do not anticipate the payment of cash dividends on its common stock in the foreseeable future.

 

Anti-takeover Effects of Our Articles of Incorporation and Bylaws

 

Our Articles of Incorporation and bylaws contain certain provisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of us or changing its board of directors and management.

 

The holders of our common stock do not have cumulative voting rights in the election of our directors. The combination of the present ownership by a few stockholders of a significant portion of our issued and outstanding common stock and lack of cumulative voting makes it more difficult for other stockholders to replace our board of directors or for a third party to obtain control of us by replacing its board of directors.

 

The authorization of classes of preferred stock with either specified voting rights or rights providing for the approval of extraordinary corporate action could be used to create voting impediments or to frustrate persons seeking to effect a merger or to otherwise gain control of the Company by diluting their stock ownership.

 

Nevada Anti-Takeover laws

 

Business Combinations

 

The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the NRS, prohibit a Nevada corporation with at least 200 stockholders from engaging in various “combination” transactions with any interested stockholder: for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; or after the expiration of the three-year period, unless:

 

  the transaction is approved by the board of directors or a majority of the voting power held by disinterested stockholders, or

 

  if the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher.

 

A “combination” is defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to five per cent or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to five per cent or more of the aggregate market value of all outstanding shares of the corporation, or (c) ten per cent or more of the earning power or net income of the corporation.

  

25

 

 

In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) ten per cent or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire our company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

 

Control Share Acquisitions.

 

The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS, which apply only to Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada, prohibit an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.

 

Transfer Agent

 

The registrar and transfer agent for our shares of common stock is VStock Transfer, LLC, 18 Lafayette Place, Woodmere, New York 11598 (Telephone: (212) 828-8436).

  

LEGAL MATTERS

 

The validity of the common stock offered by this prospectus will be passed upon for us by Indeglia PC, Marina del Rey, California.  

 

EXPERTS

 

The consolidated financial statements of Green Hygienics Holdings Inc. included in this prospectus and in the registration statement have been audited by Saturna Group Chartered Professional Accountants LLP and by M&K CPAs, both independent registered public accounting firms, to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance on such report, given the authority of said firms as experts in auditing and accounting.

  

26

 

 

AVAILABLE INFORMATION

 

We are filing with the SEC this registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedule thereto, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information regarding our common stock and our company, please review the registration statement, including exhibits, schedules and reports filed as a part thereof. Statements in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement, set forth the material terms of such contract or other document but are not necessarily complete, and in each instance reference is made to the copy of such document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.

 

We are also subject to the informational requirements of the Exchange Act which requires us to file reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information along with the registration statement, including the exhibits and schedules thereto, may be inspected at public reference facilities of the SEC at 100 F Street N.E., Washington D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC at prescribed rates. You may call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. Because we file documents electronically with the SEC, you may also obtain this information by visiting the SEC’s Internet website at http://www.sec.gov.

  

27

 

  

INDEX TO FINANCIAL STATEMENTS

 

GREEN HYGIENICS HOLDINGS INC.

  

  Page
Audited Statements  
Report of Independent Registered Public Accounting Firm F-2
Report of Independent Registered Public Accounting Firm F-3
Consolidated Balance Sheets as of July 31, 2019 and 2018 F-4
Consolidated Statements of Operations for the years ended July 31, 2019 and 2018 F-5
Consolidated Statements of Stockholders’ Deficit as of July 31, 2019 and 2018 F-6
Consolidated Statements of Cash Flows for the years ended July 31, 2019 and 2018 F-7
Notes to Consolidated Financial Statements F-8
   
Unaudited Statements:  
Consolidated Balance Sheets as of October 31, 2019 and July 31, 2019 F-15
Consolidated Statements of Operations for the three months ended October 31, 2019 and 2018 F-16
Consolidated Statements of Cash Flows for the three months ended October 31, 2019 and 2018 F-17
Consolidated Statements of Stockholders’ Deficit as of October 31, 2019 F-18
Notes to Unaudited Consolidated Financial Statements F-19

 

F-1

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Green Hygienics Holdings, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of Green Hygienics Holdings, Inc. (the Company) as of July 31, 2019 and the related statement of operations, statement of stockholders’ equity, and statement of cash flows for the year ending July 31, 2019, and the related notes and schedules (collectively referred to as the financial statements). The financial statements of Green Hygienics, Inc. as of July 31, 2018, were audited by other auditors whose report dated November 8, 2018 expressed an unqualified opinion on those statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2019, and the results of its operations and its cash flows, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ M&K CPAS, PLLC  

 

We have served as the Company’s auditor since 2019.

Houston, TX

 

November 13, 2019

 

F-2

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of Green Hygienics Holdings Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheet of Green Hygienics Holdings Inc. (the “Company”) as of July 31, 2018, and the related statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year then ended and related notes (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at July 31, 2018, and the results of their operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph Regarding Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated any revenues, has a working capital deficit, and has incurred significant operating losses and negative cash flows from operations since inception. As at July 31, 2018, the Company had a working capital deficit of $340,610 and an accumulated deficit of $40,922,248. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audit, we are required to obtain an understanding of the Company’s internal controls over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/s/ SATURNA GROUP CHARTERED PROFESSIONAL ACCOUNTANTS LLP  

 

Saturna Group Chartered Professional Accountants LLP

 

We have served as the Company’s auditor since 2014

 

November 8, 2018

 

F-3

 

 

GREEN HYGIENICS HOLDINGS INC.

Balance Sheets

(Expressed in U.S. dollars)

 

    July 31,
2019
    July 31,
2018
 
    $     $  
ASSETS            
             
Current Assets            
Cash     767       132  
Trust funds     2,486       -  
Prepaids     -       460  
Inventory-seeds (Note 4)     306,450       -  
Total Current Assets     309,703       592  
                 
Deposits (Note 3)     100,000       -  
Fixed Assets (Note 5)     145,138       -  
                 
Total Assets     554,841       592  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current Liabilities                
Accounts payable and accrued liabilities     201,178       149,491  
Accounts payable – related parties     57,500       -  
Accrued interest payable     510       -  
Loan payable (Note 6)     155,250       18,750  
Due to related parties (Note 7)     780,398       172,961  
                 
Total Current Liabilities     1,194,836       341,202  
                 
Nature of operations and continuance of business (Notes 1 and 2)                
Commitments (9)                
Subsequent events (Note 11)                
                 
Stockholder’s Deficit                
Common stock, 375,000,000 shares authorized, $0.001 par value 36,657,835 and 34,707,835 shares issued and outstanding respectively     36,658       34,708  
Additional paid-in capital     42,089,489       40,546,930  
Deficit     (42,766,142 )     (40,922,248 )
Total Stockholder’s Deficit     (639,995 )     (340,610 )
                 
Total Liabilities and Stockholder’s Deficit     554,841       592  

 

(The accompanying notes are an integral part of these financial statements)

 

F-4

 

 

GREEN HYGIENICS HOLDINGS INC.

Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars)

 

   

Year Ended

July 31,
2019

   

Year Ended

July 31,
2018

 
    $     $  
Expenses            
Consulting fees (Note 4)     152,172       120,000  
Business development costs     1,595,036       -  
General and administrative     71,303       45,989  
                 
Total Expenses     1,818,511       165,989  
                 
Loss Before Other Income (Expense)     (1,818,511 )     (165,989 )
                 
Other Income (Expense)                
Gain on forgiveness of debt     -       39,750  
Interest expense     (25,383 )     (2,841 )
                 
Total Other Income (Expense)     (25,383 )     36,909  
                 
Net Loss and Comprehensive Loss     (1,843,894 )     (129,080 )
                 
Net Loss Per Share, Basic and Diluted     (0.05 )     (0.00 )
                 
Weighted Average Shares Outstanding     35,203,862       34,707,835  

 

(The accompanying notes are an integral part of these financial statements)

 

F-5

 

 

GREEN HYGIENICS HOLDINGS INC.

Statements of Stockholders’ Equity (Deficit)

(Expressed in U.S. dollars)

 

          Additional              
    Common Stock     Paid-in              
    Shares     Amount     Capital     Deficit     Total  
    #     $     $     $     $  
                               
Balance, July 31, 2017     34,707,835       34,708       40,546,930       (40,793,168 )     (211,530 )
                                         
Net loss for the year                       (129,080 )     (129,080 )
                                         
Balance, July 31, 2018     34,707,835       34,708       40,546,930       (40,922,248 )     (340,610 )
                                         
Imputed interest                 22,009       -       22,009  
Shares issued for services     1,950,000       1,950       1,522,500       -       1,522,500  
                                         
Net loss for the year                       (1,843,894 )     (1,843,894 )
                                         
Balance, July 31, 2019     36,657,835       36,658       42,089,489       (42,766,142 )     (639,995 )

 

(The accompanying notes are an integral part of these financial statements)

 

F-6

 

 

GREEN HYGIENICS HOLDINGS INC.

Statements of Cash Flows

(Expressed in U.S. dollars)

 

   

Year Ended
July 31,
2019

   

Year Ended
July 31,
2018

 
    $     $  
Operating Activities            
Net loss     (1,843,894 )     (129,080 )
Related party imputed interest     22,009       -  
Share based compensation     1,522,500       -  
Changes in operating assets and liabilities:                
 Prepaid expenses     460       (460 )
Accrued interest payable     510       -  
Inventory     306,450       -  
Accounts payable and accrued liabilities     51,687       64,999  
Due to related parties     -       61,924  
Net Cash Provided by (Used In) Operating Activities     (556,178 )     (2,617 )
                 
Investing Activities                
Deposit on acquisition of property     (100,000 )     -  
Purchase of fixed assets     (145,138 )     -  
Net Cash Provided by (Used in) Investing Activities     (245,138 )     -  
                 
Financing Activities                
Proceeds on loans payable     155,250       -  
Advances from related parties     646,187       -  
Net Cash Provided by Financing Activities     801,437       -  
                 
Increase (Decrease) in Cash     3,121       (2,617 )
                 
Cash, Beginning of Year     132       2,749  
                 
Cash, End of Year     3,253       132  
                 
Supplemental Disclosures:                
Interest paid            
Income taxes paid            

 

(The accompanying notes are an integral part of these financial statements)

 

F-7

 

 

GREEN HYGIENICS HOLDINGS INC.

Notes to the Financial Statements

Years Ended July 31, 2019 and 2018

(Expressed in U.S. dollars)

 

1. Nature of Operations and Continuance of Business

 

Green Hygienics Holdings Inc. (the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources, Inc. On June 30, 2010, the name was changed to Takedown Entertainment Inc. On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc.

 

The Company is an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol (“CBD”). The Hemp Farming Act of 2018 removed hemp from Schedule I controlled substances (defined as cannabis with less than 0.3% THC) making it an ordinary agricultural commodity.

 

The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products; creating trusted global consumer brands; developing valuable IP; and growing the company rapidly through strategic acquisitions. With direct regard to acquisitions, the Company acts as a business accelerator and a vertical integrator focusing to support rapid growth and development of companies with extraordinary potential.

 

On June 10, 2019, the company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes. 

 

On June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures, a grower registration for industrial hemp cultivation.

 

On July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina.

The licenses were granted to the Company’s newly formed subsidiary, Coastal Labs North Carolina LLC, by the North Carolina Industrial Hemp Commission. The Company’s second subsidiary in the state is Green Hygienics North Carolina LLC, which will be partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next year’s cultivation.

 

The Company created Coastal labs and Green Hygienics near the end of July. There was no accounting activity prior to July 31, 2019. The Company’s policy is to consolidate all entities which we control and or own more than 51% of the voting stock. These entities are expected to have accounting activity during subsequent periods and will be consolidated accordingly.

 

On August 26, 2019, the Company the completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4 million. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses.

 

Going Concern

 

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at July 31, 2019, the Company has not generated any revenues, has a working capital deficiency of $885,133 and has an accumulated deficit of $42,766,142 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

F-8

 

 

2. Significant Accounting Policies

 

(a) Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars.

 

(b) Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company 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.

 

(c) Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.

 

(d) Inventory

 

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary. As of the date of this report, no reserve was deemed necessary.

 

(e) Impairment of Long-Lived Assets

 

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.

 

(f) Related Party Transactions

 

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

 

(g) Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

F-9

 

 

2. Significant Accounting Policies (continued)

 

(h) Foreign Currency Translation

 

The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.

 

(i) Financial Instruments and Fair Value Measures

 

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

(j) Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

(k) Loss Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at July 31, 2019 and 2018, the Company does not have any potentially dilutive shares.

 

F-10

 

 

2. Significant Accounting Policies (continued)

 

(l) Comprehensive Loss

 

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.

 

(m) Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

3. Deposits

 

During the year ended July 31, 2019, the Company advanced funds of $100,000 toward the acquisition of property known as the Potrero Ranch. The Company completed the acquisition on August 24, 2019.

 

4. Inventory

 

Inventory consists of hemp seeds. Inventory is recorded at cost.

 

5. Fixed Assets

 

Fixed assets recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. No depreciation has been recorded to date due to immateriality as the assets were acquired near year end.

 

Fixed assets consist of the following:

 

    Useful Life   Balance at
July 31,
2018
    Additions     Amortization     Balance at
July 31,
2019
 
                             
Production equipment     5 years   $         -     $ 46,379     $      -     $ 46,379  
Buildings and improvements    15 years     -       90,657       -       90,657  
Furniture and office equipment      5 years     -       8,102       -       8,102  
        $ -     $ 145,138     $ -     $ 145,138  

 

Fixed asset costs are being depreciated using the straight-line method based on the useful life of the asset. No depreciation expense has been recorded for the year ended July 31, 2019 due to the immateriality as the assets were acquired near year end.

 

6. Loans Payable

 

(a) As at July 31, 2019, the Company owes $155,250 (2018 - $nil) to a non-related party, which bears interest at the rate of 10% per annum, is unsecured and due and payable on or before December 19, 2019.

 

(b) As at July 31, 2019, the Company owes $nil (2018 - $18,750) to a non-related party, which is non-interest bearing, unsecured, and due on demand. During the year ended July 31, 2018, the amount owing was transferred to a company controlled by the President of the Company.

 

F-11

 

 

7. Related Party Transactions

 

(a) As at July 31, 2019, the Company owes $56,824 (2018 - $56,824) to a company controlled by the CEO of the Company. The debt bears interest at 5% per annum, is unsecured, and is due on demand. As at July 31, 2019, accrued interest of $14,825 (2018 - $11,961) has been included in accounts payable and accrued liabilities.

 

(b) As at July 31, 2019, the Company owes $696,074 (2018 - $116,137) to a company controlled by the CEO of the Company. The debt includes funds advanced to the Company for business development purposes is non-interest bearing, unsecured, and due on demand.

 

(c) As at July 31, 2019, the Company owes $27,500 (2018 - $nil) to a director of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(d) During the year ended July 31, 2019, the Company incurred $30,000 (2018 - $30,000) in consulting fees to a company controlled by the CEO of the Company.

 

(e) During the year ended July 31, 2019, the Company incurred $30,000 (2018 - $nil) in consulting fees to the CTO of the Company.

 

(f) During the year ended July 31, 2019, the Company incurred $27,500 (2018 - $nil) in consulting fees to a VP and Director of the Company.

 

(g) During the year ended July 31, 2019, the Company incurred $15,000 (2018 - $nil) in consulting fees to the President of a subsidiary of the Company.

 

(h) During the year ended July 31, 2019, the Company incurred $15,000 (2018 - $nil) in consulting fees to the CEO of a subsidiary of the Company.

 

(i) Imputed interest of $22,009 was recorded for the above related party debts.

 

8. Share Issuances

 

(a) During the year ended July 31, 2019, the Company issued 500,000 common shares to the Chief Development Officer of the Company in exchange for services rendered. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(b) During the year ended July 31, 2019, the Company issued 500,000 common shares to the Business Development Officer of the Company in exchange for services rendered. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(c) During the year ended July 31, 2019, the Company issued 500,000 common shares to the Chief Technology Officer of the Company in exchange for services rendered. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(d) During the year ended July 31, 2019, the Company issued 50,000 common shares to the Head of Research and Development of a subsidiary of the Company in exchange for services rendered. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(e) During the year ended July 31, 2019, the Company issued 200,000 common shares to the Chief Development Officer of the Company in exchange for services rendered. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(f) During the year ended July 31, 2019, the Company issued 200,000 common shares to the President of a subsidiary of the Company in exchange for services rendered. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

9. Commitments

 

(a)On April 1, 2019, the Company entered into a consulting agreement with the Chief Development Officer of the Company, Hamid Rowshan, whereby the Company agreed to pay a to be negotiated consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.

 

F-12

 

 

9. Commitments (continued)

 

On April 1, 2019, the Company entered into a consulting agreement with the Business Development Officer of the Company, Paymon Omidi, whereby the Company agreed to pay a to be negotiated consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.

 

(b) On April 1, 2019, the Company entered into a consulting agreement with the Head of Research and Development of a subsidiary of the Company, Kiarash Mirkia. Pursuant to the terms of the agreement, the Company issued the consultant 50,000 common shares upon execution of the agreement.

 

(c) On June 1, 2019, the Company entered into a consulting agreement with the CEO of a subsidiary of the Company, Kavan Thanasith, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.

 

(d) On June 1, 2019, the Company entered into a consulting agreement with the President of a subsidiary of the Company, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.

 

10. Income Taxes

 

The Company has net operating losses carried forward of $5,237,753 available to offset taxable income in future years which commence expiring in fiscal 2028.

 

The Company is subject to United States federal and state income taxes at an approximate rate of 26.42% (2018 – 26.42%). The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

 

    2019     2018  
    $     $  
             
Income tax recovery at statutory rate     (387,218 )     (34,099 )
Change in enacted tax rates     -       6,993  
Change in valuation allowance     387,218       27,106  
                 
Provision for income taxes            

 

The significant components of deferred income tax assets and liabilities as at July 31, 2019 and 2018 are as follows:

 

    2019     2018  
    $     $  
             
Net operating losses carried forward   $ 1,009,928       712,710  
Valuation allowance     (1,009,928 )     (712,710 )
                 
Net deferred income tax asset            

 

F-13

 

 

10. Income Taxes (continued)

 

The 2017 Act reduces the corporate tax rate from 34% to 21% for tax years beginning after December 31, 2017. For net operating losses arising after December 31, 2017, the 2017 Act limits a taxpayer’s ability to utilize net operating losses carryforwards to 80% of taxable income. In addition, net operating losses arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. Net operating losses generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation. The 2017 Act would generally eliminate the carryback of all net operating losses arising in a tax year ending after 2017 and instead would permit all such net operating losses to be carried forward indefinitely.

 

As at July 31, 2019, the Company is in arrears on filing its statutory corporate income tax returns and the amounts presented above are based on estimates. The actual losses available could differ from these estimates.

 

11. Subsequent Events

 

(a) On August 23, 2019, a company (Alita Capital Inc.) owned by the President of the Company executed on a Purchase and Sale Agreement to acquire the 824-acre Potrero Ranch Property near San Diego, California (the Agreement”). Alita in advance of the close immediately assigned the Agreement to the Green Hygienics Holdings Inc.

 

The Property now owned fully by Green Hygienics includes 824 acres of land and 400,000 square feet of outbuildings. The total purchase cost of the Property is $4,510,000. The Vendor agreed to a take-back mortgage of $2,750,000 (the ‘Mortgage”) and the Company borrowed $1,760,000 (the “Loan”) by way of a second mortgage to complete the acquisition. The terms of the Mortgage include interest at the rate of 6% per annum with monthly payments of interest only.commencing September 23, 2019. The maturity date of the Mortgage is August 23, 2024. The terms of the Loan include interest at 15% per annum with monthly payments of $22,000 commencing September 15, 2019. The maturity date of the Loan is August 15, 2024.

 

(b) On August 1, 2019, the Company entered into a consulting agreement with the CEO of the Company, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of three years and whereby the Company granted the Consultant an option to acquire 250,000 common shares of the Company or 250,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement for an additional 2 years.

 

(c) On August 1, 2019, the Company entered into a consulting agreement with the Chief Agricultural Operations Manager whereby the Company agreed to pay a signing bonus of $6,000 and a consulting fee of $6,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the performance with regards to an extension of the agreement.  The Company also granted the Consultant an option to acquire 25,000 common shares of the Company or 25,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement.

 

(d) On August 1, 2019, the Company entered into a consulting agreement with the Chief Project Manager whereby the Company agreed to pay a signing bonus of $15,000 and a consulting fee of $7,500 per month for a period of five years.  The Company also granted the Consultant an option to acquire 100,000 common shares of the Company or 100,000 Options priced at $0.50 per share upon execution of the consulting agreement and an additional 100,000 common shares or Options priced at 10% below market value at the date of grant six months after the execution of the agreement.

 

(e) On August 1, 2019, the Company entered into a consulting agreement with the Assistant Agricultural Operations Manager whereby the Company agreed to pay a signing bonus of $4,000 and a consulting fee of $2,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the performance with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire 25,000 common shares of the Company or Options at $0.50 per share upon execution of the consulting agreement and an additional 25,000 common shares or Options at 10% below market value at the date of grant six months after the execution of the agreement.

 

(f) On August 1, 2019, the Company granted an option to a non-related party to acquire 50,000 common shares of the Company at 10% below market value at the date of grant for services rendered.

 

(g) On September 1, 2018, the Company entered into a consulting agreement with a director of the Company, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two years, which can be extended to four years upon mutual agreement. Additionally, the Company will either grant the director 100,000 shares of common stock per year or 100,000 stock options per year to purchase shares of the Company’s common stock priced at 10% below market value at the date of grant.

 

(h) On September 1, 2018, the Company entered into a consulting agreement with the CTO, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two years commencing August 1, 2018. The agreement can be extended to four years upon mutual agreement. Upon completion of a minimum $1,000,000 financing, the Company will increase this payment to $5,000 per month. Upon completion of a minimum $5,000,000 financing or profitable operations, the Company will increase this payment to an amount mutually agreed upon that reflects the market rate for services provided by the CTO.

F-14

 

 

GREEN HYGIENICS HOLDINGS INC.

Consolidated Balance Sheets

(Expressed in U.S. dollars)

 

    October 31,
2019
$
    July 31,
2019
$
 
    (unaudited)        
ASSETS            
             
Current Assets            
Cash     46,218       767  
Prepaid expense     5,000       -  
Trust funds     -       2,486  
Inventory     306,450       306,450  
Total Current Assets     357,668       309,703  
                 
Deposits     -       100,000  
Fixed Assets (Note 5)     4,745,767       145,138  
                 
Total Assets     5,103,435       554,841  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current Liabilities                
Accounts payable and accrued liabilities     259,436       201,178  
Accounts payable – related parties     117,833       57,500  
Accrued interest payable     25,872       510  
Loan payable (Note 4)     155,250       155,250  
Due to related parties (Note 8)     1,447,100       780,398  
Total Current Liabilities     2,005,491       1,194,836  
                 
Long Term Liabilities                
Agreement payable (Note 5)     183,031       -  
Mortgage payable (Note 6)     2,750,000       -  
Note payable (Note 7)     1,760,000       -  
Total Long-Term Liabilities     4,693,031       -  
                 
Total Current and Long-Term Liabilities     6,698,522       1,194,836  
                 
Nature of operations and continuance of business (Note 1 and 2)                
Commitments (Note 10)                
Subsequent events (Note 11)                
                 
Stockholder’s Deficit                
Common stock, 375,000,000 shares authorized, $0.001 par value 37,482,835 and 36,657,835 shares issued and outstanding     37,483       36,658  
Additional paid-in capital     43,328,297       42,089,489  
Deficit     (44,960,867 )     (42,766,142 )
Total Stockholder’s Deficit     (1,595,087 )     (639,995 )
                 
Total Liabilities and Stockholder’s Deficit     5,103,435       554,841  

 

(The accompanying notes are an integral part of these Consolidated financial statements)

 

F-15

 

 

GREEN HYGIENICS HOLDINGS INC.

Consolidated Statements of Operations and Comprehensive Loss

(Expressed in U.S. dollars)

(unaudited)

 

    Three Months
Ended
October 31, 2019
$
    Three Months
Ended
October 31, 2018
$
 
Expenses            
Consulting fees (Note 4)     164,396       27,500  
Business development costs     1,227,592       -  
Supplies     392,516       -  
Sub contracts     68,289       -  
Payroll expenses     158,731       -  
General and administrative     54,400       1,909  
                 
Loss Before Other Expense     (2,065,934 )     (29,409 )
                 
Other Expense                
Interest expense     (115,451 )     (716 )
Depreciation     (13,350 )     -  
                 
Net Loss and Comprehensive Loss     (2,194,725 )     (30,125 )
                 
Net Loss Per Share, Basic and Diluted     (.06 )      
                 
Weighted Average Shares Outstanding     37,473,868       34,707,835  

 

(The accompanying notes are an integral part of these Consolidated financial statements)

 

F-16

 

 

GREEN HYGIENICS HOLDINGS INC.

Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

(unaudited)

 

    Three Months
Ended
October 31, 2019
$
    Three Months
Ended
October 31, 2018
$
 
Operating Activities            
Net loss     (2,194,725 )     (30,125 )
Imputed interest     18,633       -  
Depreciation expense     13,350       -  
Share based compensation     1,221,000       -  
Changes in operating assets and liabilities:                
Prepaid expenses     (5,000 )     -  
Accrued interest payable     25,362          
Inventory     -       -  
Accounts payable and accrued liabilities     56,258       5,216  
Accounts payable - related party     60,336       -  
Due to related parties     -       25,000  
Net Cash Provided By (Used In) Operating Activities     (802,789 )     91  
                 
Investing Activities                
Cash paid for purchase of FA     (118,586 )     -  
Net Cash Provided by (Used In) Investing Activities     (118,586 )     -  
                 
Financing Activities                
Proceeds from note payable     297,638          
Advances from related parties     666,702          
Net Cash Provided by Financing Activities     964,340       -  
                 
Increase in cash     42,965       -  
                 
Cash and trust funds, Beginning of Period     3,253       132  
                 
Cash and trust funds, End of Period     46,218       223  
                 
Supplemental Disclosures:                
Interest paid            
Income taxes paid            
Non Cash Transactions                
Equipment financed through debt     183,031          
Land acquired through debt     2,750,000          
Deposit on acquisition of property     100,000       -  

 

(The accompanying notes are an integral part of these Consolidated financial statements)

 

F-17

 

 

GREEN HYGIENICS HOLDINGS INC.

Consolidated Statements of Stockholders’ Deficit

(Expressed in U.S. dollars)

(unaudited)

 

    Common Stock                    
    Number of
shares
    Amount
$
    Additional
paid-in
capital
$
    Deficit
$
    Total
stockholders’
deficit
$
 
                               
Balance, July 31, 2018     34,707,835       34,708       40,546,930       (40,922,248 )     (340,610 )
                                         
Imputed interest     -       -       22,009       -       22,009  
                                         
Shares issued for services     1,950,000       1,950       1,522,500       -       1,522,500  
                                         
Net loss     -       -       -       (1,843,894 )     (1,843,894 )
                                         
Balance, July 31, 2019     36,657,835       36,658       42,089,489       (42,766,142 )     (639,995 )
                                         
Imputed interest     -       -       18,633       -       18,633  
                                         
Shares issued for services     825,000       825       1,220,175       -       1,221,000  
                                         
Net loss     -       -       -       (2,194,725 )     (2,194,725 )
                                         
Balance, October 31, 2019     37,482,835       37,483       43,328,297       (44,960,867 )     (1,595,087 )

 

(The accompanying notes are an integral part of these Consolidated financial statements)

 

F-18

 

 

GREEN HYGIENICS HOLDINGS INC.

Notes to the Consolidated Financial Statements

October 31, 2019

(Expressed in U.S. dollars)

(Unaudited)

 

1. Nature of Operations and Continuance of Business

 

Green Hygienics Holdings Inc. (the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources, Inc. On June 30, 2010, the name was changed to Takedown Entertainment Inc. On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc.

 

The Company is an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol (“CBD”). The Hemp Farming Act of 2018 removed hemp from Schedule I controlled substances (defined as cannabis with less than 0.3% THC) making it an ordinary agricultural commodity.

 

The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products; creating trusted global consumer brands; developing valuable IP; and growing the company rapidly through strategic acquisitions. With direct regard to acquisitions, the Company acts as a business accelerator and a vertical integrator focusing to support rapid growth and development of companies with extraordinary potential.

 

On June 10, 2019, the company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five-year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes. 

 

On June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures, a grower registration for industrial hemp cultivation.

 

On July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina.

The licenses were granted to the Company’s newly formed subsidiary, Coastal Labs North Carolina LLC, by the North Carolina Industrial Hemp Commission. The Company’s second subsidiary in the state is Green Hygienics North Carolina LLC, which will be partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next year’s cultivation.

 

The Company created Coastal labs and Green Hygienics near the end of July. There was no accounting activity prior to October 31, 2019. The Company’s policy is to consolidate all entities which we control and or own more than 51% of the voting stock. These entities are expected to have accounting activity during subsequent periods and will be consolidated accordingly.

 

On August 26, 2019, the Company the completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,510,000. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses.

 

Going Concern

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and is unlikely to generate earnings in the immediate future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at October 31, 2019, the Company has not generated any revenues, has a working capital deficiency of $1,647,823 and has an accumulated deficit of $44,960,867 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

F-19

 

 

2. Significant Accounting Policies

 

(a) Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars.

 

(b) Principles of Consolidation

 

These financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are all entities (including structured entities) which the Company controls. For accounting purposes, control is established by an investor when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. All inter-company balances and transactions are eliminated.

 

(c) Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company 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.

 

(d) Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.

 

(e) Inventory

 

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary. As of the date of this report, no reserve was deemed necessary.

 

(f) Impairment of Long-Lived Assets

 

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.

 

(g) Related Party Transactions

 

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

 

(h) Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

F-20

 

 

2. Significant Accounting Policies (continued)

 

(i) Foreign Currency Translation

 

The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.

 

(j) Financial Instruments and Fair Value Measures

 

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

(k) Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

(l) Loss Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at October 31, 2019 the Company does not have any potentially dilutive shares.

 

F-21

 

 

2. Significant Accounting Policies (continued)

 

(m) Comprehensive Loss

 

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.

 

(n) Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

3. Fixed Assets

 

Fixed assets are recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.

 

Fixed assets consist of the following:

 

    Useful Life   Balance at
July 31,
2019
$
    Additions
$
    Amortization
$
    Balance at
October 31,
2019
$
 
                             
Production equipment   5 years     46,379       305,531       (10,541 )     341,369  
Furniture and office equipment   5 years     8,102       -       (408 )     7,694  
Buildings and improvements   15 years     90,657       96,086       (2,401 )     184,342  
Land         -       4,212,362       -       4,212,362  
          145,138       4,613,979       (13,350 )     4,745,767  

 

Fixed asset costs are being depreciated using the straight-line method based on the useful life of the asset.

 

On August 26, 2019, the Company completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,510,000. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses. On August 23, 2019, the Company entered into an agreement payable with the Vendor of the Property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. The debt is secured by a Promissory Note secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024. On August 23, 2019 the Company entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. The debt is secured by a Promissory Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 15, 2024. To date we have spent $184,342 in property and building improvements and have acquired over $300,000 worth of production equipment.

 

F-22

 

 

4. Loan Payable

 

As at October 31, 2019, the Company owes $155,250 (2018 - $nil) plus accrued interest of $4,423 (2018 - $nil) to a non-related party, which bears interest at the rate of 10% per annum, is unsecured and due and payable on or before December 19, 2019.

 

5. Agreement Payable

 

As at October 31, 2019, the Company owes $183,031 (2018 - $nil) to a non-related party and requires monthly payments of $4290.40 including interest at the rate of 5.66% per annum for a period of 48 months commencing November 1, 2019. The loan is secured by a collateral charge on production equipment.

 

6. Mortgage Payable

 

As at October 31, 2019, the Company owes $2,750,000 (2018 - $nil) to a non-related party, with monthly payments of interest only at the rate of 6% per annum. The debt is secured by a Promissory Note secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024.

 

7. Note Payable

 

As at October 31, 2019, the Company owes $1,760,000 (2018 - $nil) to a non-related party, with monthly payments of interest only at the rate of 15% per annum. The debt is secured by a Promissory Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 15, 2024.

 

8. Related Party Transactions

 

(a) As at October 31, 2019, the Company owes $56,824 (July 31, 2019 - $56,824) to a company controlled by the CEO of the Company. The debt bears interest at 5% per annum, is unsecured, and is due on demand. As at October 31, 2019, accrued interest of $15,541 (July 31, 2019 - $14,825) has been included in amounts due to related parties.

 

(b) As at October 31, 2019, the Company owes $1,390,275 (July 31, 2019 - $696,074) to a company controlled by the CEO of the Company. The debt includes funds advanced to the Company for business development purposes, is non-interest bearing, unsecured, and due on demand.

 

(c) As at October 31, 2019, the Company owes $22,500 (July 31, 2019 - $nil) to the CEO of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(d) As at October 31, 2019, the Company owes $35,000 (July 31, 2019 - $27,500) to a director of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(e) As at October 31, 2019, the Company owes $22,500 (July 31, 2019 - $15,000) to the CEO of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(f) As at October 31, 2019, the Company owes $22,500 (July 31, 2019 - $15,000) to the President of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(g) As at October 31, 2019, the Company owes $7,500 (July 31, 2019 - $nil) to the CTO of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(h) As at October 31, 2019, the Company owes $7,833 (July 31, 2019 - $nil) to the Chief Agricultural Operations Manager of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.

 

(i) During the quarter ended October 31, 2019, the Company incurred $nil (2018 - $7,500) in consulting fees to a company controlled by the CEO of the Company.

 

F-23

 

 

8. Related Party Transactions (continued)

 

(j) During the quarter ended October 31, 2019, the Company incurred $22,500 (2018 - $nil) in consulting fees to the CEO of the Company.

 

(k) During the quarter ended October 31, 2019, the Company incurred $7,500 (2018 - $7,500) in consulting fees to the CTO of the Company.

 

(l) During the quarter ended October 31, 2019, the Company incurred $7,500 (2018 - $7,500) in consulting fees to a VP and Director of the Company.

 

(m) During the quarter ended October 31, 2019, the Company incurred $22,500 (2018 - $nil) in consulting fees to the President of a subsidiary of the Company.

 

(n) During the quarter ended October 31, 2019, the Company incurred $22,500 (2018 - $nil) in consulting fees to the CEO of a subsidiary of the Company.

 

(o) Imputed interest of $18,633 for the three months ended October 31, 2019 and $22,009 for the year ended July 31, 2019 has been recorded for the above related party debts.

 

9. Share Issuances

 

(a) During the quarter ended October 31, 2019, the Company issued 250,000 common shares to the CEO of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(b) During the quarter ended October 31, 2019, the Company issued 50,000 common shares to the Chief Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(c) During the quarter ended October 31, 2019, the Company issued 200,000 common shares to the Chief Project Manager of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(d) During the quarter ended October 31, 2019, the Company issued 25,000 common shares to the Assistant Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

(e) During the quarter ended October 31, 2019, the Company issued 300,000 common shares to non-related parties in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.

 

10. Commitments/Contingencies

 

(a) On September 1, 2018, the Company entered into a consulting agreement with a director of the Company, Matthew Dole, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two years, which can be extended to four years upon mutual agreement. Additionally, the Company will either grant the director 100,000 shares of common stock per year or 100,000 stock options per year to purchase shares of the Company’s common stock priced at 10% below market value at the date of grant.

 

(b) On September 1, 2018, the Company entered into a consulting agreement with the CTO, Jeff Palumbo, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two years commencing August 1, 2018. The agreement can be extended to four years upon mutual agreement. Upon completion of a minimum $1,000,000 financing, the Company will increase this payment to $5,000 per month. Upon completion of a minimum $5,000,000 financing or profitable operations, the Company will increase this payment to an amount mutually agreed upon that reflects the market rate for services provided by the CTO.

 

(c) On April 1, 2019, the Company entered into a consulting agreement with the Chief Development Officer of the Company, Hamid Rowshan, whereby the Company agreed to pay a to be negotiated consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.

 

F-24

 

 

10. Commitments/Contingencies (continued)

 

(d) On April 1, 2019, the Company entered into a consulting agreement with the Business Development Officer of the Company, Paymon Omidi, whereby the Company agreed to pay a to be negotiated consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.

 

(e) On April 1, 2019, the Company entered into a consulting agreement with the Head of Research and Development of a subsidiary of the Company, Kiarash Mirkia. Pursuant to the terms of the agreement, the Company issued the consultant 50,000 common shares upon execution of the agreement.

 

(f) On June 1, 2019, the Company entered into a consulting agreement with the CEO of a subsidiary of the Company, Kavan Thanasith, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.

 

(g) On June 1, 2019, the Company entered into a consulting agreement with the President of a subsidiary of the Company, Travis Chrisman, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.

 

(h) On August 1, 2019, the Company entered into a consulting agreement with the CEO of the Company, Ron Loudoun, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of three years and whereby the Company granted the Consultant an option to acquire 250,000 common shares of the Company or 250,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement for an additional 2 years.

 

(i) On August 1, 2019, the Company entered into a consulting agreement with the Chief Agricultural Operations Manager, Anthony Curci, whereby the Company agreed to pay a signing bonus of $6,000 and a consulting fee of $6,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the performance with regards to an extension of the agreement.  The Company also granted the Consultant an option to acquire 25,000 common shares of the Company or 25,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement.

 

(j) On August 1, 2019, the Company entered into a consulting agreement with the Chief Project Manager, Greg Stinson, whereby the Company agreed to pay a signing bonus of $15,000 and a consulting fee of $7,500 per month for a period of five years.  The Company also granted the Consultant an option to acquire 100,000 common shares of the Company or 100,000 Options priced at $0.50 per share upon execution of the consulting agreement and an additional 100,000 common shares or Options priced at 10% below market value at the date of grant six months after the execution of the agreement.

 

(k) On August 1, 2019, the Company entered into a consulting agreement with the Assistant Agricultural Operations Manager, Carol Snyder, whereby the Company agreed to pay a signing bonus of $4,000 and a consulting fee of $2,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the performance with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire 25,000 common shares of the Company or Options at $0.50 per share upon execution of the consulting agreement and an additional 25,000 common shares or Options at 10% below market value at the date of grant six months after the execution of the agreement.

 

(l) On August 1, 2019, the Company granted an option to a non-related party to acquire 50,000 common shares of the Company at 10% below market value at the date of grant for services rendered.

 

There is currently no pending or threatened litigation.

 

F-25

 

 

11. Subsequent Events

 

None

 

Effective December 19, 2019, the Company entered into a securities purchase agreement dated as of December 19, 2019 (the “SPA”) with an accredited investor (the “Buyer”), pursuant to which the Company issued and sold to the Buyer (i) a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share, for an aggregate purchase price of $600,000.

 

On December 31, 2019, the Buyer paid an initial purchase price of $100,000 at the initial closing. The purchase price balance of $500,000 will be paid upon a registration statement for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant being declared effective by the Securities & Exchange Commission (the “SEC”). The Note is currently vested only as to an aggregate principal amount of $125,000, and the Warrant is currently vested only as to the right to purchase 41,667 shares. The remainder of the Note (as to an aggregate principal amount of $625,000) and the remainder of the Warrant (as to the right to purchase up to 203,333 shares) shall vest if, and only if, the Buyer pays the purchase price balance of $500,000. The original issue discount on the Note for the initial purchase price is $25,000, and the original issue discount for the Note, fully vested, is $150,000.

 

The Note can be prepaid at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”); provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75% of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.

 

Concurrently therewith, the Company entered into a registration rights agreement with the Buyer, pursuant to which the Company agreed to file a registration statement with the SEC for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant and to have the registration statement declared effective by the SEC at the earliest possible date.

 

F-26

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OR PLAN OF OPERATION

 

This section of the Registration Statement includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

The following discussion should be read in conjunction with the consolidated financial statements and notes. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions, which could cause actual results to differ materially from management’s expectations.

 

Corporate Overview

 

Green Hygienics Holdings Inc. (the Company) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources Inc.  On June 30, 2010, the Company changed its name to Takedown Entertainment Inc. On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc.

 

The Company is an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol (“CBD”). The Hemp Farming Act of 2018 removed hemp from Schedule I controlled substances (defined as cannabis with less than 0.3% THC) making it an ordinary agricultural commodity.

 

The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products; creating trusted global consumer brands; developing valuable IP; and growing the company rapidly through strategic acquisitions. With direct regard to acquisitions, the Company acts as a business accelerator and a vertical integrator focusing to support rapid growth and development of companies with extraordinary potential.

 

In June, 2019, the Company formed two wholly owned subsidiaries, Coastal Labs NC LLC and Green Hygienics NC LLC for the purpose of registering as an industrial hemp processor and cultivator in the State of North Carolina pursuant to the North Carolina Industrial Hemp Pilot Program.

 

On June 10, 2019, the Company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five-year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes. 

 

On June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures, a grower registration for industrial hemp cultivation.

 

On July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina. The licenses were granted to the Company’s newly formed subsidiary, Coastal Labs NC LLC, by the North Carolina Industrial Hemp Commission. The Company’s second subsidiary in the state is Green Hygienics NC LLC, which will be partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next year’s cultivation.

 

On August 26, 2019, the Company the completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4 million. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses.

 

28

 

 

PRESENTATION OF MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Results of Operations

 

Three Months Ended October 31, 2019 Compared to the Three Months Ended October 31, 2018

 

We are currently in the product growing and production stages and anticipate that we will begin producing revenue in the next six months.

 

We have incurred operating losses of $45,241,260 from date of incorporation June 12, 2008 to the period ended October 31, 2019. These losses consisted of general operating expenses and professional fees incurred in connection with the day to day operation of our business and the preparation and filing of our periodic reports.

 

Operating expenses for the three months ended October 31, 2019 increased to $2,065,934 compared to $29,409 for the three months ended October 31, 2018. This increase is primarily due to an increase in business development costs but was also due to increases in consulting fees, supplies, subcontracts, payroll expenses, and general administrative costs, all of which resulted from our commencement of cultivation operations.

 

We incurred $115,451 in interest expenses due to debt financing during the three months ended October 31, 2019, which is an increase from $716 for the same period in 2018.

 

We recorded $13,350 of depreciation for the three months ended October 31, 2019.

 

We experienced a net loss of $2,194,725 during the three months ended October 31, 2019, as compared to a net loss of $30,125 for the three months ended October 31, 2018.

 

An analysis of our results of operations are as follows:

 

    Three Months Ended        
    October 31,
2019
    October 31,
2018
    Change  
Expenses                  
Consulting Fees   $ 164,396     $ 27,500     $ 136,896  
Business Development Costs     1,227,592       -       1,227,592  
Supplies     392,516       -       392,516  
Subcontracts     68,289       -       68,289  
Payroll Expenses     158,731       -       158,731  
General and Administrative     54,400       1,909       52,491  
Interest     115,451       716       114,735  
Depreciation     13,350       -       13,350  
Net Loss for the Period   $ (2,194,725 )   $ (30,125 )   $ (2,164,600 )

 

29

 

 

Year Ended July 31, 2019 Compared to the Year Ended July 31, 2018

 

Operating expenses for the year ended July 31, 2019 increased to $1,818,511 compared to $165,989 for the year ended July 31, 2018. This increase is primarily due to an increase in business development costs resulting from the issuance of shares of common stock for services but was also due to increases in consulting fees from the addition of consultant and general and administrative costs from increase legal and accounting expenditures, all of which resulted from our commencement of cultivation operations.

 

We incurred $25,383 in interest expenses due to debt financing during the year ended July 31, 2019, which is an increase from $2,841 for the same period in 2018.

 

We recorded gain on forgiveness of debt of $39,750 in the year ended July 31, 2018.

 

We experienced a net loss of $1,843,894 during the year ended July 31, 2019, as compared to a net loss of $129,080 for the year ended July 31, 2018.

 

An analysis of our results of operations are as follows:

 

    Year Ended        
    July 31,
2019
    July 31,
2018
    Change  
Expenses                  
Consulting Fees   $ 152,172     $ 120,000     $ 32,172  
Business Development Costs     1,595,036       -       1,595,036  
General and Administrative     71,303       45,989       25,314  
Interest     25,383       2,841       22,542  
Gain on forgiveness of debt     -       (39,750 )     39,750  
Net Loss for the Period   $ (1,843,894 )   $ (129,080 )   $ (1,714,814 )

 

Balance Sheet

 

Our total assets increased to $5,103,435 as of October 31, 2019, from $554,841 as of July 31, 2019. This increase resulted primarily from our acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,000,000.

 

    October 31,
2019
    July 31,
2019
 
             
Cash and Prepaid Expenses   $ 51,218     $ 3,253  
Inventory     306,450       306,450  
Fixed Assets     4,745,767       245,138  
Total Assets     5,103,435       554,841  
Total Liabilities     6,698,522       1,194,836  
Stockholder’s Equity (Deficit)     (1,595,087 )     (639,995 )
                 

 

Liquidity and Capital Resources

 

As of October 31, 2019, our current assets were $357,668, comprised of $46,218 in cash, $5,000 in prepaid expenses, and $306,450 in inventory. This is an increase in current assets from $309,703 as of July 31, 2019. Our working capital deficit as of October 31, 2019 was $1,747,823, compared to a working capital deficit of $885,133 as of July 31, 2019.

 

30

 

 

Working Capital:

 

    October 31,
2019
    July 31,
2019
 
             
Current Assets   $ 357,668     $ 309,703  
Current Liabilities     2,005,497       1,194,836  
Working Capital (Deficit)     (1,647,829 )     (885,133 )

 

During the three months ended October 31, 2019, we used $802,789 of cash for operating activities compared to generating $91 in the three months ended October 31, 2018.

 

During the three months ended October 31, 2019, we used $118,586 of cash for investing activities compared to none in the three months ended October 31, 2018.

 

During the three months ended October 31, 2019, we generated $964,340 of cash from financing activities compared to none in the three months ended October 31, 2018.

 

Cash Flows:

 

    Three Months Ended  
    October 31,
2019
    October 31,
2018
 
             
Net cash provided by (used in) operating activities   $ (802,789 )   $ (91 )
Net cash used in investing activities     (118,586 )     -  
Net cash provided by financing activities     964,340       -  
Net Change in Cash   $ 42,965     $ (91 )

 

Our current cash balance will be unable to sustain operations for the next twelve months. We will be forced to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. We are a development stage company and have generated no revenue to date.

 

The future of our company is dependent upon its ability to obtain financing and upon future profitable operations from the development of acquisitions.

 

We estimate that our expenses over the next 12 months will be approximately $600,000, comprised of $120,000 in business development costs and $480,000 in general and administrative expenses.  These estimates may change significantly depending on the performance of our products in the marketplace and our ability to raise capital from shareholders or other sources.

 

We intend to meet our cash requirements for the next 12 months through a combination of debt financing and equity financing by way of private placements.  We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any private placement financings on terms that will be acceptable to us.  We may not raise sufficient funds to fully carry out our business plan.

 

31

 

 

Effective December 19, 2019, we entered into a securities purchase agreement dated as of December 19, 2019 (the “SPA”) with Triton Funds, LP, an accredited investor (the “Buyer”), pursuant to which the Company issued and sold to the Buyer (i) a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share, for an aggregate purchase price of $600,000.

 

On December 31, 2019, the Buyer paid an initial purchase price of $100,000 at the initial closing. The purchase price balance of $500,000 will be paid upon a registration statement for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant being declared effective by the Securities & Exchange Commission (the “SEC”). The Note is currently vested only as to an aggregate principal amount of $125,000, and the Warrant is currently vested only as to the right to purchase 41,667 shares. The remainder of the Note (as to an aggregate principal amount of $625,000) and the remainder of the Warrant (as to the right to purchase up to 203,333 shares) shall vest if, and only if, Triton pays the purchase price balance of $500,000. The original issue discount on the Note for the initial purchase price is $25,000, and the original issue discount for the Note, fully vested, is $150,000.

 

The Note can be prepaid at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”); provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75% of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.

 

Concurrently therewith, we entered into a registration rights agreement with the Buyer, pursuant to which we agreed to file a registration statement with the SEC for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant and to have the registration statement declared effective by the SEC at the earliest possible date.

 

We will require additional financing in order to enable us to proceed with our plan of operations, as discussed above, including approximately an additional $120,000 over the next 12 months to pay for our ongoing expenses. These expenses include legal, accounting and audit fees as well as general and administrative expenses.  These cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to continue operations and to repay our liabilities. There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.

 

We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

 

We presently do not have any arrangements for additional financing and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company 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.

 

32

 

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.

 

Inventory

 

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary.

 

Impairment of Long-Lived Assets

 

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.

 

Related Party Transactions

 

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

 

Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

Foreign Currency Translation

 

The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.

 

Financial Instruments and Fair Value Measures

 

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

33

 

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

Loss Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at July 31, 2019 and 2018, the Company does not have any potentially dilutive shares.

 

Comprehensive Loss

 

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

34

 

 

SELECTED FINANCIAL DATA

 

Not applicable because we are a smaller reporting company.

 

SUPPLEMENTARY FINANCIAL INFORMATION

 

Not applicable because we are a smaller reporting company.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Previous independent registered public accounting firm

 

On August 15, 2019, Saturna Group Chartered Professional Accountants LLP (“Saturna Group”) provided notice that they could no longer provide audit services to the Company.

 

The reports of Saturna Group on our financial statements for the fiscal years ended July 31, 2018 and July 31, 2017 did not contain an adverse opinion or a disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principles, except that the accountant’s reports of Saturna Group on our financial statements as of and for the fiscal years ended July 31, 2017 and 2018 stated that we have suffered losses from operations and have a working capital deficit, and that these conditions raise substantial doubt about our ability to continue as a going concern.

 

During our fiscal years ended July 31, 2017 and 2018 and the subsequent interim period through August 15, 2019, the date of the notice from Saturna Group, we did not have any disagreement with Saturna Group on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

 

During that time, there were no “reportable events” as set forth in Item 304(a)(1) of Regulation S-K adopted by the Securities and Exchange Commission, except that (i) the accountant’s reports of Saturna Group on our financial statements as of and for the fiscal years ended July 31, 2017 and 2018 stated that we have suffered losses from operations and have a working capital deficit, and that these conditions raise substantial doubt about our ability to continue as a going concern, (ii) our disclosure controls and procedures were not effective for the fiscal years ended July 31, 2017 and 2018, as reported in our annual reports on Form 10-K for the fiscal years ended July 31, 2017 and 2018, and (iii) our management identified material weaknesses in our internal control over financial reporting for the fiscal years ended July 31, 2017 and 2018, as reported in our annual reports on Form 10-K for the fiscal years ended July 31, 2017 and 2018. The material weaknesses included weaknesses in procedures for control evaluation, a lack of an audit committee, insufficient documentation of review procedures, and insufficient information technology procedures. Our board of directors have discussed these matters with Saturna Group, and we authorized Saturna Group to respond fully to the inquiries of our successor accountant, M&K CPAs, concerning these matters.

 

New independent registered public accounting firm

 

On September 9, 2019, we engaged M&K CPAs as our independent registered public accounting firm for our fiscal year ended July 31, 2019. The decision to engage M&K CPAs as our independent registered public accounting firm was approved by our board of directors.

 

 

During the two most recent fiscal years and through September 9, 2019, we have not consulted with M&K CPAs regarding either of the following:

 

  1. the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us nor oral advice was provided that M&K CPAs concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue; or

 

  2. any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable because we are a smaller reporting company.

 

35

 

  

3,250,000 Common Shares

 

 

 

 

GREEN HYGIENICS HOLDINGS INC.

 

 

 

 

PROSPECTUS

 

 

 

 

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

 

Until ___________, 2020, all dealers that effect transactions in these securities whether or not participating in this offering may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

 

 

The Date of This Prospectus Is:  _____ __, 2020

 

 

 

 

PART II -- INFORMATION NOT REQUIRED IN THE PROSPECTUS

 

Item. 13 Other Expenses Of Issuance And Distribution.

 

The estimated costs of this offering are as follows:

 

Securities and Exchange Commission registration fee   $ 1,265  
Transfer Agent Fees*   $ 1,000  
Accounting fees and expenses*   $ 10,000  
Legal fees and expenses*   $ 25,000  
Edgar filing, printing and engraving fees*   $ 4,000  
TOTAL   $ 41,265  

 

*Indicates expenses that have been estimated for filing purposes.

 

All amounts are estimates other than the Securities and Exchange Commission’s registration fee.

 

All amounts are estimates other than the Commission’s registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the selling shareholders. The selling shareholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.

 

Item. 14 Indemnification Of Directors And Officers.

 

Nevada law provides for discretionary indemnification for each person who serves as one of our directors or officers. We may indemnify such individuals against all costs, expenses and liabilities incurred in a threatened, pending or completed action, suit or proceeding brought because such individual is one of our officers or directors. Such individual must have conducted himself in good faith and reasonably believed that his conduct was in, or not opposed to, our best interests. In a criminal action, he must not have had a reasonable cause to believe his conduct was unlawful.

 

Article Eighth of our Articles of Incorporation states as follows:

 

No director, officer or shareholder of this corporation shall have personal liability for damages for breach of any fiduciary duty as a director or officer to the corporation, its shareholders or any other person except for: (a) Acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or (B) the payment of dividends in violation of NRS 78.300. Any amendment, repeal or modification of the foregoing shall not adversely affect any right or protection of a director of the corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

  

Article IX of our Bylaws provides for the following indemnification:

 

Indemnification

 

The Corporation may indemnify and advance litigation expenses to its directors, officers, employees and agents to the extent permitted by law, the Articles or these Bylaws, and shall indemnify and advance litigation expenses to its directors, officers, employees and agents to the extent required by law, the Articles or these Bylaws. The Corporation’s obligations of indemnification, if any, shall be conditioned on the Corporation receiving prompt notice of the claim and the opportunity to settle and defend the claim. The Corporation may, to the extent permitted by law, purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee or agent of the Corporation.

 

Disclosure of Commission Position of Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilities arising under the Act, may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

 

II-1

 

 

Item 15. Recent Sales of Unregistered Securities

 

During the year ended July 31, 2019, the Company issued 500,000 common shares to the Chief Development Officer of the Company in exchange for services rendered. The issuance was exempt under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

 

During the year ended July 31, 2019, the Company issued 500,000 common shares to the Business Development Officer of the Company in exchange for services rendered. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the year ended July 31, 2019, the Company issued 500,000 common shares to the Chief Technology Officer of the Company in exchange for services rendered. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the year ended July 31, 2019, the Company issued 50,000 common shares to the Head of Research and Development of a subsidiary of the Company in exchange for services rendered. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the year ended July 31, 2019, the Company issued 200,000 common shares to the Chief Development Officer of the Company in exchange for services rendered. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the year ended July 31, 2019, the Company issued 200,000 common shares to the President of a subsidiary of the Company in exchange for services rendered. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the quarter ended October 31, 2019, the Company issued 250,000 common shares to the CEO of the Company in exchange for consulting services. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the quarter ended October 31, 2019, the Company issued 50,000 common shares to the Chief Agricultural Operations Manager of the Company in exchange for consulting services. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the quarter ended October 31, 2019, the Company issued 200,000 common shares to the Chief Project Manager of the Company in exchange for consulting services. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the quarter ended October 31, 2019, the Company issued 25,000 common shares to the Assistant Agricultural Operations Manager of the Company in exchange for consulting services. The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

During the quarter ended October 31, 2019, the Company issued 300,000 common shares to non-related parties in exchange for consulting services. The issuances were exempt under Section 4(a)(2) of the Securities Act.

 

Effective December 19, 2019, we entered into a securities purchase agreement dated as of December 19, 2019 (the “SPA”) with Triton Funds, LP, an accredited investor (the “Buyer”), pursuant to which the Company issued and sold to the Buyer (i) a convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share, for an aggregate purchase price of $600,000.

 

On December 31, 2019, the Buyer paid an initial purchase price of $100,000 at the initial closing. The purchase price balance of $500,000 will be paid upon a registration statement for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant being declared effective by the Securities & Exchange Commission (the “SEC”). The Note is currently vested only as to an aggregate principal amount of $125,000, and the Warrant is currently vested only as to the right to purchase 41,667 shares. The remainder of the Note (as to an aggregate principal amount of $625,000) and the remainder of the Warrant (as to the right to purchase up to 203,333 shares) shall vest if, and only if, Triton pays the purchase price balance of $500,000. The original issue discount on the Note for the initial purchase price is $25,000, and the original issue discount for the Note, fully vested, is $150,000.

 

The Note can be prepaid at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”); provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75% of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.

 

Concurrently therewith, we entered into a registration rights agreement with the Buyer, pursuant to which we agreed to file a registration statement with the SEC for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant and to have the registration statement declared effective by the SEC at the earliest possible date.

 

The issuance was exempt under Section 4(a)(2) of the Securities Act.

 

II-2

 

 

Item 16. Exhibits.

 

Exhibit No.   Description
     
2.1   Definitive Agreement dated April 29, 2019 by and among between Coastal Labs, LLC and Green Hygienics Holdings Inc. (1)
3.1   Articles of Incorporation of Silver Bay Resources, Inc. (now known as Green Hygienics Holdings Inc.), incorporated by reference to our Registration Statement on Form S-1 filed on September 17, 2008 (File No. 333-153510).
3.2   Certificate of Amendment of Silver Bay Resources, Inc. (now known as Green Hygienics Holdings Inc.), incorporated by reference to our Current Report on Form 8-K filed on July 1, 2010 (File No. 333-153510).
3.3   Articles of Merger dated June 1, 2012 between of Green Hygienics Holdings Inc. and Takedown Entertainment, Inc., incorporated by reference to our Current Report on Form 8-K filed on June 7, 2012.
3.4   Certificate of Change Pursuant to NRS 78.209, incorporated by reference to our Current Report on Form 8-K filed on June 7, 2012.
3.5   Certificate of Amendment of Green Hygienics Holdings Inc., incorporated by reference to our Current Report on Form 8-K filed on February 21, 2013.
3.6   Bylaws, incorporated by reference to our Registration Statement on Form S-1 filed on September 17, 2008 (File No. 333-153510).
4.1   10% Convertible Promissory Note dated December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.
4.2   Common Stock Purchase Warrant dated December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.
5.1   Legal Opinion of Indeglia PC (1)
10.1   Securities Purchase Agreement by and between Green Hygienics Holdings, Inc. and Triton Funds LP dated as of December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.
10.2   Registration Rights Agreement by and between Green Hygienics Holdings, Inc. and Triton Funds LP dated as of December 19, 2019, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.
10.3   Amending Agreement by and between Green Hygienics Holdings, Inc. and Triton Funds LP dated as of January 8, 2020, incorporated by reference to our Current Report on Form 8-K filed on January 15, 2020.
10.4   Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated March 11, 2019 by and between Alita Capital, Inc. or Assignee, and Kreutzkamp Trust, incorporated by reference to our Current Report on Form 8-K filed on August 29, 2019.
10.5   Promissory Note Secured by Deed of Trust dated August 23, 2019 (1)
10.6   Secured Promissory Note dated August 15, 2019 (1)
10.7   Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated October 18, 2019 by and between Green Hygienics Holdings, Inc. or Assignee, and Dos Molson LLC and Pat Reid, incorporated by reference to our Current Report on Form 8-K filed on October 25, 2019.
10.8   Consulting Agreement dated August 1, 2019 between Ronald Loudoun and Green Hygienics Holdings Inc. (1)
10.9   2011 Stock Plan, incorporated by reference to our Current Report on Form 8-K filed on September 8, 2011.
14   Code of Ethics of Takedown Entertainment, Inc. (now known as Green Hygienics Holdings Inc.), incorporated by reference to our Annual Report on Form 10-K filed on October 27, 2011.
23.1   Consent of Saturna Group (1)
23.2   Consent of M&K CPAs (1)
23.3   Consent of Indeglia PC (filed as part of Exhibit 5.1)

 

 

(1) Filed herewith

 

II-3

 

 

Item 17. Undertakings.

 

The undersigned registrant hereby undertakes:

 

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

i. To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

 

ii. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

 

iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

 

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

II-4

 

 

(5) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(6) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

i. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. 

 

II-5

 

 

SIGNATURES

 

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and authorized this registration statement to be signed on its behalf by the undersigned on January 31, 2020.  

 

  GREEN HYGIENICS HOLDINGS INC.
     
  By: /s/ Ronald Loudoun
    Ronald Loudoun
    President, Chief Executive Officer, Chief Financial Officer and Director
    (Principal Executive and Financial and Accounting Officer)

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ronald Loudoun, as his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following person in the capacities and on the date indicated.

 

Signatures   Title   Date
         
/s/ Ronald Loudoun   President, Chief Executive Officer,   January 31, 2020
Ronald Loudoun   Chief Financial Officer, and director    
    (Principal Executive and Financial    
    And Accounting Officer)    

 

 

II-6

 

 

Exhibit 2.1

 

DEFINITIVE AGREEMENT

 

This Definitive Agreement (Agreement) between COASTAL LABS, LLC (Coastal), a Nevada limited liability company (SELLER), and GREEN HYGIENICS HOLDINGS, INC., (Green Hygienics) a Nevada corporation (BUYER), takes effect on April 29, 2019 (Effective Date).

 

BACKGROUND

 

The parties acknowledge that:

 

SELLER is engaged in the business of: laboratory testing of CBD and (the Business); and

 

SELLER desires to sell to BUYER and BUYER desires to purchase from SELLER, on the terms and subject to the conditions of this Agreement, the Acquired Assets.

 

The parties therefore agree as follows.

 

ARTICLE ONE

DUE DILIGENCE

 

Section 1.01 Due Diligence Period

 

The Due Diligence Period begins on the Effective Date and lasts until 5 PM Pacific time on proposed Close Date of May 15, 2019.

 

Section 1.02 Delivering Due Diligence Material

 

SELLER shall deliver to BUYER all of the Due Diligence Material (defined below in Error! Reference source not found.) within 10 business days after the Effective Date. BUYER shall notify SELLER in writing of any materials not provided within the 10-day period. For each day that passes after the notice is delivered until all of the Due Diligence Materials are delivered to BUYER, the Due Diligence Period and the Closing Date will be extended by one business day, up to a maximum of 10 days. If BUYER fails to notify SELLER of any missing Due Diligence Materials within 10 days after the end of the 10-day period, SELLER’s obligation to deliver Due Diligence Material will be deemed fulfilled.

 

ARTICLE TWO

PURCHASE AND SALE OF THE ACQUIRED ASSETS

 

Section 2.01 Purchase and Sale

 

Subject to the terms of this Agreement, SELLER agrees to sell to BUYER, and BUYER agrees to purchase from SELLER, the Acquired Assets. Simultaneously with BUYER’s payment of the Closing Payment, the Acquired Assets will be sold and delivered to BUYER electronically, together with bills of sale and other transfer documents duly signed by SELLER. The closing of the purchase and sale of the Acquired Assets (Closing) will take place electronically on May 31, 2019, or when and where the parties otherwise mutually agree (Closing Date).

 

Section 2.02 Purchase Price

 

Based on the information known to Green Hygienics on the date hereof, the total consideration for the Assets in

 

Coastal would be at Green Hygienics’ election:

 

BUYER to acquire, directly or through a syndicated group, 100% of the Assets of Coastal for an interest of 100%:

USD$ 3,000,000

 

BUYER to immediately upon closing issue 400,000 Common Shares, 200,000 to each individual member of Coastal, and 400,000 Common Shares each year thereafter for a term of five years, pursuant to the [Share Agreements] executed contemporaneously herewith;

 

1

 

  

Buyer to enter into a Consulting Agreement with each individual member of Coastal, or such entity as each respective member may designate, that sets forth ongoing compensation to each individual member of Coastal.

 

Use of Proceeds in the execution of this transaction, include without limit, those outlined in the attached SCHEDULE “A”

 

In addition to the Purchase Price, the Parties agrees as follows:

 

A New Entity, Inc. may be formed, or the parties shall arrange for the transfer of ownership of Coastal to a wholly owned subsidiary of Green Hgyienics (“NewCoastal”) to hold the Assets and operate the business on an ongoing basis.

 

The Parties shall contemporaneously enter in to an “Operating Agreement” that governs NewCoastal that reflects the material terms of this Agreement and the Consulting Agreement.

 

On Closing and as set forth in the Operating Agreement the Board of directors of NewCoastal shall be comprised of up to 6 members, of whom 3, or half, whichever is greater, of all Board members shall be nominees of Coastal. Each Board member shall have one vote with respect to Coastal’s affairs. Green Hygienics shall agree to vote in favor of Coastal’s nominees.

 

Green Hygienics will assume all of Coastal’s contracts relating to sales and distribution of the products.

 

By time of Closing, Coastal must satisfy Green Hygienics that it has or will within 30 days settled any outstanding issues with respect to its own shareholders or creditors.

 

ARTICLE THREE

REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER

 

Except as otherwise set forth in the attached schedules, SELLER represents, warrants, and covenants to BUYER as follows.

 

Section 3.01 Ownership of Acquired Assets

 

SELLER is the beneficial and record owner of, and has good and marketable title to, all of the Acquired Assets. This title is free and clear of all security interests, pledges, mortgages, liens, charges, encumbrances, adverse claims, preferential arrangements, obligations to sell, options or other rights to purchase, rights of first refusal or first negotiation, or other restrictions of any kind, including any restriction on the use, transfer, receipt of income, or other exercise of any attributes of ownership other than the Permitted Encumbrances described on Error! Reference source not found. (collectively, Encumbrances).

 

Green Hygienics would acquire, directly or through a syndicated group, 100% of the Assets of Coastal including all Goodwill and any Brands or Trademarks, by way of cash as of the closing of the proposed transaction. The parties intend that the closing of the proposed transaction would occur on or before May 31, 2019 (the “Closing”).

 

Section 3.02 Capacity and Authority

 

SELLER have the right and the requisite power, legal capacity, and authority to execute and deliver this Agreement and to carry out the terms and conditions applicable to SELLER under this Agreement. At Closing, BUYER will acquire from SELLER legal and beneficial ownership of, and good and marketable title to, the Acquired Assets, free and clear of all Encumbrances.

 

This Agreement and each other agreement and instrument to be signed and delivered by SELLER under this Agreement (collectively, SELLER’s Transaction Documents) comprise SELLER’s legal, valid, and binding obligation enforceable in accordance with their respective terms. SELLER has taken all requisite legal action to duly authorize the signing, delivery, and performance of this Agreement and the other SELLER’s Transaction Documents. SELLER have duly signed and delivered this Agreement.

 

Section 3.03 No Violations

 

To the best of Seller’s knowledge, SELLER’s signing and delivery of this Agreement and the other SELLER’s Transaction Documents, consummation of the transactions, and performance of these obligations will not:

 

conflict with or violate any applicable law or rule or regulation affecting SELLER, the Acquired Assets or the Business;

 

2

 

  

conflict with or violate any judgment, order, decree, or award of any court, arbitrator, mediator, or governmental agency or instrumentality to which SELLER is a party or by which SELLER or any of the Acquired Assets is bound or affected;

 

conflict with, violate, terminate, or accelerate the performance required by any contract, indenture, instrument, or other agreement to which SELLER is a party, or by which SELLER, or any of the Acquired Assets may be bound or affected.

 

Section 3.04 Consents and Approvals

 

No consent, approval, authorization, or other action by, or filing or registration with, any federal, state, or local governmental authority, or any other person or entity is required in connection with SELLER’s signing and delivery of this Agreement and SELLER’s Transaction Documents, SELLER’s consummation of the transactions contemplated by these documents, or SELLER’s performance of the obligations under them.

 

Section 3.05 Non-Foreign Status

 

SELLER is not a foreign person or entity under Internal Revenue Code Section 1445.

 

Section 3.06 Organization and Standing

 

SELLER is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware. SELLER is duly qualified to do business as a foreign limited liability company in each state in which the nature of the Business or the character or location of its assets requires this qualification. SELLER has the requisite limited liability company power and limited liability company authority to own or lease and operate the assets and properties owned or leased by SELLER and to carry on the Business as it is currently being conducted.

 

Section 3.07 Financial Statements

 

The Financial Statements contain only true statements of material fact, and include all material facts necessary to make the statements or information in the Financial Statements complete and accurate. The Financial Statements fairly present in all material respects SELLER’s financial position, operations results, and changes in financial position for the periods indicated; were prepared from SELLER’s books and records in accordance with generally accepted accounting principles; and have been prepared consistent with past periods. SELLER’s books of account and other financial records are complete and correct in all material respects.

 

Section 3.08 Absence of Specified Changes

 

Other than matters disclosed to BUYER in writing, there has not been any:

 

transaction by SELLER except in the ordinary course of business;

 

adverse change in the Acquired Assets and other properties, financial condition, liabilities, Business, operations, or prospects of SELLER;

 

change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by SELLER;

 

revaluation by SELLER of any of the Acquired Assets;

 

acquisition or disposition by SELLER of any of the Acquired Assets, except in the ordinary course of business;

 

amendment or termination of any material contract, agreement, or license to which SELLER is a party, except in the ordinary course of business; or

 

Encumbrance placed on any of the Acquired Assets.

 

Section 3.09 Acquired Assets

 

As of the Closing Date, each of the Acquired Assets must be included on the List of Acquired Assets (Error! Reference source not found.), with the exception of immaterial Acquired Assets (that have no more than a total fair market value of $1,000.00). The tangible Acquired Assets include the spare parts and inventory necessary to continue the operation of the Business as presently conducted without material interruption. The tangible Acquired Assets (other than Inventory) are in good operating condition and repair. All assets not listed on Schedule 3.09 shall automatically be considered Excluded Assets, even if such assets are not specifically designated as such.

 

Section 3.10 Excluded Assets

 

Schedule 3.10 lists all of the Excluded Assets specifically excluded from the sale.

 

3

 

  

Section 3.11 Assumed Liabilities.

 

The Buyer assumes and agrees to pay, perform and discharge the following Liabilities of the Seller (collectively, the “Assumed Liabilities”):

 

All trade accounts payable as of the Closing Date;

 

Liabilities to be performed after the Closing Date under any Acquired Agreement or Contract and/or assumed permit, license, and/or registration incurred by the Seller in the ordinary course of business; provided, however, that such Liabilities will only be Assumed Liabilities to the extent that all benefits under such Contracts or Permits are transferred to the Buyer pursuant to this Agreement and the existence of such Liabilities does not constitute a breach of the representations and warranties of the Seller and the Members set forth in this Agreement or in such Contract or Permit. For the avoidance of doubt, the Assumed Liabilities shall not include any expenses or Liabilities of the Seller or the individual members of Coastal incurred in connection with the negotiation and consummation of the Transactions (including any amounts paid or payable to lawyers, accountants, investment bankers or other third party advisors).

 

As used herein, “Liability” means any liability, obligation or commitment of any kind or nature, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due,

 

Section 3.12 Intellectual Property

 

Error! Reference source not found. lists all SELLER’s Intellectual Property. SELLER has delivered true, correct, and complete copies of all this Intellectual Property to BUYER. SELLER has not received any notice of any conflict with the asserted rights of others with respect to any Intellectual Property of SELLER. SELLER owns or is the licensee of all Intellectual Property necessary to continue the Business operations as presently conducted. The consummation of this transaction will not cause the loss or impairment of any of SELLER’s rights under any of the items described on Error! Reference source not found..

 

Section 3.13 Inventory

 

SELLER’s inventory (Inventory) comprises items of a quality and quantity usable and saleable in the usual and ordinary course of business. The Inventory items comprising raw materials and work in process are capable of being processed into finished goods of merchantable quality at ordinary costs and by ordinary procedures.

 

Section 3.14 Personal Property Leases

 

Error! Reference source not found.4 lists the name and address of each party to any lease affecting any item of personal property used by SELLER (Personal Property), the address of the Real Property subject to the lease, and the term of the lease. The leases described in Error! Reference source not found. are valid and in full force and effect. Neither SELLER nor any other party to any lease is in default under the terms of the lease, and no condition exists that, with notice or lapse of time or both, would constitute such a default. No lease has been modified or amended other than as indicated on or attached to the lease. SELLER has made no commitment, concession, undertaking, or representation to any lessor other than as set forth in Error! Reference source not found..

 

Section 3.15 Acquired Agreements and Contracts

 

Error! Reference source not found.5 comprises a complete and accurate list of all material Acquired Agreements and Contracts. Before Closing, BUYER will have been provided with or given an opportunity to review a complete and accurate copy of each of these agreements or contracts. No agreement or contract has been modified or amended other than as disclosed in Error! Reference source not found.5. Except as otherwise disclosed in Error! Reference source not found.5, SELLER has performed all obligations required to be performed to date; there are no material defaults by SELLER or, to SELLER’s best knowledge, by any other party. To SELLER’s best knowledge, no event has occurred (or not occurred) that, with the passing of time or the giving of notice or both, would be a material default under any such contract.

 

4

 

 

Section 3.16 Litigation and Claims

 

SELLER is not a party to, and to SELLER’s knowledge, there is no pending or overtly threatened litigation, other legal proceeding, or governmental investigation against SELLER:

 

affecting the Acquired Assets or the Business, or challenging the validity or propriety of, or seeking to enjoin or to set aside, the transactions contemplated by this Agreement, including the signing and delivery of this Agreement, consummation of the transactions contemplated herein, or performance of its respective obligations.

 

SELLER is not a party to any judgment, order, decree, or award of any court, arbitrator, mediator, governmental agency, or instrumentality that would or might affect the Acquired Assets or the Business.

 

Section 3.17 Employees

 

Error! Reference source not found.7 lists all union or collective-bargaining agreements, employment agreements, compensation agreements, deferred-compensation agreements, severance plans, stay-bonus plans, and all employee-benefit plans, including pension or retirement plans, profit-sharing plans, stock-purchase or stock-option plans, medical insurance, bonuses, and provisions for vacation or sick leave, to which SELLER is a party. Error! Reference source not found. also lists the salary, severance, bonus, or other compensation programs pertaining to all SELLER’s officers and employees. SELLER is not subject to any actual or, to SELLER’s best knowledge, threatened labor dispute or labor trouble, and is not subject to any actual, or, to SELLER’s best knowledge, threatened demand by its employees for a collective-bargaining agreement or recognition by any labor organization, labor grievance proceeding, controversy with any labor or employee organization, or claim or proceeding with any employee or union under any labor law, including equal opportunity law or occupational safety and health law. None of the key management employees has indicated to SELLER any intention to terminate his or her employment with SELLER. Before Closing, BUYER will have been provided with a complete and current copy of all of SELLER’s employee manuals, benefits, and policies. SELLER:

 

has no obligation under, no commitment or agreement to enter into, and no officer, director or employee of SELLER is covered in respect of their employment by, employees’ profit-sharing plan, employees’ stock-purchase plan, employees’ pension plan, employees’ severance-pay plan or policy, or other similar agreement or benefit plan;

 

is not in default under any such plan; and

 

is not a party to, or participant in, any multi-employer pension plan.

 

Section 3.18 Compliance with Laws

 

To the best of its knowledge, SELLER has complied in all material respects with all laws, rules, regulations, and orders applicable to the Business’s operation. SELLER has all licenses and permits from governmental authorities required to continue to conduct the Business in the same manner it is currently conducted.

 

Section 3.19 Insurance Policies and Coverages

 

Error! Reference source not found. lists and describes all insurance policies (including policy amounts and deductibles) that provide coverage to SELLER. SELLER’s insurance coverages are adequate for the conduct of the Business and for the full repair or replacement of the Acquired Assets. The Acquired Assets are covered if they are damaged, destroyed, or lost as the result of any fire or other casualty or loss customarily insured against under extended fire and all-risk insurance policies. SELLER’s general liability coverage insurance is written on an occurrence-form policy, and includes errors and omissions coverage, premises and operations coverage, and products and completed operations coverage. SELLER has not received any notice of policy termination and to SELLER’s best knowledge, no facts or conditions exist that, with notice or lapse of time or both, would or might terminate any of the policies. SELLER has had similar liability insurance in full force and effect, without interruption. SELLER is not in default and, to SELLER’s best knowledge, no event has occurred (or not occurred) that, with the passing of time or the giving of notice or both, would constitute a default by SELLER under any such policy of insurance, or would entitle the insurer under this insurance to deny coverage of any claim against SELLER.

 

Section 3.20 Brokers and Finders

 

No broker or finder has acted for SELLER in connection with this Agreement or the transactions contemplated by it. No broker or finder is entitled to any brokerage commission, finder’s fee, or other compensation based on an agreement or arrangement by SELLER.

 

5

 

  

Section 3.21 Taxes and Tax Returns

 

All federal, state, and local income and other tax returns (including all returns or declarations in respect of taxes and impositions) of SELLER required to be filed on or before this date have been filed. All taxes shown on these returns or on any assessments received by SELLER that are due on or before this date have been paid or adequately reserved for in SELLER’s financial books and records. All taxes and assessments required to have been withheld or collected by SELLER have been duly withheld and collected on or before this date and have been duly paid over to the proper governmental authorities, as and to the extent required by law. SELLER has not been advised of any deficiency claimed or proposed to be claimed against or relating to SELLER by any taxing authority that has not been paid, settled, or scheduled herein, and no matters are under discussion with any taxing authority that might result in the assessment of additional amounts against or relating to SELLER. There are no agreements, waivers, or other arrangements providing for an extension of time with respect to the filing of any returns or the assessment of any tax or deficiency against or relating to SELLER. The reserve for taxes in the financial books and records of SELLER are sufficient for the payment of all unpaid federal, state and local taxes (including the various taxes or impositions referred to in the first sentence of this Section) through the date hereof and for all periods prior thereto. SELLER has furnished BUYER with true and complete copies of all SELLER’s federal, state, and local income tax and property tax returns as actually filed for SELLER’s last 03 tax years and has furnished copies of all of the related work papers used to prepare these tax returns if requested by BUYER.

 

Section 3.22 Schedules Delivered

 

All of the schedules described in this Agreement and prepared by or on behalf of SELLER that are being delivered to BUYER with this Agreement are accurate and complete as of this date and will be accurate and complete as of the Closing Date, unless the schedule reflects a different date. If the schedule reflects a different date, the schedules are true, accurate, and complete as of the date indicated, and have been prepared in conformity with the provisions of this Agreement.

 

Section 3.23 No Material Misstatements

 

No representation or warranty by SELLER in this Agreement or in any attached exhibit or schedule contains any untrue statement of a material fact or omits to state a material fact necessary to fairly inform BUYER.

 

ARTICLE FOUR

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Except as otherwise set forth in the attached schedules, BUYER represents, warrants, and covenants to SELLER as follows.

 

Section 4.01 Organization and Standing

 

BUYER is a corporation duly organized, validly existing, and in good standing under the laws of Nevada. [

 

Section 4.02 Capacity and Authority

 

BUYER has the requisite corporation power and corporation authority to sign and deliver this Agreement and to carry out the terms applicable to it under this Agreement. The signing, delivery, and performance of this Agreement by BUYER has been duly authorized by all requisite corporation action on the part of Buyer, and this Agreement has been duly signed and delivered by BUYER. This Agreement comprises, and each other agreement or instrument to be signed and delivered by BUYER under the terms of this Agreement will comprise, the legal, valid, and binding obligations of BUYER, enforceable against BUYER in accordance with their terms.

 

Section 4.03 No Violations

 

BUYER’s signing and delivery of this Agreement, consummation of the transactions contemplated by this Agreement, and performance of BUYER’s obligations under this Agreement will not:

 

conflict with or violate BUYER’s articles or bylaws;

 

conflict with or violate any applicable law, rule, or regulation affecting BUYER; or

 

conflict with or violate any judgment, order, decree, or award of any court, arbitrator, mediator, or governmental agency or instrumentality, to which BUYER is a party or by which BUYER is bound or affected;

 

conflict with any other agreement, MOU/LOI, or understanding between BUYER, GRYN, and any other individual or entity.

 

violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of, or to cancel, terminate, modify or exercise any remedy under, any Contract to which the Buyer is a party or by which the Buyer is bound or the performance of which is guaranteed by the Buyer. The Buyer is not required to notify, make any filing with, or obtain any Consent of any Person in order to perform the Transactions.

 

6

 

  

Section 4.04 Consents and Approvals

 

No consent, approval, authorization, or other action by, or filing or registration with, any federal, state, or local governmental authority or any other person or entity is required in connection with BUYER’s signing and delivery of this Agreement, consummation of the transactions contemplated by this Agreement, or performance of BUYER’s obligations under this Agreement.

 

Section 4.05 Litigation and Claims

 

BUYER is not a party to, nor is there any pending or overtly threatened litigation or other legal proceeding or governmental investigation against BUYER challenging the validity or propriety of, or seeking to enjoin or set aside BUYER’s:

 

signing and delivery of this Agreement;

 

consummation of the transactions contemplated by this Agreement; or

 

performance of BUYER’s obligations under this Agreement.

 

Section 4.06 Brokers and Finders

 

No broker or finder has acted for BUYER in connection with this Agreement or the transactions contemplated by this Agreement. No broker or finder is entitled to any brokerage commission, finder’s fee, or other compensation based on agreements or arrangements made by BUYER.

 

ARTICLE FIVE

COVENANTS OF SELLER

 

Section 5.01 Schedules

 

At least 5 business days before the Closing, SELLER will deliver to BUYER any schedules referenced in Article Three schedules that have not already been delivered to BUYER with this Agreement.

 

Section 5.02 Investigation

 

SELLER agrees that, from the date of this Agreement through the Closing, SELLER shall:

 

permit BUYER and its authorized representatives full access to its facilities and properties during regular business hours and during reasonable additional hours;

 

make SELLER’s employees and authorized representatives available to confer with BUYER and its authorized representatives; and

 

make available to BUYER and its authorized representatives all books, papers, and records relating to the Acquired Assets, the Business, or the obligations and liabilities of SELLER including all books of account (including the general ledger), tax records, organizational documents, corporate minute book, bylaws, contracts and agreements, filings with any regulatory authority, any financial operating data, and any other business information relating to the Business as BUYER requests.

 

SELLER acknowledges that BUYER also wants to contact (including making telephone inquiries and local on-site visits) customers and suppliers of SELLER and it agrees to cooperate with BUYER in making this contact so that BUYER will have full opportunity to investigate SELLER’s business affairs. All customer contacts will be done in a manner that will not disclose the identity of BUYER or the transactions contemplated by this Agreement.

 

Section 5.03 Conduct of Business

 

SELLER agrees that, from the date of this Agreement through the Closing, SELLER shall:

 

conduct the Business and engage in transactions only in the ordinary course of business and in a commercially reasonable manner;

 

use all commercially reasonable efforts to keep SELLER’s business organization intact and to preserve all SELLER’s present relationships with, and the goodwill of, employees, suppliers, and others having a business relationship with SELLER;

 

7

 

  

protect and preserve the Acquired Assets and SELLER’s rights in them;

 

maintain the tangible Acquired Assets in good operating condition and repair, ordinary wear and tear excepted; and

 

maintain in full force and effect all existing insurance policies to cover and protect the Acquired Assets against damage or destruction and to insure SELLER against liability.

 

Without BUYER’s prior consent, SELLER will not:

 

dispose of any of the Acquired Assets, other than inventory and supplies consumed in the ordinary conduct of Business;

 

enter into any new contract or cancel or amend any existing contract to which SELLER is a party;

 

or commit any act that will have a materially adverse effect on the Business or the Acquired Assets.

 

Section 5.04 Satisfying Conditions

 

SELLER shall use all commercial efforts to perform all of its covenants in this Agreement that are conditions to BUYER’s obligation to purchase the Acquired Assets before April 26, 2019. This includes obtaining all consents, approvals, authorizations, and other actions by, and completing all filings or registrations with, all federal, state, and local governmental authorities that are necessary for SELLER to consummate the transactions contemplated by this Agreement.

 

Section 5.05 Disclosure of Changes

 

SELLER will not knowingly take any action or fail to take any action that would make any representation, warranty, or covenant made by SELLER in this Agreement untrue. SELLER shall promptly notify BUYER in writing of:

 

the commencement or overt threat of any lawsuit or claim against SELLER that affects the Acquired Assets or the Business, challenges the validity or propriety of this Agreement, or seeks to enjoin or to set aside the transactions contemplated by this Agreement;

 

any adverse change in the Acquired Assets or Business; and

 

any change in any of the representations or warranties of SELLER in this Agreement or in any exhibit, certificate, or other document delivered to BUYER by SELLER under this Agreement. Notice to BUYER of any of the foregoing is not an amendment to the representations and warranties of SELLER in this Agreement.

 

Section 5.06 Exclusive Dealing

 

Up until the Closing Date, SELLER must deal exclusively with BUYER with respect to the transactions contemplated by this Agreement, and must not:

 

solicit, encourage, or entertain offers of inquiry from other persons or entities;

 

provide information to, participate in, or continue after this date any discussions or negotiations with any other persons or entities with an interest in acquiring any of the Acquired Assets other than in the ordinary course of SELLER’s business, or the Business (nor will SELLER authorize or permit any director, officer, employee, attorney, accountant or other representative or agent of SELLER to solicit, encourage, or entertain offers or inquiries).

 

Section 5.07 Destruction of Acquired Assets

 

If any of the Acquired Assets are stolen, damaged, or destroyed before the Closing, at BUYER’s option, SELLER will either:

 

replace a stolen or destroyed Acquired Asset with an asset of like value, quality, and type or repair a damaged Acquired Asset; or

 

deliver to BUYER at the Closing any insurance proceeds that SELLER received in connection with the stolen, damaged, or destroyed asset, or assign the insurance proceeds to BUYER if SELLER has not received them by the Closing.

 

ARTICLE SIX

COVENANTS OF BUYER

 

Section 6.01 Satisfying Conditions

 

BUYER shall use all commercial efforts to perform all of its covenants in this Agreement that are conditions to SELLER’s obligation to sell the Acquired Assets before April 26, 2019. This includes reasonably obtaining all consents, approvals, authorizations, and other actions by, and completing all filings or registrations with, all federal, state, and local governmental authorities that are necessary for BUYER to consummate the transactions contemplated by this Agreement.

 

8

 

  

Section 6.02 Collection of Accounts Receivable

 

After the Closing, BUYER shall use commercial efforts to collect all Accounts Receivable in existence at the Closing on SELLER’s behalf. BUYER must pay all amounts collected (less any reasonable collection expenses incurred by BUYER) to SELLER not less frequently than on the first business day of each month. If a Business customer owes amounts to both SELLER and BUYER, unless this customer clearly indicated in writing the payment allocation, the payment will be allocated as follows: 100% to SELLER and 0% to BUYER. Until 10 days after the Closing, SELLER must not attempt to collect any of the Accounts Receivable, or authorize or engage any third party to attempt to collect the Accounts Receivable.

 

Section 6.03 Access to Books and Records

 

After the Closing, at SELLER’s expense, BUYER will make available to SELLER the information and documents that SELLER reasonably requests:

 

to defend any claim, demand, or assertion, including tax audits, brought by or against SELLER or a third party related to any claim that arose prior to closing; and

 

to prepare any tax returns for the fiscal year of SELLER (or any portion thereof) occurring before the Closing.

 

For any claim that arose after the closing, all such information and documents shall be made available at BUYER’s sole expense.

 

Section 6.04 Employment of SELLER’s Employees

 

After Closing, BUYER has no responsibility whatsoever with respect to SELLER’s employees. BUYER is not obligated to hire any of SELLER’s employees. SELLER acknowledges that BUYER is entitled to hire any of SELLER’s employees, but BUYER must give SELLER a written list of the employees BUYER wants to hire at least five days before Closing. The hire will be effective on the Closing Date. BUYER assumes none of SELLER’s obligations to or with respect to any of its employees; this includes, but is not limited to, obligations under employment contracts, employee-benefit plans, collective-bargaining agreements, and applicable laws. Applicable laws include, without limitation, liability for payroll taxes and other proper deductions and withholdings.

 

Specifically—but without limiting the generality of the foregoing—SELLER is solely responsible for any liability arising directly or indirectly under the Worker Adjustment and Retraining Notification Act, as amended because of the transactions contemplated by this Agreement. SELLER acknowledges and agrees that BUYER does not assume or agree to discharge any liability of SELLER under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA) with respect to any of SELLER’s current or former employees. SELLER agrees that it will not take any voluntary action, including, without limitation, the termination of its healthcare plan that would—or might reasonably be expected to—impose COBRA liability upon BUYER for SELLER’s current or former employees not hired by BUYER. SELLER shall indemnify, defend, and hold harmless BUYER from and against any liabilities, damages, costs, and expenses assessed upon or incurred by BUYER that are SELLER’s responsibility under this Section.

 

ARTICLE SEVEN

CONDITIONS TO OBLIGATION OF BUYER TO PERFORM

 

BUYER’s obligations under this Agreement are subject to the satisfaction of the following conditions on or before the Closing Date. BUYER may waive any condition by delivering written notice of the waiver to SELLER.

 

Section 7.01 Representations and Warranties True on the Closing Date

 

The representations and warranties of SELLER in this Agreement, in the Schedules and Exhibits to it, and in any certificate, document, or statement delivered under its provisions must be true and correct on the Closing Date as if made on the Closing Date. SELLER must have delivered to BUYER a certificate in form and substance satisfactory to BUYER, dated the Closing Date and signed by SELLER to this effect.

 

Section 7.02 Compliance with Agreement

 

SELLER must have performed and complied with all agreements, covenants, conditions, and obligations required by this Agreement to be performed or complied with by SELLER before or on the Closing Date. SELLER must have delivered to BUYER a certificate in form and substance satisfactory to BUYER, dated the Closing Date and signed by SELLER to this effect.

 

9

 

 

Section7.03 No Material Adverse Changes

 

From this date to the Closing Date, there must have been no material adverse changes in the Business or the Acquired Assets as determined by BUYER’s good-faith judgment.

 

Section 7.04 No Pending Litigation

 

There is no pending or threatened claim, proceeding, investigation, or inquiry by any person, governmental body, or authority that seeks to prevent or change the terms of this Agreement or the transaction contemplated by it, to obtain damages in connection with this Agreement or the transaction contemplated by it, or to question the validity or legality of the consummation of the transaction contemplated by this Agreement.

 

Section 7.05 Consents

 

SELLER and BUYER have received all consents from all third parties necessary to consummate the transaction contemplated in this Agreement.

 

Section7.06 Documents, Certificates, and Other Items

 

SELLER will have delivered or caused to be delivered to BUYER:

 

a current Certificate of Good Standing evidencing SELLER’s corporate standing in each state where it is incorporated or qualified to do business;

 

if available from the taxing authorities, a current certificate issued by the appropriate taxing authority of the states of Arizona, California, Connecticut, Delaware and Florida certifying that there are no tax liens of record against SELLER and that SELLER is not obligated for any taxes that are due but unpaid; and

 

bills of sale and assignments, and other transfer documents reasonably requested by BUYER.

 

Section 7.07 Miscellaneous

 

BUYER has received all additional instruments and documents as may reasonably be required by this Agreement or to consummate the transactions contemplated in this Agreement.

 

ARTICLE EIGHT

CONDITIONS TO OBLIGATION OF SELLER TO PERFORM

 

SELLER’s obligations under this Agreement are subject to the satisfaction of the following conditions on or before the Closing Date. SELLER may waive any of these conditions by delivering written notice of the waiver to BUYER.

 

Section 8.01 Representations and Warranties True on the Closing Date

 

BUYER’s representations and warranties in this Agreement; in the Schedules and Exhibits to the Agreement; and in any certificate, document, or statement delivered under the provisions of the Agreement must be true and correct on and as of the Closing Date as if made on the Closing Date. BUYER must have delivered to SELLER a certificate in form and substance satisfactory to SELLER and Member, dated the Closing Date and signed by BUYER to this effect.

 

Section 8.02 Compliance with Agreement

 

BUYER must have performed and complied with all agreements, covenants, conditions, and obligations required by this Agreement to be performed or complied with by BUYER before or on the Closing Date. BUYER must have delivered to SELLER a certificate in form and substance satisfactory to SELLER, dated the Closing Date and signed by BUYER to this effect.

 

Section 8.03 No Pending Litigation

 

There is no pending or threatened claim, proceeding, investigation, or inquiry by any person, governmental body, or authority that seeks to prevent or change the terms of this Agreement or the transaction contemplated by it, to obtain damages in connection with this Agreement or the transaction contemplated by it, or to question the validity or legality of the consummation of the transaction contemplated by this Agreement.

 

10

 

 

Section 8.04 Consents

 

SELLER and BUYER have received all consents from all third parties necessary to consummate the transactions contemplated by this Agreement.

 

Section 8.05 Miscellaneous

 

SELLER have received all additional instruments and documents as may reasonably be required by this Agreement, or to consummate the transactions contemplated in this Agreement.

 

ARTICLE NINE

TERMINATION

 

If for any reason the Closing does not occur by May 31, 2019, and neither BUYER, on the one hand, nor SELLER, on the other hand, is in breach of its respective obligations under this Agreement, then any party may terminate this Agreement and no party will have any further obligation to the others. If the Closing does not occur because of the breach or default by any party to the Agreement, the non-breaching party or parties have the right to pursue all remedies available provided under this Agreement, at law, and in equity, including specific performance or injunctive relief.

 

ARTICLE TEN

INDEMNIFICATION

 

Section 10.01 Indemnification by SELLER and BUYER

 

Subject to the limitations in Section 10.02, SELLER will indemnify, hold harmless, defend, and bear all costs of defending BUYER, together with BUYER’s successors and permitted assigns, from, against, and with respect to all damage, loss, deficiency, and related expense (including any reasonable attorney and accountant fees, and related expenses), action, suit, proceedings, demand, assessment, or judgment to or against BUYER (collectively, BUYER’s Aggregate Net Loss) arising prior to Closing out of or in connection with:

 

any breach or violation of, or nonperformance by SELLER of any of its representations, warranties, covenants, or agreements in this Agreement or in any agreement, document, certificate, or schedule required to be furnished under this Agreement;

 

any obligation, debt, or liability of SELLER that is not one of the Assumed Liabilities; or all taxes arising out of the purchase and sale of the Acquired Assets.

 

Subject to the limitations in Section 10.02, BUYER will indemnify, hold harmless, defend, and bear all costs of defending SELLER, together with its heirs, successors and permitted assigns, from, against, and with respect to all damage, loss, deficiency, expense (including any reasonable attorney and accountant fees and related expenses, but any indemnification with respect to attorney and accountant fees and related expenses is limited to one legal counsel and one accountant who represent all of SELLER, action, suit, proceedings, demand, assessment, or judgment to or against SELLER (collectively, SELLER’s Aggregate Net Loss) arising out of or in connection with:

 

BUYER’s breach, violation, or nonperformance of any of its representations, warranties, covenants, or agreements in this Agreement or in any agreement, document, certificate, or schedule required to be furnished under this Agreement; and

 

any of the Assumed Liabilities.

 

The rights of BUYER, SELLER to assert indemnification claims survive for a period of five years. Seller shall have no liability with respect to any particular loss or series of related losses indemnifiable hereunder until the total amount of such losses exceeds $250,000 at which point the full amount thereof will be considered an indemnifiable loss.

 

Section 10.02 Third-Party Claims

 

If any third-party claim (Third-Party Claim) is made by or against a party (the Claiming Party) that, if sustained, would give rise to a liability of the other party or parties under this Agreement (collectively, Indemnifying Party), that Claiming Party will promptly cause written notice of the claim to be delivered to the Indemnifying Party and will afford the Indemnifying Party and its counsel (who must be reasonably acceptable to the Claiming Party), at the Indemnifying Party’s sole expense, the opportunity to defend or settle the Third Party Claim.

 

11

 

 

Any notice of a Third-Party Claim will specifically state the alleged basis for the claim and the amount of liability asserted by or against the Claiming Party or Claiming Parties. If this notice is not given, the Indemnifying Party will not be released, in whole or in part, from its obligations under Article Ten, except to the extent that the Indemnifying Party’s ability to defend against the Third-Party Claim is actually prejudiced by the lack of notice. Alternatively, if notice is given and the Indemnifying Party fails to assume the defense of this claim with counsel reasonably satisfactory to the Claiming Party within 10 days of receiving notice, the Third-Party Claim may be defended, compromised, or settled by the Claiming Party without the Indemnifying Party’s consent and the Indemnifying Party will remain liable under Article Ten. The Claiming Party must fully cooperate with counsel for the Indemnifying Party. The Indemnifying Party will cause its counsel to consult with the Claiming Party, as appropriate, as to the defense of the claim. The Claiming Party may, at its own expense, participate in this defense, assistance, or enforcement, but the Indemnifying Party will control this defense, assistance, or enforcement.

 

The Indemnifying Party may settle any Third-Party Claim that it is defending under Section 10.02 only if this Third-Party Claim solely involves monetary damages and only if the amount of the settlement is to be paid entirely by the Indemnifying Party under Article Ten. The Indemnifying Party may not enter into a settlement of a Third-Party Claim that involves a non-monetary remedy or that will not be paid entirely by the Indemnifying Party under Article Ten without the Claiming Party’s written consent; this consent must not be unreasonably withheld.

 

The amount of any indemnification under this Agreement will be reduced by any insurance proceeds paid to the Claiming Party because of the loss or other matter for which indemnification is sought, as adjusted for any increased insurance premiums resulting from tendering the claim to the insurance carrier. The Claiming Party must submit all coverable claims to its insurance carrier and pursue these claims against its insurance carrier in good faith. The Claiming Party must not abandon or compromise any claim without the consent of the Indemnifying Party; this consent will not be unreasonably withheld.

 

Section 10.03 Deferred Payment as Source of Payment Obligations of SELLER

 

At the election of BUYER in its sole and absolute discretion, any of BUYER’s indemnity claims resolved in its favor by a final non-appealable court order, may be satisfied by offsetting the amount of the claims against the Deferred Payment.

 

Section 10.04 Sole and Exclusive Remedy

 

The indemnification provided in Article Ten is the sole and exclusive remedy of BUYER and SELLER with respect to matters described in Article Ten without regard to whether the matter involves claims fraud in contract, tort, equity or otherwise.

 

ARTICLE ELEVEN

GENERAL PROVISIONS

 

Section 11.01 Expenses

 

Except as otherwise specifically provided, each party is responsible for its own fees, costs, and other expenses—including fees for counsel, financial advisors, and accountants—incurred in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated under it.

 

Section 11.02 Survival of Representations, Warranties, and Covenants

 

The respective representations, warranties, and covenants of BUYER and SELLER made in this Agreement or in any certificate or other document delivered under this Agreement, including the obligations of indemnity, will survive the Closing Date and the consummation of the transactions contemplated by this Agreement, despite any examination made by or for the party to whom the representations, warranties, or covenants were made; the knowledge of any officers, directors, employees, or agents of the party; or the acceptance of any certificate or opinion.

 

12

 

 

Section 11.03 Notices

 

All notices and other communications given or made under this Agreement must be in writing and will be considered duly given or made:

 

on the date delivered, if delivered personally or if sent by facsimile and the facsimile is promptly confirmed by written confirmation sent by registered or certified US mail (postage prepaid, return receipt requested); or three days after being mailed, if mailed by registered or certified US mail (postage prepaid, return receipt requested) to the parties to this Agreement at the following addresses (or the address a party specifies by like notice, except that notices of changes of address shall be effective upon receipt).

 

  If to SELLER

COASTAL LABS, LLC

 

email: travis@coastallabs.com

Attn: Travis Chrisman

848 N. Rainbow Blvd. #8086

Las Vegas, NB 89107

800 619 1451

     
  with a copy to

Global Legal Law Firm

James C. Huber

380 Stevens Ave. Ste. 311

Solana Beach, CA 92075

     
  If to BUYER

GREEN HYGIENICS HOLDINGS, INC.

13795 Blaisdaell Place, Suite 202

Poway, CA 92064

tel: 778 839 7373

email: ron@greenhygienicsholdings.com

Attn: RON LOUDOUN

 

Section 11.04 Entire Agreement

 

This Agreement constitutes the sole and entire agreement of its parties with respect to the Agreement’s subject matter. This Agreement supersedes all prior and contemporaneous understandings, agreements, representations, and warranties—both written and oral—with respect to the subject matter. As between or among the parties, no oral statements or prior written material not specifically incorporated herein shall be of any force and effect. The parties specifically acknowledge that, in entering into and executing this Agreement, each is relying solely upon the representations and agreements contained in this Agreement and no others.

 

Section 11.05 Amendments

 

No provision of this Agreement may be amended or modified except by a written instrument executed by all parties to this Agreement.

 

Section 11.06 Multiple Originals; Validity of Copies

 

This Agreement may be signed in any number of counterparts, each of which will be deemed an original. Any Person may rely on a copy of this Agreement that any party to this Agreement certifies to be a true copy to the same effect as if it were an original.

 

Section 11.07 Governing Law

 

This Agreement is governed, construed, and administered according to the laws of California, as from time to time amended, and any applicable federal law. No effect is given to any choice-of-law or conflict-of-law provision or rule (whether of California or any other jurisdiction) that would cause the application of the law of any jurisdiction other than those of California.

 

13

 

 

Section 11.08 Attorneys’ Fees

 

If any party to this Agreement institutes any legal cause of action—including arbitration—against another party arising out of or relating to this Agreement, the prevailing party will be entitled to the costs incurred in conducting the cause of action, including reasonable attorneys’ fees and expenses and court costs.

 

Section 11.09 No Third-Party Beneficiaries

 

This Agreement is for the sole benefit of its parties and their respective heirs, executors, administrators, successors, and assigns. Nothing in this Agreement, express or implied, confers any legal or equitable right, benefit, or remedy of any nature whatsoever upon any other person or the creditors of any person.

 

Section 11.10 Assignment

 

No party to this Agreement may assign or transfer this Agreement without the prior written consent of all other parties, except in connection with the sale of all or substantially all of BUYER’s assets and properties, or the merger or other reorganization of BUYER.

 

Section 11.11 Successors

 

Except as otherwise provided in this Agreement, all provisions of this Agreement bind, inure to the benefit of, and are enforceable by and against the respective heirs, executors, administrators, personal representatives, successors, and permitted assigns of any of the parties to this Agreement.

 

Section 11.12 Modification for Legal Events

 

If any court of competent jurisdiction determines that any provision or any part of a provision set forth in this Agreement is unenforceable because of its duration or geographic scope, the court has the power to modify the unenforceable provision instead of severing it from this Agreement in its entirety. The modification may be by rewriting the offending provision, by deleting all or a portion of the offending provision, by adding additional language to this Agreement, or by making other modifications as it determines necessary to carry out the parties’ intent to the maximum extent permitted by applicable law. The parties expressly agree that this Agreement as modified by the court is binding upon and enforceable against each of them.

 

Section 11.13 Severability

 

The invalidity or unenforceability of any provision of this Agreement does not affect the validity or enforceability of any other provision of this Agreement. If a court of competent jurisdiction determines that any provision is invalid, the remaining provisions of this Agreement are to be construed as if the invalid provision had never been included in this Agreement.

 

Subject to Section 11.12, upon a determination that any provision is invalid, illegal, or unenforceable, the parties to this Agreement shall negotiate in good faith to modify this Agreement to give effect to the original intent of the parties as closely as possible in a mutually acceptable manner so that the transactions contemplated by this Agreement can be consummated as originally contemplated to the greatest extent possible.

 

Section 11.14 Further Assurances

 

The parties agree to provide to each other such further assurances, information, or documentation, or to undertake such further action, including signing and delivering any additional documents, instruments, or conveyances, as the other party may reasonably request for the purpose of carrying out the provisions of, or transactions contemplated, by this Agreement.

 

ARTICLE TWELVE

DEFINITIONS AND INTERPRETATION

 

Section 12.01 Definitions

 

For purposes of this Agreement, the following terms have the following meanings.

 

(a) Acquired Agreements and Contracts

 

Acquired Agreements and Contracts means, collectively, all agreements and contracts to which SELLER is a party, or by which Acquired Assets and SELLER are subject.

 

14

 

  

(b) Acquired Assets

 

Acquired Assets means all assets and properties of SELLER, including all:

 

furniture, fixtures, and equipment;

 

inventory;

 

owned or leased Real Property;

 

Intellectual Property;

 

Acquired Agreements and Contracts; and

 

books and records pertaining to the Business.

 

(c) Accounts Receivable

 

Accounts Receivable means all SELLER’s rights to payment for goods sold or leased or for services provided. This includes all notes and other instruments or obligations arising out of, evidencing, or representing the right to payment for goods sold or leased by SELLER, or for services provided by SELLER.

 

(d) Agreement

 

Agreement means this Asset Purchase Agreement.

 

(e) Assumed Liabilities

 

Assumed Liabilities is defined in later sections.

 

(f) Business

 

Business is defined in the Background section of this Agreement.

 

(g) Closing

 

Closing means the closing of the purchase and sale of the Acquired Assets.

 

(h) Closing Date

 

Closing Date means the date the Closing will take place as described in Section 2.01.

 

(i) Closing Payment

 

Closing Payment is defined in Section 2.02.

 

(j) Deferred Payment

 

Deferred Payment means the balance of the Estimated Purchase Price after BUYER makes the Closing Payment.

 

(k)       Excluded Assets Excluded Assets means:

 

all cash on hand and in SELLER’s deposit accounts, money market accounts, and other similar accounts located at banks and other financial institutions;

 

all marketable securities; and

 

all Accounts Receivable.

 

15

 

 

(l) Encumbrances

 

Encumbrances is defined in Section 3.01 and does not include Permitted Encumbrances.

 

(m) Financial Statements

 

Financial Statements means consolidated statements of the income and expenses of the SELLER for the 12-month period ended December 31, 2018, and the consolidated balance sheets of SELLER as of such dates, compiled by WILD, MANEY & RESNICK LLP, SELLER’s independent certified public accountant.

 

(n) Intellectual Property

 

Intellectual Property means patents (including all reissues, divisions, continuations, and extensions of patents), patent applications, patent disclosures docketed, inventions, improvements, copyrights, trademarks, trademark applications, trade names, corporate names, fictitious names, domain names, and websites.

 

(o) Inventory

 

Inventory means SELLER’s inventory as described in Section 3.13.

 

(p) Permitted Encumbrances

 

Permitted Encumbrances means all of the Encumbrances disclosed on Error! Reference source not found.

 

(q) Personal Property

 

Personal Property means items of personal property used by the SELLER.

 

(r) SELLER’s Transaction Documents

 

SELLER’s Transaction Documents means the documents described in Section 3.02.

 

(s) Tax and Taxes

 

In this Agreement, the terms tax and taxes include:

 

all income, gross receipts, franchise, excise, transfer, severance, value added, sales, use, wage, payroll, worker’s compensation, employment, occupation, intangibles, and real and personal property taxes;

 

taxes measured by or imposed on capital;

 

levies, imposts, duties, licenses, legislation fees, and other taxes imposed by a federal, state, municipal, local, foreign, or other governmental authority or agency such as tax assessments for interest, penalties, and fines; and

 

any transferee or secondary tax liability for taxes and any tax liability as a member of any affiliated, consolidated, combined, or unitary group or any liability in respect of taxes under a tax-sharing, tax allocation, tax indemnity, or other agreement.

 

(t) Tax Returns

 

In this Agreement, the terms tax return and tax returns include all reports, estimates, information, statements, and returns relating to or required to be filed in connection with any taxes under the statutes, rules, or regulations of any federal, state, local, or foreign governmental taxing authority.

 

16

 

 

Section 12.02 Interpretation

 

The following general provisions and rules of construction apply to this Agreement.

 

(a) Singular and Plural; Gender

 

Unless the context requires otherwise, words denoting the singular may be construed as plural and words of the plural may be construed as denoting the singular. Words of one gender may be construed as denoting another gender as is appropriate within the context. The word or, when used in a list of more than two items, may function as both a conjunction and a disjunction as the context requires or permits.

 

(b) Headings of Articles, Sections, and Subsections

 

The headings of Articles, Sections, and Subsections used within this Agreement are included solely for the reader’s convenience and reference. They have no significance in the interpretation or construction of this Agreement.

 

(c) Days and Business Days

 

In this Agreement, days, without further qualification, means calendar days and business days means any day other than a Saturday, Sunday or a day on which national banks are allowed by the Federal Reserve to be closed.

 

(d) Delivery

 

Delivery is taken in its ordinary sense and includes:

 

personal delivery to a party;

 

mailing by certified United States mail to the last known address of the party to whom delivery is made, with return receipt requested to the party making delivery;

 

facsimile transmission to a party when receipt is confirmed in writing or by electronic transmission back to the sending party; or

 

electronic mail transmission to a party when receipt is confirmed in writing or by electronic mail transmission back to the sending party.

 

The effective date of delivery is the date of personal delivery or the date of the return receipt, if received by the sending party. If no return receipt is provided, the effective date is the date the transmission would have normally been received by certified mail if there is evidence of mailing.

 

(e) Include, Includes, and Including

 

In this Agreement, the words include, includes, and including mean include without limitation, includes without limitation, and including without limitation, respectively. Include, includes, and including are words of illustration and enlargement, not words of limitation or exclusivity.

 

(f) Words of Obligation and Discretion

 

Unless otherwise specifically provided in this Agreement or by the context in which used, the word shall is used to impose a duty, to command, to direct, or to require. Terms such as may, is authorized to, is permitted to, is allowed to, has the right to, or any variation or other words of discretion are used to allow, to permit, or to provide the discretion to choose what should be done in a particular situation, without any other requirement. Unless the decision of another party is expressly required by this Agreement, words of permission give the decision-maker the sole and absolute discretion to make the decision required in the context.

 

17

 

  

(g) References to Property or Assets

 

Any reference in this Agreement to property or assets, without further qualification, must be construed broadly to include, as to any person, all property of any kind—real or personal, tangible or intangible, legal or equitable—whether now owned or subsequently acquired. The following items are each considered assets or property of a person: money, stock, accounts receivable, contract rights, franchises, value as a going concern, causes of action, undivided fractional ownership interests, intellectual property rights, and anything of any value that can be made available for or appropriated to the payment of debts.

 

(h) References to Individuals and Entities

 

Unless further qualified in the context, any reference in this Agreement to a person, party, or individual, or the use of indefinite pronouns like anyone, everyone, someone, or no one must be construed broadly to include any individual, trust, estate, partnership, association, company, corporation, or other entity or non-entity capable of having legal rights and duties. Person, without further qualification, has the same broad meaning as defined in Code Section 7701(a)(1) and includes any individual, trust, estate, partnership, association, company, or corporation. BUYER and SELLER and their successors, assigns, heirs, and personal representatives are all considered persons for purposes of this Agreement. Natural person is used to distinguish a human being from a juridical person, such as a trust, estate, partnership, association, company, or corporation.

 

(i) Internal References

 

Unless the context otherwise requires:

 

reference to Articles, Sections, and Exhibits mean the Articles and Sections of, and Exhibits attached to, this Agreement;

 

reference to an agreement, instrument or other document means the agreement, instrument, or other document as amended, supplemented, and modified from time to time to the extent permitted by its provisions; and

 

reference to a statute means the statute as amended from time to time and includes any successor legislation to it and any regulations promulgated under it.

 

The Exhibits referred to in this Agreement must be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim in this Agreement.

 

(j) No Presumption against Drafting Party

 

This Agreement is to be construed without giving force to any presumption or rule requiring construction or interpretation against the drafting party.

 

Signed: May 18, 2019.

 

SELLER:

 

  COASTAL LABS, LLC
   
  /s/ Travis Chrisman
  By:

  

BUYER:

 

  GREEN HYGIENICS HOLDINGS INC.
   
  /s/ Ron Loudoun
  By: Ron Loudoun
  Its: Director

 

18

 

 

ADDENDUM “A”

 

USE OF PROCEEDS:

 

NOTE SOME OF THE EQUIPMENT MAY BE LEASED FOR THE PURPOSES THAT THE COMPANY CAN MAKE EFFECTIVE USE OF IT’S CASH AND BUILD MORE LAB FACILITIES AS WELL AS FOR INCOME TAX PURPOSES. THIS IS ACKNOWLEDGED BY THE PARTIES TO THIS AGREEMENT.

 

New equipment Use

2x White Film Machines $240,000

Distillate production 100 litre reactor with heater $120,000

Decarbing 2x Cup 30s $250,000

Hemp extraction Falling film $100,000

Recovery 100 litre jacketed tank w/ chiller $100,000

Ethanol chiller for washing material 2x 20 litre filters $5,000

Crude filter 2x 50 litre roto vapes $50,000

Ethanol recovery 2x 7.5 cubic foot vac oven $30,000

Isolate production 2x columns for remediation $300,000

THC remediation Miscellaneous lab supplies $150,000

Solvents, glass equipment, furniture, basic lab tools

 

Other expenses

Payout existing debt $588,000

Purchasing Material $600,000

Operating Expenses $450,000

 

 

 

 

 

Exhibit 5.1

 

 

 

E-Mail: marc@indegliapc.com

 

January 31, 2020

Green Hygienics Holdings Inc.

13795 Blaisdell Place, Suite 202

Poway, CA 92064

 

Re: Green Hygienics Holdings Inc.

Registration Statement on Form S-1

 

To Whom It May Concern:

 

We are special counsel to Green Hygienics Holdings Inc., a Nevada corporation, (the “Company”). In connection with the preparation and filing of a Form S-1 Registration Statement (the “Registration Statement”) with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), related to the registration under the Securities Act of an aggregate of up to 3,250,000 shares of common stock of the Company, par value $0.001 per share (“Common Stock”) that will be sold by a certain selling stockholder of the Company, we have examined the originals or copies of corporate records, certificates of public officials and officers of the Company, and other instruments relating to the authorization and issuance of such shares of Common Stock as we have deemed relevant and necessary for the opinion hereinafter expressed. In rendering this opinion, we have relied, to the extent we deem such reliance appropriate, on certificates of officers of the Company as to factual matters regarding the Company and the transactions described in the Registration Statement that were not readily ascertainable by us. We have assumed the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as copies.

 

Based upon the foregoing, we are of the opinion that (i) 3,000,000 shares of Common Stock to be issued upon conversion of a convertible promissory note in the aggregate principal amount of up to $750,000, when converted in accordance with the terms of such note, will be validly issued, fully paid, and non-assessable, and (ii) 250,000 shares of Common Stock to be issued pursuant to a common stock purchase warrant held by selling stockholder, when exercised in accordance with the terms of such warrant, will be validly issued, fully paid, and nonassessable.

 

We are admitted to practice law in the State of California, and we render this opinion only with respect to, and express no opinion herein concerning the application or effect of the laws of any jurisdiction other than, the existing laws of the United States of America, the State of California and the existing Nevada Revised Statutes and reported judicial decisions relating thereto. In giving the foregoing consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder.

 

  Very truly yours,
   
 
  /s/ Indeglia PC

 

13274 Fiji Way, Suite 250

Marina del Rey, CA 90292

(310) 982-2720

 

Exhibit 10.5

 

DO NOT DESTROY THIS NOTE: When paid, this Note with the Deed of Trust must be surrendered to Trustee under the Deed of Trust for cancellation before reconveyance will be made.

 

PROMISSORY NOTE SECURED BY DEED OF TRUST

 

$2,750,000.00 San Diego, California

August 23, 2019

 

1. Promise to Pay

 

For value received, Green Hygienics Holdings, Inc., a Nevada corporation (hereinafter referred to as “Borrower”), promises to pay to Ernestina Gonzalez Kreutzkamp and Robert P. Pizzuto, Trustees of the Kreutzkamp Spouse’s Trust dated August 31, 2015 (referred to herein as “Lender”), or order, at 401 B Street, Suite 2400, San Diego, CA 92101-4200, or such other place as the Holder hereof may from time to time direct in writing, the principal sum of Two Million Seven Hundred Fifty Thousand Dollars and 00/100, together with interest as provided below on the outstanding principal balance existing from time to time from the date of this Note until paid.

 

2. Definitions

 

Unless otherwise required by the context, words and phrases having their initial letters capitalized herein shall have the following meanings:

 

Deed of Trust” and “First Deed of Trust” shall mean that certain Short Form Deed of Trust With Assignment of Rents dated and executed by Borrower on August 22, 2019, recorded against the Property, defined below, and given to secure payment of this Note.

 

Escrow Holder” and “Title Company” shall mean and refer to Debbie Fritz, Escrow Officer and First American Title Company, One Ridgegate Drive, Suite 225, Temecula, CA 92590 and to the escrow through which this transaction will be consummated.

 

Event of Insolvency” shall mean when a person: (a) seeks or submits to a decree or order, or a court shall have made or entered any decree or order with respect to such person (or a petition or pleading shall have been filed in connection therewith), which: (1) grants, constitutes or seeks an order for relief, appointment of a trustee or confirmation of a reorganization plan under the bankruptcy laws of the United States; (2) approves as properly filed or seeks such approval of a petition seeking liquidation or reorganization under such bankruptcy laws or any other insolvency, bankruptcy or other debtor’s relief law or statute of the United States or any state thereof; or (3) otherwise directs or seeks the winding up or liquidation of the business affairs of such person and such petition, decree or order shall have continued in effect for an aggregate of 30 or more days (whether or not consecutive) from the first day of entry thereof; (b) otherwise avails itself of any insolvency or other law for the protection of debtors; (c) makes an assignment for the benefit of creditors; (d) has all or a substantial part of its assets attached, seized, subjected to a writ or distress warrant, levied upon or subjected to a custodian or receivership; (e) shall admit in writing its inability to pay its debts generally as they become due; or (f) is for any reason enjoined, restrained or in any way prevented from the conduct of all or a substantial part of its business affairs.

 

Guarantor” shall mean Alita Capital, Inc., a Nevada corporation.

 

Holder” shall mean any person entitled to receive payment under this Note including Lender or any person to whom all or a portion of this Note has been assigned or transferred.

 

1

 

 

Maturity Date” shall mean the earlier to occur of the following:

 

(a) August 23, 2024; or

 

(b) the date the entire indebtedness is accelerated upon the occurrence of a default under this Note.

 

Note” shall mean this Promissory Note Secured by Deed of Trust.

 

Property” shall mean the real property commonly known as Round Potrero Road, Potrero, CA 91963 (APNs: 602-.170-02-00; 604-010-02-00; 604-050-01-00; and 604-090-01-00).

 

Purchase Agreement” shall mean that certain Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (Vacant Land) dated March 11, 2019, by and between Borrower and Lender.

 

Purchase Documents” shall mean this Note, the Deed of Trust, the Purchase Agreement, the Guaranty, or any other document contemplated hereby or executed pursuant to this Note or the Purchase Agreement.

 

Second Deed of Trust” shall mean that certain second deed of trust on the Property executed as collateral security for the secured promissory note in the amount of $1,760,000 in favor of Home Loan Eagle, Inc., a California corporation.

 

3. Interest and Payments

 

3.1 Interest. The principal balance hereunder shall bear interest at the rate of Six Percent (6.0%) per annum from the Effective Date until this Note is paid in full. Notwithstanding any other provision of this Note or other Purchase Documents, interest payable under this Note shall not exceed the maximum rate of interest permitted by law.

 

3.2 Payments. Beginning September 23, 2019 and continuing on the twenty-third (23rd) day of each month thereafter until the Maturity Date of this Note, Borrower shall pay Lender monthly interest only payments pursuant to the loan amortization schedule which is incorporated herein and attached hereto as Exhibit A.

 

3.3 Right to Prepay. Borrower shall have the right to prepay this Note in whole or in part, at any time, without penalty.

 

3.4 Maturity Date Payment. On the Maturity Date of this Note (initially scheduled for August 23, 2024), Borrower shall pay Holder the entire principal balance of this Note, if any, plus accrued but unpaid interest.

 

3.5 Application of Payments. Any payment made under this Note shall first be applied against any accrued but unpaid interest as of the payment date and thereafter against principal.

 

3.6 Currency. Principal and interest shall be due and payable in lawful money of the United States of America.

 

4. Collateral

 

4.1 Guaranty. In consideration of Lender making the loan as evidenced in this Note, Borrower shall require Guarantor to unconditionally guarantee payment of any and all indebtedness of Borrower to Lender as provided in the Guaranty dated and executed by Guarantor on August 22, 2019.

 

4.2 Security. This Note is secured by the First Deed of Trust recorded in favor of Lender on the Property.

 

2

 

 

4.3 Second Deed of Trust. Holder consents to and instructs Escrow Holder to record the Second Deed of Trust on the Property without constituting or triggering a default, breach, or violation of the First Deed of Trust or any due on sale, no further encumbrances and/or alienation acceleration clause(s) in the First Deed of Trust.

 

4.4 Due on Sale. Borrower acknowledges the Deed of Trust, among other provisions, contains the following provision:

 

“This Deed of Trust is given and accepted upon the express provision that should the property hereinabove described, or any part thereof, or any interest therein, be conveyed by Trustor, whether voluntarily, involuntarily or by operation of law, without the prior written consent of the Beneficiary and Holder of this Note having been first obtained, then and in that event all sums secured hereby shall at the option of the Beneficiary and Holder of this Note become immediately all due and payable.”

 

5. Default and Remedy

 

5.1 Material Breaches. A material breach under this Note shall occur upon:

 

(a) the failure to pay when due any sums due under this Note or the Deed of Trust;

 

(b) the occurrence of a breach of or default under any term, covenant, agreement, condition, provision, representation or warranty under this Note or the Deed of Trust;

 

(c) the sale, transfer, encumbrance or conveyance of the Property, other than as expressly permitted herein or in the Deed of Trust, without Holder’s prior consent; and

 

(d) the sufferance by Borrower or Alita Capital, Inc., a Nevada corporation of an Event of Insolvency.

 

5.2 Default and Opportunity to Cure. If a material breach occurs under this Note, Holder shall notify Borrower of the obligation breached and the provisions of this Note or the Purchase Agreement under which the obligation arises. After Holder’s notice, Borrower shall either: (a) cure the breach; (b) be deemed in default under this Note if Borrower has failed to cure the breach within: (1) 5 days after Holder’s notice if the breach is a result of a breach of the due on sale provision in the Deed of Trust referenced in section 4.4 above; or (2) 15 days after Holder’s notice if the breach can be cured solely by the payment of money; or (c) if the breach cannot be cured solely by the payment of money or is not as a result of a breach of the due on sale provision in the Deed of Trust referenced in section 4.4 above, be deemed in default under this Note if Borrower has failed to cure the breach within 30 days after Holder’s notice provided Borrower diligently and continuously prosecutes such cure after receiving notice.

 

5.3 Acceleration. At the option of Holder, without demand or notice, the entire indebtedness under this Note shall become immediately due and payable on the occurrence of a default under this Note and notwithstanding any provision of this Note to the contrary, the Maturity Date hereunder shall be accelerated to coincide with the date such default occurs.

 

5.4 Remedies. Except as otherwise provided in this Note or in the Purchase Documents, Holder upon the occurrence of a default under this Note shall be entitled to any remedy available at law or in equity, including the foreclosure of the real property and any personal property liens created under the Deed of Trust and the sale of any collateral encumbered by the Deed of Trust.

 

3

 

 

6. Miscellaneous

 

6.1 Attorneys’ Fees. If any party commences any legal proceeding whatsoever (including insolvency, bankruptcy, arbitration, declaratory relief or other litigation) to interpret or enforce this Note, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and court/arbitration costs in addition to any other remedy it may obtain or be awarded. Any judgment or final order issued in any legal proceeding shall include such reimbursement for attorneys’ fees and costs. In any legal proceeding, the “prevailing party” shall mean the party determined by the court to most nearly prevail and not necessarily the party in whose favor a judgment is rendered. Notwithstanding the preceding, the arbitrator may determine, in his separate reasonable discretion, that there is no prevailing party.

 

6.2 Interpretation. Wherever the context of this Note requires, all words used in the singular shall be construed to have been used in the plural, and vice versa, and the use of any gender specific pronoun shall include any other appropriate gender. The term “person” shall refer to any individual, corporation or legal entity that has standing to bring an action in its own name under applicable state law. The conjunctive “or” shall mean “and/or” unless otherwise required by the context in which the conjunctive “or” is used. The term “including” shall mean “including without limitation” and “including but not limited to” unless otherwise required by the context in which the term “including” is used. This Note has been negotiated at arm’s length and each party has been represented by independent legal counsel in this transaction. Accordingly, each party hereby waives any benefit under any rule of law (including Section 1654 of the California Civil Code) or legal decision that would require interpretation of any ambiguities in this Note against the party drafting it.

 

6.3 Successors. Except as provided to the contrary in this Note, this Note shall be binding on and inure to the benefit of the parties and their successors and assigns.

 

6.4 Assignment. Borrower shall not voluntarily or by operation of law assign, hypothecate, convey, give, transfer, mortgage, sublet, license, or otherwise transfer or encumber all or any part of its rights, duties, or other interests in this Note or the proceeds thereof without the prior consent of Lender, which consent may be unreasonably withheld. Any attempt to make an assignment in violation of this provision shall be a material default under this Note and any assignment in violation of this provision shall be null and void.

 

6.5 Integrated Note; Modifications. This Note, along with the Purchase Document contain all the agreements of the parties concerning the subject hereof and cannot be amended or modified except by a written instrument executed and delivered by the parties. There are no other representations, agreements, arrangements or understandings, either oral or written, between or among the parties hereto relating to the subject matter of this Note that are not fully expressed herein or therein. In addition, there are no representations, agreements, arrangements or understandings, either oral or written, between or among the parties upon which any party is relying upon in entering this Note that are not fully expressed herein or in the Purchase Documents.

 

6.6 Severability. The unenforceability, invalidity, or illegality of any provision of this Note shall not render the other provisions unenforceable, invalid, or illegal.

 

6.7 Notices. Any delivery of this Note, notice, modification of this Note, collateral or additional agreement, demand, disclosure, request, consent, approval