SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 29, 2020
VERUS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction
9841 Washingtonian Boulevard, #390
Gaithersburg, MD 20878
(Address of principal executive offices) (zip code)
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|[ ]||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|[ ]||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|[ ]||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|[ ]||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 7.01 Regulation FD.
On April 29, 2020, the Company held a scheduled earnings call for its shareholders, wherein, among other business matters discussed, an update was provided regarding the Company’s acquisition of ZC Top Apparel Manufacturing, Inc. (“ZC TAM”). Previously, on April 3, 2020, the Company announced its binding agreement with ZC TAM to acquire a 51% controlling interest in that entity, and its one year exclusive option with ZC TAM to complete the acquisition, secure purchase orders and make further capital investments. Local counsel in the Philippines has been engaged and the anticipated closing date is by May 8, 2020.
Item 9.01 Financial Statements and Exhibits.
|99.1||Press Release, dated April 3, 2020|
|99.2||Verus International, ZC Top Apparel Manufacturing, Inc. Term Sheet, April 3, 2020|
|99.3||Verus International, ZC Top Apparel Manufacturing, Inc Option Notification Letter, April 2, 2020|
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Verus International, Inc.|
|Dated: May 4, 2020||/s/ Anshu Bhatnagar|
|Chief Executive Officer|
VERUS INTERNATIONAL ACQUIRES CONTROLLING INTEREST IN N95 MASK AND BIOHAZARD SUIT MANUFACTURER
Gaithersburg, MD – April 3, 2020 – Verus International, Inc. (“Verus” or the “Company”) (OTCQB: VRUS) is pleased to announce that it has acquired a controlling 51% interest in ZC Top Apparel Manufacturing, Inc. (“ZC Top”), a Philippines-based maker of reusable N95 fabric masks and biohazard suits.
ZC Top produces a highly sought-after, premium mask that is N95 compliant and constructed of a washable shell and a multi-layer filter than can provide protection for three days before replacement. The multi-layer filter consists of BFE99, PFE99 melt-blown and spun-bond polypropylene, which are the same materials used in medical surgical and N95 disposable masks. The masks also feature an activated carbon filter that functions like a high-efficiency particulate air (HEPA) filter, giving an additional layer of protection compared to a regular N95 mask.
The ZC Top masks also incorporate exhalation valve technology to facilitate smoother breathing, along with cotton construction to create a high-quality reusable mask that is more comfortable and cost effective than many other anti-viral mask designs.
“Investors may be surprised to see us enter this business, but we have international trade experience that is highly sought after in this current environment. We were approached early in the COVID-19 crisis by the management team at ZC Top, who were experiencing an overwhelming number of requests for protective gear from governments and other entities around the world,” explained Verus International CEO Anshu Bhatnagar. “We are providing the funding and other resources to begin filling these pending orders as quickly as possible. We are not yet prepared to provide revenue estimates, but based on initial demand, we believe protective gear could eclipse all of our existing revenue sources.”
The new ZC Top subsidiary currently has request for quotes (RFQs) from the U.S. Government and other governments, agencies and sellers on multiple continents. The Philippines-based facility has a peak production capacity of ten million masks per month. Based on pending orders, the Company believes that it can operate at near capacity for the foreseeable future.
“This is a transformative moment for our company, giving us a new subsidiary that more than doubles our backlog overnight,” said Bhatnagar. “We worked hard to get the resources in place to unlock this unused capacity at a time when the world needs it most. This is an operating facility with an existing product line, so our investment will go directly to produce masks and biohazard suits. We expect this to be a very profitable enterprise within the first month of operation, with a positive impact on our future projections.”
Verus will provide additional details on this new subsidiary during the upcoming Fiscal 2019 financial results conference call on Monday, April 13, 2020 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time).
About Verus International
Verus is a global, emerging multi-line consumer packaged goods (CPG) company developing branded product lines in the U.S., South America, and the Middle East. The Company trades on the OTC market (OTCQB: VRUS). Investors can find real-time quotes and market information for the Company on www.otcmarkets.com. Additional information is also available at the Company’s website, www.verusfoods.com, and via the official Twitter feed @Verus_Foods and the Big League Foods subsidiary Twitter feed @BigLeagueFoods.
Safe Harbor Statement
This press release contains certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are identified by the use of the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions that are intended to identify forward-looking statements. All forward-looking statements speak only as of the date of this press release. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, objectives, expectations and intentions reflected in or suggested by the forward-looking statements are reasonable, we can give no assurance that these plans, objectives, expectations or intentions will be achieved. Forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from historical experience and present expectations or projections. Actual results could differ materially from those in the forward-looking statements and the trading price for our common stock may fluctuate significantly. Forward-looking statements also are affected by the risk factors described in the Company’s filings with the U.S. Securities and Exchange Commission. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
MKR Group Inc.
Todd Kehrli or Mark Forney
ZC TOP APPAREL MANUFACTURING INC.
Standard Manufacturing Building (SMB) 4, Zamboanga Economic Zone, Talisayan, Z.C.
Telephone No.: (062) 955-3165
ZC TOP APPAREL MANUFACTURING INC. is the biggest apparel manufacturer in Mindanao. The company is engaged in international export and local manufacturing distribution. Its factory is located within the Zamboanga City Special Economic Zone Authority – a tax- free zone where other local and international companies are also based. The Company has been in operation for five (5) years through its subsidiary Zamtees Garments and Advertising. It caters both local and international clients and is engaged in E-commerce through Lazada, Shoppee and other online marketplaces.
Chief Executive Officer
Verus International, Inc.
9841 Washington Blvd., Suite 390 Gaithersburg MD 20878
Telephone No. (301) 329-2700
|AMOUNT OF INVESTMENT||100,000.00 USD at closing. Up to additional $300,000 as required.|
|EQUITY PERCENTAGE OFFERED||Fifty one percent (51%)|
|TYPE OF SECURITIES OFFERED||Ordinary shares – SEED|
|EXISTING CAPITAL STRUCTURE||Ordinary shares - Founders||100%|
|Ordinary shares – SEED||0%|
51% % noncumulative, payable if and when declared by the Board of Directors
The terms of the “Ordinary Shares – SEED” will contain standard “weighted average” anti-dilution protection with respect to the issuance by the Company of additional securities, subject to
standard and customary exceptions.
On all matters submitted for stockholder approval, each share of “Ordinary Shares – SEED” shall be entitled to such number of votes in relation to the total number of outstanding ordinary shares.
The holders of “Ordinary Shares – SEED” shall have equal preference with other shareholders when it comes to liquidation. For purposes of this section, a merger, consolidation, sale of all or substantially all of the Company’s assets, or other corporate reorganization shall constitute a liquidation, unless the holders of at least a majority of the holders of the ordinary shares vote otherwise.
|BOARD OF DIRECTORS||Investor assigns two (2) director. Investee assigns one (1) director.|
While any “Ordinary Shares – SEED” is outstanding, the company will:
a) maintain adequate property and business insurance.
b) comply with all laws, rules, and regulations.
c) preserve, protect, and maintain its corporate existence; its rights, franchises, and privileges; and all properties necessary or useful to the proper conduct of its business.
d) submit all reports required under the Internal Revenue Code and the regulations promulgated thereunder.
e) cause all key employees to execute and deliver noncompetition, non-solicitation, non-hire, nondisclosure, and assignment of inventions agreements for a term of their employment with the Company plus one year in a form reasonably acceptable to the Board of Directors.
f) not enter into related party transactions without the consent of a majority of disinterested directors.
|FINANCIAL STATEMENTS AND REPORTING||
The Company will provide all information and materials, including, without limitation, all internal management documents, reports of operations, reports of adverse developments, copies of any management letters, communications with shareholders or directors, and press releases and registration statements, as well as access to all senior managers as requested by holders of “Ordinary Shares – SEED”. In addition, the Company will provide such holders with unaudited monthly and quarterly and audited yearly financial statements, as well as an annual budget.
Commencing with the date that is five years from the date of closing and on each one-year anniversary of such date thereafter, holders of at least a majority of the then issued and outstanding shares of “Ordinary Shares – SEED” may request the Company to redeem their shares at a price equal to the original purchase price for such shares plus any declared but unpaid dividends, with 1/2 of the shares to be redeemed on such redemption date, and the remaining 1/2 on the date that is one year from such date.
|RIGHT OF FIRST REFUSAL||
Holders of “Ordinary Shares – SEED” shall have a pro-rata right to participate in subsequent stock issuances.
|RIGHT OF FIRST REFUSAL AND COSALE||
In the event that any of the Founders and existing executive management propose to sell their stock to third parties, the Company shall have the first right to purchase the securities on substantially the same terms as the proposed sale; the “Ordinary Shares – SEED” holders shall next have said right according to respective percentage ownership of such shares or to sell proportionate percentage pursuant to cosale rights. Such rights shall terminate upon a Qualified Public Offering.
|OTHER PROVISIONS||The purchase agreement shall include standard and customary representations and warranties of the Company, and the other agreements prepared to implement this financing shall contain other standard and customary provisions. Definitive agreements will be drafted by Investors counsel. This term sheet is intended by the parties to be nonbinding. Company shall indemnify Investor of liabilities prior to closing.|
The Company will reimburse the holders of “Ordinary Shares – SEED” for reasonable legal fees in connection with the transaction, payable at closing and only in the event that the transactions contemplated by this term sheet are consummated, up to a limit of $500.
|CONDITIONS TO CLOSING||
Closing shall be subject to the standard and customary conditions, including the completion of due diligence and the delivery to the investors of a legal opinion of counsel to the Company, regarding standard and customary matters and satisfactory to the Investors
and their legal counsel.
For 30 days, the Company will not solicit, encourage or accept any offers for the acquisition of Company capital stock (other than equity compensation for service providers), or of all or any substantial portion of Company assets.
The terms in this term sheet are legally binding between the parties.
|ZC TOP APPAREL MANUFACTURING, INC.|
|By:||/s/ Ronald Ian Bilang|
|Name:||Ronald Ian Bilang|
|Title:||Chief Executive Officer|
|Date:||April 3, 2020|
|VERUS INTERNATIONAL, INC.|
|By:||/s/ Anshu Bhatnagar|
|Title:||Chief Executive Officer|
|Date:||April 3, 2020|
9841 Washingtonian Blvd., Suite 390
Gaithersburg, MD 20878
April 2, 2020
Ronald Ian Bilang
ZC Top Apparel Manufacturing, Inc.
Standard Manufacturing Building (SMB)
Zamboanga Economic Zone Authority (ZCSEZA)
Talisayan Zamboanga City Del Sur, Philippines
Re: Verus-TAM Term Sheet
Dear Mr. Bilang:
This letter is in reference to the signed Term Sheet by and between Verus International, Inc. (“Verus”) and ZC Top Apparel Manufacturing, Inc. (“TAM”), pursuant to which Verus has agreed to purchase, and TAM has accepted, a direct investment interest for Fifty-One Percent (51%) control of TAM (the “Control Interest”) in exchange for the sum certain of One Hundred Thousand Dollars U.S. ($100,000.00 U.S.) (the “Purchase Price”) (a copy of which is attached). Each of Verus and TAM shall be referred to individually as a “Party” and, collectively, as the “Parties.” Any use of lower-case “party” shall mean a third-party.
Contemporaneous with the funding of the first Purchase Order by Verus, Verus seeks binding assurance from TAM, for an exclusivity period of 365 days to purchase the Control Interest in TAM (the “Exclusivity Period”). This shall be an option and not an obligation. Accordingly, Verus seeks the following binding agreement from TAM:
NOW THEREFORE, for valuable consideration exchanged, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
1. Option and Exclusivity Period. For a period of 365 days from and after the date that this letter is signed by both Parties (the “Exclusivity Period”), TAM shall grant to Verus, and no other party, the exclusive right to close the Control Interest transaction (the “Exclusive Option”). The Exclusive Option may be in the form of an asset purchase, stock purchase or any other transaction as advised by both US and Philippian counsel.
2. Working Capital Terms. At any time after the exercise of the Exclusive Option, if TAM requires, Verus shall fund an additional amount of One Hundred Thousand Dollars U.S. ($100,000.0 U.S.) towards the manufacturing of HAZMAT suits or respirators. If required, Verus may fund an additional Two Hundred Thousand Dollars U.S. ($200,00.00 U.S.) for working capital. Working capital may be in the form of P.O. financing, Letters of Credit, Bank Guarantee, LC discounting or any other structure that may be required to facilitate the business.
3. Binding Agreement. Paragraph (1.) above shall be binding upon the Parties.
4. Governing Law and Venue. This Agreement shall be enforced under the laws of the State of New York (United States), without regard to the conflicts of laws, and any action or controversy shall be resolved in the federal courts of the United States in the State of New York.
5. Confidentiality. This letter and its binding terms shall be and be deemed confidential and neither party shall disclose to any third party its contents or the nature of the transactions.
6. Counterparts. This letter agreement may be executed in one or more counterpart signatures via facsimile or other electronic transfer.
The undersigned, intending to be legally bound, have dually executed this Letter Agreement, as of the Effective Date.
|VERUS International Inc.|
|Signed:||/s/ Anshu Bhatnagar|
|By:||Anshu Bhatnagar, CEO|
|Date:||April 3, 2020|
|ZC Top Apparel Manufacturing, Inc.|
|Signed:||/s/ Ronald Ian Bilang|
|By:||Ronald Ian Bilang|
|Date:||April 3, 2020|