MJ HARVEST, INC. S-1 Registration No. 333-_____________________

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

MJ HARVEST, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

5090

(Primary Standard Industrial Classification Code Number)

 

82-3400471

(I.R.S. Employer Identification Number)

 

9205 West Russell Road, Suite 240, Las Vegas, NV 8913

954-519-3115

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

CT Corporation System

701 S. Carson Street, Suite 200

Carson City, NV 89701

888-724-9870

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

COPIES TO:

 

Gary R. Henrie, Esq.

General Delivery

Alpine, Wyoming 83128

307-200-9415

 

From time to time after this registration statement becomes effective.

(Approximate date of commencement of proposed sale to the public)

 

 

 
 

 

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.☒

 

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

 

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

     
Large accelerated filer ☐   Accelerated filer ☐
     

Non-accelerated filer ☐

  Smaller reporting company ☒
     
    Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

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 (1)

 

Amount of registration fee

Common Stock, $0.001 par value 2,614,413 $                     0.80 $_______      2,091,530 $__271.48

 

(1)                          The Registrant is registering for resale by the selling stockholders identified in the prospectus contained herein 2,614,413 shares of common stock. Pursuant to Rule 416 under the Securities Act of 1933, as amended, the shares of common stock registered hereby also include an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions. Pursuant to Rule 416 of the Securities Act, as amended, this registration statement shall be deemed to cover additional securities (i) to be offered or issued in connection with any provision of any securities purported to be registered hereby to be offered pursuant to terms that provide for a change in the amount of securities being offered or issued to prevent dilution resulting from stock splits, stock dividends, or similar transactions and (ii) of the same class as the securities covered by this registration statement issued or issuable prior to completion of the distribution of the securities covered by this registration statement as a result of a split of, or a stock dividend paid with respect to, the registered securities.

 

(2)                          Estimated solely for purposes of calculating the registration fee under Rule 457 under the Securities Act, as amended. Our common stock is currently traded on the OTCBB. The price of $2.00 per share was the closing price on the OTCBB on October 1, 2019. Selling security holders may sell their shares through public or private transactions at market prices prevailing at the time of sale, at fixed prices, or at negotiated prices, as determined in the sole discretion of the selling security holders.

 

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.

 
 

 

YOU MAY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THESE SHARES OF THE COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR SOLICITATION IS UNLAWFUL.

 

 

 

 

2,614,413 SHARES

 

 

MJ HARVEST, INC.

 

PROSPECTUS

 

 

, 2019

 

 

 

TABLE OF CONTENTS

  

 

  Page
Prospectus Summary 2
Corporate Information 2
Summary of the Offering 3
Risk Factors 4
Note About Forward Looking Statements 6
Use of Proceeds 6
Selling Security Holders 6
Plan of Distribution 9
Description of Securities 10
Interests of Experts and Counsel 10
Description of Business 10
Organization Within Last Five Years 12
Description of Property 12
Legal Proceedings 12
Market Price of Common Equity 13
Selected Financial Data 13
Management’s Discussion and Analysis 13
Changes in Accountants 16
Disclosures About Market Risk 16
Directors and Executive Officers 16
Executive Compensation 17
Security Ownership 18
Certain Transactions 19
Available Information 20
Experts 20
Index to Financial Statements F-1

 

Until , 2019, 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 information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the SEC is effective. This prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion, Dated ______________, 2019

 

PROSPECTUS

 

2,614,413 shares of common stock

 

MJ HARVEST, INC.

 

This prospectus relates to the resale of Common Shares which were issued by MJ HARVEST, INC., a Nevada corporation (“we” or the “Company”) in previous private placement transactions, by the selling security holders named herein under “Selling Shareholders.” We will not receive any proceeds from the resale of these Common Shares.

 

The Selling Shareholders may offer all or part of the shares for resale from time to time through public or private transactions, at a price that they determine based on prevailing market prices or privately negotiated prices. The timing and amount of any sale are within the sole discretion of the selling security holders, The Company is paying for all registration, listing and qualification fees, printing fees and legal fees.

 

Our Common Shares are quoted on OTC Market’s “OTC Pink” tier under the ticker symbol “MJHI.” We are applying to have our common stock quoted on the OTCQB-tier of OTC Markets.

 

Investing in the common stock involves risks. MJ HARVEST, INC., currently has limited operations, limited income, and limited assets, is in unsound financial condition, and you should not invest unless you can afford to lose your entire investment. See “Risk Factors” beginning on page 3.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of 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 ________________, 2019

  2  

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Prospectus on Form S-1 of MJ Harvest, Inc., a Nevada corporation (the "Company"), contains "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", believes", "estimates", "predicts" or "continue", which list is not meant to be all-inclusive and other such negative terms and comparable technology. These forward-looking statements, include, without limitation, statements about market opportunity, strategies, competition, expected activities and expenditures as we pursue business our plan, and the adequacy of available cash reserves. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include among other things: (i)product demand, market and customer acceptance of any or all of the Company's products, equipment and other goods, (ii) ability to obtain financing to expand its operations, (iii) ability to attract qualified personnel, (iv) competition pricing and development difficulties, (v) ability to locate operators in the agricultural sector that desire our services, (vi) the growth of the cannabis industry, (vii) the legal framework surrounding the cannabis industry, (viii) the adequacy of capital reserves and liquidity including, but not limited to, access to additional borrowing capacity, (ix) and general industry and market conditions and growth rates, unexpected natural disasters, and other factors, which we have little or no control: and any other factors discussed in the Company's filings with the Securities and Exchange Commission ("SEC").

 

This list of factors that may affect future performance and the accuracy of forward-looking statements are illustrative but not exhaustive. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty.

 

Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

PROSPECTUS SUMMARY

 

You should read the following summary together with the more detailed information and the financial statements appearing elsewhere in this Prospectus. Unless the context indicates or suggests otherwise, references to “we,” “our,” “us,” the “Company,” or the “Registrant” refer to MJ HARVEST, INC., a Nevada corporation.

 

MJ HARVEST, INC.

 

The Company acquires, develops and markets products and technologies that benefit customers engaged in agriculture and horticulture. Currently, the Company has acquired the intellecutal property and rights to manufacture and sell 5-gallon and 20-liter debudder bucket lids used in harvesting buds from plants, including hemp and cannabis, and a straight edge debudder for mounting on flat surfaces. The debudder products are branded under the name “Original 420.” The debudder lid products are patent pending.

The Company is now reviewing a number of other products, opportunities and technologies that align well with the Original 420 Brand Debudder Lid. Efforts are underway to acquire additional products and technologies, build marketing capabilities and distribution channels for hemp and cannabis industry related products. The Company started ramping sales up late in 2018 and this effort will continue in 2019. In this regard, the Company recently entered into an agreement with several international distributors to distribute the Debudder products in Europe, South America, North America, and Australia. Each distributor selected is a significant wholesaler of agricultural and/or horticultural products and services in their respective markets. We are establishing distributors to serve as regional hubs for sub-distributors and direct to consumer sales with product on hand for rapid shipment.

The Company also launched www.ProCannaGro.com, the Company’s website for product distribution and sales in the United States, Europe, Australia and South America. The Company also recently launched www.ProCannaGor.ca for sales and product distribution in Canada. The ProCannaGro websites will serve as the portals for the expanding product offerings envisioned by the Company. The websites, and others to be added later for Mexico and other global regions, will serve as the platform for direct to consumer marketing of the world’s best harvest and cultivation tools worldwide. The Company will fill orders through authorized distributors and local shops where our customers are located.

 

Strategy: The Company’s strategy is twofold. We seek small independent inventors and operators that have interesting and viable products and we acquire a controlling interest in those products. The initial product line (the debudder product) was acquired late in 2017 and is now being sold to an international customer list. Sales are expected to ramp up significantly in calendar year 2019 with additional growth forecast over the next three years. Management anticipates that each acquisition will be structured to provide the Company with a controlling interest in the product or technology acquired while leaving the inventor or operator with a significant financial stake in the success of the product or technology. Each acquisition will be structured to be accretive to revenue and earnings on a consolidated basis. We also offer distribution to existing independent inventors and operators that already have viable products with early stage traction in our markets, who are looking to expand sales, grow their brand, and/or reach new international markets. Through these distribution arrangements, we are able to build our product portfolio, attract additional customers and build the ProCannaGro brand.

 

  3  

 

Applying this model to a wide range of agricultural products will allow the combined business to achieve economies of scale and efficiencies unavailable to the small inventor/operator. Procannagro.com will enable our customers to obtain access to a wide range of products in a one-stop shopping experience. Additional economies of scale will come from available accounting, human resources, marketing, and sales skill sets that will be highly evolved inside of the MJ Harvest business framework

 

Currently, we do not have the money or funding to achieve the above goals and we will not be able to achieve our goals unless we are successful in obtaining additional funding, likely through sales of our securities, all which may serve to dilute the ownership position of our current and future shareholders.

 

Corporate Information

 

We were originally incorporated under the name Healthguard International Marketing Corp., in the State of Nevada on August 15, 2002. During 2002, Ryozanpaku International Ltd.’s (A Japanese Gaming Company) board of directors acquired voting control over Healthguard International Marketing Corp and renamed the Company Ryozanpaku International Inc. for the primary purpose of acquiring and developing gaming properties in northern California. The Company never achieved its gaming objectives and was later taken into receivership by the shareholders to gain management control from Ryozanpaku International Ltd.

 

On September 20, 2011, the Company made a complete change of its board of directors along with a change in control of the Company by issuing a new control block of common shares with the approval of the court appointed custodian. On October 24, 2011, the shareholders approved the name change to EM Energy, Inc. (“EM” or the “Company”), along with a 1 for 10 reverse split in the outstanding common stock of the Company and at that time, refocused its operations from gaming towards opportunities in the energy field within the United States and other potential business plans of operation.

 

In late 2017, the Company pivoted its operations from energy to product marketing and sales with a focus on the agricultural industry. The Company acquired a 51% interest in G4 Products LLC on November 17, 2017 and has commenced sales of the Debudder product line marketed under the Original 420 Brand and used in the cannabis harvest process.

 

In September 2018, the Company filed a Notification of Change with FINRA regarding a name change of EM Energy, Inc. to MJ Harvest, Inc. and a corresponding request to change the stock symbol of the Company to MJHI. The Company filed amended and restated articles of incorporation with the Nevada Secretary of State to reflect the change on September 28, 2018.The Notification of Change became effective with FINRA on October 1, 2018 and the stock began trading under the new symbol MJHI in the OTC Pink Market on October 2, 2018. For consistency in reporting, the Company is using the name MJ Harvest, Inc. for all purposes, including the preparation of these financial statements even though the name change did not become effective until after the end of the quarter ended August 31, 2018.

 

These changes were effected in order to make our corporate name and ticker symbol better align with our short-term and long-term business focus, which in the short-term is to build a portfolio of products that are useful to farmers and horticulturists in growing a range of products, including hemp and cannabis. In this process, we hope to position the company to take advantage of the growing popularity of the hemp, CBD, and cannabis space.

 

Our corporate offices are located at 9205 W. Russell Rd., Suite 240, Las Vegas, NV 89139, telephone number 954-519-3115.

 

Our website is located at www.mjharvestincinc.com. Information contained on or accessible through our website is not, and should not be considered, part of, or incorporated by reference into, this prospectus.

 

SUMMARY OF THE OFFERING

 

Common Shares offered by Selling Security Holders 2,614,413 Common Shares
Common Shares outstanding before offering 19,191,740 Common Shares as of the date hereof.
Common Shares outstanding after offering 19,191,740 Common Shares.
Use of proceeds We will not receive any proceeds from the sale of shares by the Selling Security Holders.
OTC Markets Trading Symbol MJHI
Risk Factors The Common Shares offered hereby involve a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”.

 

Summary Financial Information

 

The tables and information below are derived from the Company's audited consolidated financial statements as of May 31, 2019 and 2018.

 

Balance Sheet Summary   May 31, 2019   May 31, 2018
         
Cash   $ 13,592     $ 3,277  
Intangible assets     150,000       328,137  
Total assets     250,387       361,101  
Total current liabilities     15,915       15,668  
Total equity (deficit)     (432,357 )     163,539  
  4  

 

 

 

Statements of Operations Summary   May 31, 2019   May 31, 2018
         
Revenue   $ 72,654     $ 1,520  
Total operating expenses     1,004,598       733,489  
Net loss from operations     (956,541 )     (732,305 )
Net loss per common share – basic and diluted     (0.053 )     (0.047 )

 

RISK FACTORS

 

We have a limited operating history and historical financial information upon which you may evaluate our performance.

 

You should 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 of development. We may not successfully address these risks and uncertainties, we may not successfully build our product portfolio, or we may not successfully ramp up sales of the products in our product portfolio. If we fail in any of these endeavors, it could materially harm our business and impair the value of our common stock. Even if we accomplish these objectives, we may not generate the positive cash flows or profits we anticipate in the future. We were incorporated in the State of Nevada on August 15, 2002. From 2003 until 2013, we were owned and controlled by a group of Japanese investors that initially attempted to develop a Japanese gaming opportunity and later allowed the company to become dormant. In 2013, a group of existing shareholders took legal action to oust the Japanese group and reorganized the company as an energy exploration company, with limited results. In 2017, the Company reorganized again, and the Board of Directors adopted the present business plan of building a portfolio of agricultural and horticultural products and to date, has not generated significant sales revenues or operating cash flows. Unanticipated problems, expenses and delays are frequently encountered in establishing a new business and developing new products. These include, but are not limited to, inadequate funding, unforeseen transactional issues in acquiring products, lack of consumer acceptance, competition, additional product development, and inadequate sales and marketing. The failure by us to meet any of these conditions will have a materially adverse effect upon us and may force us to reduce or curtail operations. No assurance can be given that we can or will ever operate profitably.

 

We may not be able to meet our future capital needs.

 

To date, we have not generated any significant revenue and we have limited cash liquidity and capital resources. Our future capital requirements will depend on many factors, including the progress and results of our efforts to build our product portfolio, our ability to develop and market products, cash flow from operations, and competing market developments. We will need additional capital in the near future. Any equity financings will result in dilution to our then-existing stockholders. Although we currently do not have any debt financing, any sources of debt financing in the future may result in a high interest expense. Any financing, if available, may be on unfavorable terms. If adequate funds are not obtained, we will be required to reduce or curtail operations.

 

If we cannot obtain additional funding, our product development efforts may be reduced or discontinued, and we may not be able to continue operations.

 

We have historically experienced negative cash flows from operations since our inception and we expect the negative cash flows from operations to continue for the foreseeable future. Unless and until we are able to generate revenues, we expect such losses to continue for the foreseeable future. As discussed in our financial statements, there exists substantial doubt regarding our ability to continue as a going concern.

 

Research and development efforts are highly dependent on the amount of cash and cash equivalents on hand combined with our ability to raise additional capital to support our future operations through one or more methods, including but not limited to, issuing additional equity or debt.

 

In addition, we may also raise additional capital through additional equity offerings. While we will continue to explore these potential opportunities, there can be no assurances that we will be successful in raising sufficient capital on terms acceptable to us, or at all. Based on our current projections, we believe we have insufficient cash on hand to meet our obligations as they become due based on current assumptions. The uncertainties surrounding our future cash inflows have raised substantial doubt regarding our ability to continue as a going concern.

 

Any disruption and/or instability in economic conditions and capital markets could adversely affect our ability to access the capital markets, and thus adversely affect our business and liquidity.

 

Economic conditions and issues with the financial markets have had, and will continue to have, a negative impact on our ability to access the capital markets, and thus have a negative impact on our business and liquidity. The shortage of liquidity and credit combined with the substantial losses in worldwide equity markets could lead to an extended worldwide recession. We may face significant challenges if conditions in the capital markets do not improve. Our ability to access the capital markets has been and continues to be severely restricted at a time when we need to access such markets, which could have a negative impact on our business plans. Even if we are able to raise capital, it may not be at a price or on terms that are favorable to us. We cannot predict the occurrence of future disruptions or how long the current conditions may continue.

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Our proposed business is at least partially dependent on laws pertaining to the cannabis industry.

 

Continued development of the cannabis industry is dependent upon continued legislative authorization of marijuana at the state level. Any number of factors could slow or halt progress in this area. Further, progress for the industry, while encouraging, is not assured. While there may be ample public support for legislative action, numerous factors impact the legislative process. Any one of these factors could slow or halt use of marijuana, which would negatively impact our business.

 

As of the end of January 2019, 33 states and the District of Columbia allow its citizens to use medical marijuana and 10 states have passed legislation legalizing recreational use of marijuana. These state laws are in conflict with the Federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The prior administration (President Obama) effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana. However, the Trump administration has indicated the potential for stricter enforcement of the marijuana industry at the federal level, but to date there has been very little in terms of action. There is no guarantee that the Trump administration or future administrations will maintain the low-priority enforcement of federal laws in the marijuana industry that was adopted by the Obama administration. The Trump administration or any new administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to our business and our shareholders.

 

Further, and while we do not intend to harvest, distribute or sell cannabis, if we sell products, including our DeBudder product line to growers of cannabis, we could be deemed to be participating in marijuana cultivation, which remains illegal under federal law, and exposes us to potential criminal liability, with the additional risk that our properties could be subject to civil forfeiture proceedings.

 

The cannabis industry faces strong opposition.

 

It is believed by many that large well-funded businesses may have a strong economic opposition to the cannabis industry. We believe that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant revenue. For example, medical cannabis will likely adversely impact the existing market for the current “marijuana pill” sold by mainstream pharmaceutical companies. Further, the medical cannabis industry could face a material threat from the pharmaceutical industry, should cannabis displace other drugs or encroach upon the pharmaceutical industry’s products. The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical cannabis movement. Any inroads the pharmaceutical industry could make in halting or impeding the cannabis industry could have a detrimental impact on our proposed business.

 

Cannabis remains illegal under Federal law.

 

Cannabis is a schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of cannabis has been legalized, its production and use remains a violation of federal law. Since federal law criminalizing the use of cannabis preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with our business plan.

 

Laws and regulations affecting the medical cannabis industry are constantly changing, which could detrimentally affect our proposed operations.

 

Local, state and federal medical cannabis 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 our 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.

 

If we are unable to recruit and retain qualified personnel, our business could be harmed.

 

Our growth and success is highly depend on our ability to attract and retain qualified personnel. Competition in the industry could cause us difficulty in recruiting or retaining a sufficient number of qualified technical personnel, which could harm our ability to develop new products. Also, the fact cannabis remains illegal at the federal level may dissuade qualified personnel from working in the cannabis industry, thus limiting the pool of qualified individuals to run our business. If we are unable to attract and retain necessary key talents, it would harm our ability to develop competitive product and retain good customers and could adversely affect our business and operating results.

 

We may be unable to adequately protect our proprietary rights.

 

Our ability to compete partly depends on the superiority, uniqueness and value of our intellectual property. To protect our proprietary rights, we will rely on a combination of patent, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. Despite these efforts, any of the following occurrences may reduce the value of our intellectual property:

  6  

 

 

Our applications for patents relating to our business may not be granted and, if granted, may be challenged or invalidated;
Issued patents may not provide us with any competitive advantages;
Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology;
Our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we develop;
Another party may obtain a blocking patent and we would need to either obtain a license or design around the patent in order to continue to offer the contested feature or service in our products; or
The fact cannabis is illegal at the federal level may impact our ability to secure patents from the United States Patent and Trademark Office, and other intellectual property protections may not be available to us.

 

We may become involved in lawsuits to protect or enforce our patents that would be expensive and time consuming.

 

In order to protect or enforce our patent rights, we may initiate patent litigation against third parties. In addition, we may become subject to interference or opposition proceedings conducted in patent and trademark offices to determine the priority and patentability of inventions. The defense of intellectual property rights, including patent rights through lawsuits, interference or opposition proceedings, and other legal and administrative proceedings, would be costly and divert our technical and management personnel from their normal responsibilities. An adverse determination of any litigation or defense proceedings could put our pending patent applications at risk of not being issued.

 

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. For example, during the course of this kind of litigation, confidential information may be inadvertently disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. This disclosure could have a material adverse effect on our business and our financial results.

 

The Selling Shareholders may sell their shares of common stock in the open market, which may cause our stock price to decline.

 

The Selling Shareholders may sell the shares of common stock being registered in this offering in the public market. That means that up to 2,614,413 shares of common stock, the number of shares being registered in this offering, may be sold in the public market. Such sales will likely cause our stock price to decline.

 

Sale of our common stock by the Selling Shareholders could encourage short sales by third parties, which could contribute to the further decline of our stock price.

 

The significant downward pressure on the price of our common stock caused by the sale of material amounts of common stock could encourage short sales by third parties. Such an event could place further downward pressure on the price of our common stock.

 

Our common stock has been thinly traded and we cannot predict the extent to which a trading market will develop.

 

Our common stock is traded on the OTC Markets’ “Pink Current Information” tier. Our common stock is thinly traded compared to larger more widely known companies. Thinly traded common stock can be more volatile than common stock trading in an active public market. We cannot predict the extent to which an active public market for our common stock will develop or be sustained after this offering.

 

Because we are subject to the “penny stock” rules, the level of trading activity in our stock may be reduced.

 

Our common stock is traded on the OTC Markets’ “Pink Current Information” tier. Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ. 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 nature and level of risks in the penny stock market. The broker-dealer also must 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, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must 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. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.

 

 

USE OF PROCEEDS

 

This prospectus relates to shares of our common stock that may be offered and sold from time to time by the Selling Shareholders. We will not receive any proceeds from the sale of shares of common stock in this offering.

 

 

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SELLING SHAREHOLDERS

 

The Selling Shareholders may offer from time to time up to an aggregate of 2,614,413 shares of our Common Stock.

 

Except as otherwise provided, the following table sets forth certain information with respect to the beneficial ownership of our common stock including the names of the Selling Shareholders, the number of shares of our Common Stock owned beneficially by the Selling Shareholders as of September 20, 2019, the number of shares of Common Stock being offered by each selling stockholder hereby, and the number and percentage of shares of Common Stock that will be owned by each selling stockholder following the completion of this offering. Total outstanding shares for purposes of computing the percentages in the table was 19,191,740.

 

SELLING SHAREHOLDER TABLE
Shareholder Note Shares of Common Stock Owned Prior to the Offering Shares of Common Stock to be Offered for the Selling Shareholder's Account Shares of Common Stock to be owned by the Selling Shareholder After the Offering Percent of Common Stock to be Owned by the Selling Shareholder After the Offering
4 POINT LAKE LLC 1                 11,820                   11,820                          -      0.00%
AJZ ASSOCIATES LLC 2                   1,540                     1,540                          -      0.00%
MICHAEL AJZENMAN                 100,000                   30,000                   70,000   0.37%
ROBIN AMES                        330                        330                          -      0.00%
MONTE ANDERSON                            4                            4                          -      0.00%
GEOFFREY BAILE                        150                        150                          -      0.00%
COLIN BASTON                        210                        210                          -      0.00%
ALFRED BEESLEY                        600                        600                          -      0.00%
RAYMOND E BEHM                          23                          23                          -      0.00%
BURDETTE J BERNTSON                        100                        100                          -      0.00%
CRYSTAL G BERNTSON                        100                        100                          -      0.00%
JIM BERRY                            2                            2                          -      0.00%
PATRICK BILTON 3            2,339,734                 233,973              2,105,761   10.99%
SALON LLC 3               500,000                   30,000                 470,000   2.45%
SAMANTHA BILTON 3                 50,000                   30,000                   20,000   0.10%
SAWYER BILTON 3                 50,000                   30,000                   20,000   0.10%
SHAWNA BILTON 3                 50,000                   30,000                   20,000   0.10%
TONY BRANDLIN                   20,000                   20,000                          -      0.00%
JOHN E BRENNAN                 180,000                   30,000                 150,000   0.78%
NICK BUNICK                          16                          16                          -      0.00%
ALAN BUTCHER                     1,000                     1,000                          -      0.00%
CADUCEUS PARTNERS LLC 4                 20,635                   20,635                          -      0.00%
CAN-AM ROOFING (1993) LTD 5                 12,288                   12,288                          -      0.00%
JOANNE D CASE                        100                        100                          -      0.00%
ROY CONSTABLE                        100                        100                          -      0.00%
JERRY CORNWELL 6            3,483,578                 347,024              3,136,554   16.36%
RONALD CROKE                        130                        130                          -      0.00%
ROBERT G CROMPTON                          47                          47                          -      0.00%
JUDY DASILVA                   94,000                   30,000                   64,000   0.33%
JANET DAVIES                        200                        200                          -      0.00%
RICHARD DAVIS                 150,000                   30,000                 120,000   0.63%
ROBERT J DAVIS                            1                            1                          -      0.00%
TERRY DUNNE                 200,000                   30,000                 170,000   0.89%
EMERALD ROYALTY, INC 7                 55,000                   30,000                   25,000   0.13%
EMPEROR GOLD CORP 8                          6                            6                          -      0.00%
  8  

 

 

RICK FILLMAN                   50,000                   30,000                   20,000   0.10%
THOMAS E FISH                          51                          51                          -      0.00%
ROBERT FREDERICKSON                            1                            1                          -      0.00%
STEVENS FRINK                            4                            4                          -      0.00%
RONALD E FURROW                 250,000                   30,000                 220,000   1.15%
STAN GABELEIN                            4                            4                          -      0.00%
GARCOR REALTY 9                          4                            4                          -      0.00%
LOIS L GARDINER                            2                            2                          -      0.00%
LESTER E GOETZKE                        100                        100                          -      0.00%
P E GOODWIN                          18                          18                          -      0.00%
TOM VAN HALM                          19                          19                          -      0.00%
MICHAEL HAMM                            1                            1                          -      0.00%
JOHN HATFIELD                          14                          14                          -      0.00%
ROGER HAWKEN                        130                        130                          -      0.00%
JAMES HILL                        400                        400                          -      0.00%
ERICKA J JOHNSTON                   35,000                   30,000                     5,000   0.03%
ALAN JONES                        150                        150                          -      0.00%
HARMESH JUTLE                        100                        100                          -      0.00%
JAMES H KEIM                            6                            6                          -      0.00%
ROBERT O KNUTSON                          41                          41                          -      0.00%
FRANK A LANG                        105                        105                          -      0.00%
KARL LARSON                   50,000                   30,000                   20,000   0.10%
BREANNE LEITHMANN                   27,000                   27,000                          -      0.00%
PETER LIND                            3                            3                          -      0.00%
LARRY L LINDSTROM                            6                            6                          -      0.00%
ROBERT M LINSMAYER                            5                            5                          -      0.00%
LANDON LONG                   30,000                   30,000                          -      0.00%
LR EXECUTIVE & BUSINESS COACHING CONSULTING, INC. 10               272,000                   30,000                 242,000   1.26%
M2K, LLC 11               750,000                   75,000                 675,000   3.52%
MARKET SOLUTIONS LLC 12               158,666                   30,000                 128,666   0.67%
STUART MARSHALL                        420                        420                          -      0.00%
DARYL MATTHEWS                   50,000                   30,000                   20,000   0.10%
JONATHAN M MCGEE              1,150,000                 115,000              1,035,000   5.40%
WILLIAM F MCNAGNY                            1                            1                          -      0.00%
JACK G MCNALL                            3                            3                          -      0.00%
BRAD J MCNAUGHT                        100                        100                          -      0.00%
KAREN G MCNAUGHT                        100                        100                          -      0.00%
RICHARD MORRIS                     2,100                     2,100                          -      0.00%
NEXIT INC 13               220,000                   30,000                 190,000   0.99%
ORIGINAL VENTURES INC 14               580,000                   58,000                 522,000   2.72%
JOANNE PATTERSON                        100                        100                          -      0.00%
JENNIFER PHELPS                        100                        100                          -      0.00%
MARK PILCHER                        180                        180                          -      0.00%
R.A. MACTIRE & COMPANY 15                 60,000                   30,000                   30,000   0.16%
NICK RAINIER                   80,000                   30,000                   50,000   0.26%
ROBERT W RALEIGH JR                   52,000                   30,000                   22,000   0.11%
  9  

 

 

BECKY S RICHARDSON                        209                        209                          -      0.00%
STEPHEN ROAKE                   29,256                   29,256                          -      0.00%
HARMESH ROOPRAI                        100                        100                          -      0.00%
CARL SANKO                 250,000                   25,000                 225,000   1.17%
PATRICK E SATY                            7                            7                          -      0.00%
JAMES R SCHELTEMA                 280,000                   30,000                 250,000   1.30%
GERALD W SIMONSON                        100                        100                          -      0.00%
GORDON SMITH                        675                        675                          -      0.00%
RONALD M STARK                   30,000                   30,000                          -      0.00%
GLENN STELTING                   33,000                   30,000                     3,000   0.02%
GORDON STELTING                 100,000                   30,000                   70,000   0.37%
STEVEN WOHLWEND AND ASSOC. 16                   1,480                     1,480                          -      0.00%
DAVID TOBIAS 17            6,175,733                 617,573              5,558,160   29.00%
DIANE TOBIASSEN                   33,000                   30,000                     3,000   0.02%
TP ACQUISITIONS, LLC 18               870,000                   87,000                 783,000   4.08%
TRUST FBO RYAN M. BRENNAN                 50,000                   30,000                   20,000   0.10%
TRUST FBO SARAH BRENNAN   50,000   30,000   20,000   0.10%
BETTY TWEEDDALE                            1                            1                          -      0.00%
VALERIE GOLD RESOURCES LTD 19                          6                            6                          -      0.00%
LOUIS R VASSO                            4                            4                          -      0.00%
LEE JAMES & HELEN C WAGNER                   75,000                   30,000                   45,000   0.23%
ELONE U & E WALTER WEED JTTEN                            1                            1                          -      0.00%
CHARLES WHEELER                            1                            1                          -      0.00%

 

 

1. 4 Point Lake LLC is owned by Dean Kalivas
2. AJZ Associates, LLC is owned by Michael Ajzenman
3. Patrick Bilton, CEO and a Director of the Company, is the sole owner of Salon, Inc. Samantha, Sawyer, and Shawna Bilton are Patrick’s adult children.
4. Of the aggregate shares listed as owned by Jerry Cornwell, 2,446,261 shares are registered in the name of XXX Enterprises LLC, a limited liability company solely owned by Mr. Cornwell. Mr. Cornwell is a Director of the Company.
5. Caduceius Partners LLC is owned by Jim Wagner.
6. Can-Am Roofing (1993) Ltd., is owned by Brian Bickerton.
7. Emerald Royalty, Inc. is owned by R.A. MacTire which is owned by Randy Barsotti.
8. Emperor Gold Corp. is owned by the Estate of Frank Lang.
9. Garcor Realty is owned by the Estate of James Garland.
10. LR Executive & Business Coaching and Consulting, Inc. is wholly owned by Lorena Rosario. Ms. Rosario provides consulting service to the Company.
11. M2K LLC is owned by Ann M. Miller.
12. Market Solutions, Inc. is wholly owned by Lou Viveros. Mr. Viveros has provided consulting services to the Company in the past.
13. The shares registered to Nexit Inc. are controlled by its sole owner, Brad Herr, the Chief Financial Officer of the Company.
14. Original Ventures, Inc. is controlled by Wade Atteberry. Mr. Atteberry is the inventor of the Debudder product which was acquired by the Company through the acquisition of G4 Products LLC.
15. R.A. MacTire & Company is owned by Randy Barsotti.
16. Steven Wohlwend & Associates is owned by Steven Wohlwend.
17. David Tobias is a Director of the Company.
18. TP Acquisitions LLC is owned by Stephen MacDonald.
19. Valerie Gold Resources Ltd. is owned by the Estate of Frank Lang.

 

  10  

 

None of the Selling Shareholders has, or within the past three years has had, any position, office or material relationship with us or any of our predecessors or affiliates, except as follows:

· Patrick Bilton is our Chief Executive Officer, Secretary and a Director of the Company.
· Jerry Cornwell is a Director of the Company.
· Nexit, Inc., is solely owned by Brad E. Herr, our Chief Financial Officer.
· David Tobias is a Director of the Company.

 

PLAN OF DISTRIBUTION

 

We are not offering any of the Selling Shareholders’ securities. The Selling Shareholders may offer all or part of the shares for resale from time to time through public or private transactions, at prices they determine based on prevailing market prices or privately negotiated prices. We will not receive any of the proceeds from any sale by the Selling Shareholders. The Selling Shareholders may sell or distribute their shares in transactions through underwriters, brokers, dealers or agents from time to time or through privately negotiated transactions, including in distributions to shareholders or partners or other persons affiliated with the Selling Shareholders. If a Selling Shareholder enters into an agreement after the date of this prospectus to sell their shares to a broker-dealer as a principal and that broker-dealer is acting as an underwriter, we will file a post-effective amendment to the registration statement containing this prospectus identifying the broker-dealer and disclosing required information on the plan of distribution. Additionally, prior to any involvement of any broker-dealer in the offering, such broker-dealer must seek and obtain clearance of the underwriting compensation and arrangements from the Financial Industry Regulatory Agency.

 

Penny Stock Rules / Section 15(g) of the Exchange Act

 

Our shares may be considered penny stock covered by Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rules 15g-1 through 15g-6 promulgated thereunder. These Regulations impose additional sales practice requirements on broker/dealers who sell our securities to persons other than established customers and accredited investors who are generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 (including spouse's net worth and may include the fair market value of home furnishings and automobiles, but excluding from the calculation the value any primary residence and the related amount of any indebtedness on primary residence up to the fair market value of the primary residence (any indebtedness that exceeds the fair market value of the primary residence must be deducted from net worth calculation)) or annual income exceeding $200,000 or $300,000 jointly with their spouses.

 

Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules. Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless the broker/dealer has first provided to the customer a standardized disclosure document.

 

Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny stock transaction unless the broker/dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.

 

Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for a customer unless the broker/dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.

 

Rule 15g-5 requires that a broker/dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the salesperson’s compensation.

 

Rule 15g-6 requires broker/dealers selling penny stocks to provide their customers with monthly account statements.

 

Rule 15g-9 requires broker/dealers to approved the transaction for the customer’s account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination and that it is unlawful to effect the transaction without written authorization for the transaction from the customer.

 

The application of the penny stock rules may affect your ability to resell your shares due to broker-dealer reluctance to undertake the above- described regulatory burdens.

 

DESCRIPTION OF SECURITIES

 

Our authorized capital stock consists of 50,000,000 shares of common stock, par value $0.0001, and 5,000,000 shares of preferred stock, par value $0.0001. As of September 20, 2019, there are 19,191,740 shares of our common stock issued and outstanding, held by approximately 113 shareholders of record. There are no shares of our preferred stock outstanding as of the date of this filing.

 

Common Stock. Each shareholder of our common stock is entitled to a pro rata share of cash distributions made to shareholders, including dividend payments. The holders of our common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election of those directors can elect all of the directors. The holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors from funds legally available therefore. Cash dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our common stock. Holders of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our common stock.

  11  

 

 

Dividend Policy. We have never issued any dividends and do not expect to pay any stock dividend or any cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared on our common stock in the future will be at the discretion of our Board of Directors and subject to any restrictions that may be imposed by our lenders.

 

Preferred Stock. We are authorized to issue 5,000,000 shares of preferred stock, par value $0.0001. We have not issued, nor established any series for, any of our preferred stock. Our preferred stock is “blank check preferred” whereby our Board of Directors may create a series of preferred stock and set the rights and preferences of such preferred stock, without further shareholder approval. The availability or issuance of preferred shares in the future could delay, defer, discourage or prevent a change in control.

 

INTEREST OF NAMED EXPERTS AND COUNSEL

 

The Law Offices of Gary R. Henrie serve as our legal counsel in connection with this offering. His mailing address is General Delivery, Alpine, Wyoming 83128. He is licensed to practice law in the states of Nevada and Utah. Mr. Henrie owns none of our securities.

 

DESCRIPTION OF BUSINESS

 

General

 

We are a development stage company currently focused on the building a portfolio of best in class products that can benefit farmers and hobbyists in their growing operations. Our first product line consists of the DeBudder Lids and EDGE. The Debudder is used to strip buds off of stems for a variety of plants, including hemp and cannabis. We are also building an international network of distributors that can service our customers with rapid deliveries of products stocked in country. Currently, we are actively seeking additional products to expand our portfolio and are adding international distributors as we find them. Our website is www.mjharvestincinc.com, and we market our products through our branded distribution website at www.procannagro.com.

In the short-term, management is focused on adding additional products to our product offerings through distribution agreements, licensing, and acquisition. We are primarily focused on agricultural implements, durable goods, and services that will benefit smaller growers of hemp and cannabis by making their growing operations more efficient. We are actively seeking access to new products through attendance at trade shows and industry events, word-of-mouth, cold calling when we learn of interesting new technologies, and referrals from our distributors and associates in the industry. While our current focus in on agricultural tools, soil additives, growing methods, and optimization techniques, we have also explored the potential for consumer products that are produced by the growers or third-party processors from the crops grown using our tools. We believe that there is an opportunity to build an affinity and level of trust with our customers and then expand that relationship into distribution of consumer products containing CBD (cannabidiol) oil, including balms, salves, oils, tinctures, and similar products. With the uncertainties surrounding the cannabis industry and limitations on products derived from Cannabis or containing THC, our focus will remain on CBD products derived from Hemp until such time as the legal status of cannabis is addressed at the federal level. In the meantime, we believe there are adequate product opportunities outside of the cannabis space that can be evaluated and licensed, acquired or distributed effectively and profitably through our existing web site and distribution network.

In the long-term, we intend to expand our focus beyond the hemp and cannabis agricultural product marketing niche to include hemp growing operations in Florida, a research laboratory, and an extraction processing operation. The timing for development of these expanded operations will depend on availability of cash flow. Management believes that our customer base for agricultural products will be actively engaged in growing operations and will need services to identify optimum strains of plants to obtain commercially acceptable qualities and yield of CBD oils for the diverse geographic locations in which we intend to sell our products. In addition, once the crops are grown, the Company expects that our customers will also need access to CBD extraction facilities to process the plants into the derivative elements that will be incorporated into the consumer products that the market demands. These needs by our customer base provide an opportunity to grow by providing our customers with more of what they need to generate revenues from their growing activities. If we can build our relationships with our tool and implement customers, and then expand to offer services and research on plants, resistance to insects by regions, which soil additives produce the best yields and other similar science-market based data, our existing customers will provide a ready base of demand for the new services and capabilities. Management believes that this will result in a lower cost of obtaining new customers for the new services and will give us a competitive advantage against companies offering only one or a small number of the capabilities, services and products we will offer.

 

 

Competition

 

At this point in our development, we believe our competitors are those companies that are acting as product aggregators and distributors of products similar to ours. To date, the hemp industry (primarily relating to CBD oils) and the cannabis industry, have been fragmented and chaotic with large numbers of small and medium sized companies attempting to develop products and then working to gain a toehold in the burgeoning market for those products. Products are currently offered on Amazon, E-Bay, and company specific web sites and the competition for consumer attention is extreme. A few larger companies have reached critical mass in terms of brand awareness and market reach, but these companies are focused on selling consumer-oriented products which utilize the CBD oils and other elements of the hemp and cannabis crops.

 

The direct competition for distribution of the “picks and shovels” needed by the small growers is significantly less congested. There are some retail offshoots from brick and mortar businesses like hydroponics shops that offer a range of tools and implements similar to the Company’s product offerings, and these businesses are likely to compete directly with the Company’s offerings. To date we are not aware of any large nationally recognized distributors of like products and we are attempting to position ourselves as a player at the national level. There are significant hurdles to accomplishing this objective, most significantly, availability of capital to build and maintain the online information needed for a comprehensive “one-stop-shop” offering. If we are unable to find the necessary capital to build our product lines and our online presence, we are likely to face increasing competition as other players enter the market. This could have a negative impact on our ability to grow our revenues and compete effectively in the future.

  12  

 

Competitive Advantages

 

We believe our competitive advantage is derived from our ability to pursue opportunities when and where we find them without getting bogged down in the bureaucracy that a larger and more diverse business might face. As a small publicly traded company, we are able to move quickly, rapidly negotiate and document licensing and distribution agreements, and when appropriate, acquisitions. Upon completion of this registration statement, we expect that a more active trading market will develop for our shares and that will further enhance our ability to offer shares as part of the consideration package we can propose to the companies controlling attractive technologies, products and capabilities.

 

There are no assurances that we will be able to execute this business plan as stated, and if the capital we need is not available or we are unable to attract a sufficiently broad range of new products, our business may suffer.

 

Marketing

 

Currently, we market our business primarily through attendance at trade shows and keeping a very close eye on developments in the hemp and cannabis industries. When we identify an interesting prospect, our CEP reaches out personally to the management team of the prospect to see if there is a basis for furthering discussions. Our management team also has a long history in the industry and large networks of contacts that can provide word of mouth connections to other interesting prospects. Collectively, we believe we will be able to capitalize on these various connections to build a dynamic and broad-based business selling agricultural and horticultural tools and implements to our customers in the hemp and cannabis space. In the longer term, we intend to pay close attention to other needs of our customers and to meet those needs at the appropriate time with new offerings of products and services, including sales of hemp plant clones and CBD oil extraction services. If we can help our customers succeed and grow, the market for our products will continue to expand.

 

Manufacturing

 

We are not currently manufacturing any products in our own facilities. We rely on third party manufacturers for our production runs, and currently have relationships with third party companies for the manufacturing our products, primarily with Chinese companies. We are monitoring the China tariff situation closely and will take appropriate steps to find new contract manufacturing capabilities in other countries should the China tariffs cause a significant impact on our business. The molds used to manufacture our products were built by Eco Molding Co., Limited in Guandong, China. We do not currently have any outstanding contracts with Eco Molding for production of our product and have historically operated on the basis of purchase orders. Our last order for product was for 10,000 units of the Debudder Edge product and as of September 26, 2019, Eco Molding was holding 7,956 units pending our shipping instructions. We intend to ship the remaining product held by Eco Molding to the locations where product demand can be filled at lowest cost. When inventory levels reach the reorder point, we intend to place additional purchase orders with Eco Molding.

 

Intellectual Property

 

Currently, we have two design patents, and several foreign patents covering our debudder products. The United States Patent and Trademark Office (“USPTO”) issued our patents on October 8, 2019. Design Patent D862180 covers the original Debudder Bucket Lid, and Design Patent D862281 covers the Debudder Edge. Our business strategy will continue to focus on intellectual property protections when appropriate. As we research additional products to include in our product catalogue, we include an analysis of the level of protection that is available for such product as an element of our decision to pursue licensing or distribution of that product. Our preference is to license or distribute products that have intellectual property protections, either because of patent pending or patented status, or as a result of trade secrets.

 

Government Regulation

 

We do not intend to harvest, distribute or sell plant-based hemp or cannabis products unless or until they are legalized at the state and federal levels. Our current business model involves sales of tools and implements that are used in agricultural and horticultural applications for growing a variety of plants, including cannabis. If we knowingly sell our products to a cannabis grower, we could be deemed to be participating in marijuana cultivation, which remains illegal under federal law, and exposes us to potential criminal liability, with the additional risk that our properties could be subject to civil forfeiture proceedings.

 

As of August 2019, growing and processing hemp has been legalized at the federal level and at least six states have adopted regulations relating to the hemp industry, and at least 47 states have enacted legislation to establish industrial hemp cultivation and production programs. Thirty-three states and the District of Columbia allow its citizens to use medical marijuana. Voters in 10 additional states and the District of Columbia have legalized cannabis for adult recreational use. Other states are considering legalization, either for medical use or for both medical and recreational use. The state laws legalizing marijuana use are in conflict with the Federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The prior administration (President Obama) effectively stated that it is not an efficient use of resources to direct law federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana. However, the Trump administration has indicated the potential for stricter enforcement of the marijuana industry at the federal level, but to date there has been very little in terms of action. There is no guarantee that the Trump administration or future administrations will maintain the low-priority enforcement of federal laws in the marijuana industry that was adopted by the Obama administration. The Trump administration or any new administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to our business and our shareholders.

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We are not aware of other specific Governmental Regulations that impact our business. We do, however, utilize Chinese vendors for manufacturing a significant portion of the products we sell. To the extent that tariffs are imposed on imported goods manufactured in China, our pricing structure and acceptance in the marketplace may be affected. We currently stock our products through distributors in foreign countries when appropriate and ship direct from our manufacturer to the foreign distributor when such can be done at a cost savings. We will continue to explore ways that we can hold our costs down on the products we sell in order to minimize price sensitivity concerns with our customers.

 

Organization Within Last Five Years

 

We were originally incorporated under the name HealthGuard International Marketing Corporation, in the State of Nevada on August 15, 2002. At the time we operated under the name HealthGuard International Marketing Corporation, no business was conducted. In 2003, the Company entered into a reverse takeover transaction with a Japanese Investment Group engaged in the business of gaming. After completing the reverse takeover, the Japanese Investment Group failed to implement its business plan, and ceased having any contact with the shareholders of the Company. As a result, the Company was dormant until June 27, 2011 when Jerry Cornwell, our president and one of our Directors, took legal action to obtain the appointment of a custodian to regain control over the Corporation. On August 15, 2011, the Corporation held a meeting, with the Custodian acting on behalf of the Japanese shareholders and approved a private offering of a control block of stock to a new investor. On September 18, 2011 the District Court of Clark County, Nevada entered an order cancelling all of the shares issued to the Japanese Investment Group. The result of this action was to cede control of the Company to the new investor. In late September, the Company undertook a one for ten reverse stock split of its total shares outstanding, reorganized the Company under the name EM Energy, Inc., and began seeking oil and gas properties for development.

 

In late 2017, the Board reevaluated the oil and gas development efforts and elected to reorganize again to focus on distribution of agricultural and horticultural implements used by farmers and hobbyists around the world. The Company has acquired the rights to the DeBudder product line, including the DeBudder Bucket Lid and the DeBudder Edge, and continues to seek other products for distribution through its distributor relationship and its distribution web site located at www.procannagro.com. In 2018, the Company changed its name to MJ Harvest, Inc. and amended and restated its articles of incorporation to reflect the reorganized business direction. The Company also changed its stock symbol to MJHI (formerly RZPK).

 

These changes were affected in order to make our corporate name and ticker symbol better align with our short-term and long-term business focus. Our current, short-term goals will focus on building our product portfolio while we expand our product sales and build our distribution platform and brand under the www.procannagro.com website.

 

Our long-term plan is to acquire a hemp grow operation where we can use our products in a real world setting and provide concrete examples of the effectiveness of the tools to our customers. This step will also allow us to expand operations into biomass production, processing, and sale of products containing CBD from hemp (no or very low THC content). We are currently looking at alternatives to speed up this aspect of our business plan through acquisition of an existing grow operation, but to date, we have not found the right opportunity. Assuming that we achieve our long-term goal of developing or acquiring a hemp grow operation, we also believe that it will position us well should marijuana be legalized at the federal level or the regulatory climate changes to allow legal grow operations in the cannabis space. We can offer no assurances that we will be able to accomplish any portion of our long-range vision.

 

Employees

 

As of September 25, 2019, we had three employees which consisted of our three executive officers. Many of our activities are outsourced to consultants who provide services to us on a project basis. As business activities require and capital resources permit, we will hire additional employees to fulfill our company’s needs.

 

 

DESCRIPTION OF PROPERTY

 

Our company is based in Nevada with our mailing address at 9205 West Russell Road, Suite 240, Las Vegas Nevada 89139. In order to keep overhead to a minimum, we have staffed our business with independent contractors working out offices in diverse locations in the United States. We have contractors in Arizona, Florida, California, and Washington. We utilize technology to communicate effectively and control our business remotely. We also meet face-to-face periodically as needed for specific projects or actions. Accordingly, we do not lease or own any real property.

 

 

LEGAL PROCEEDINGS

 

In the ordinary course of business, we may, from time-to-time, be involved in pending or threatened legal actions, and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, at this time, no litigation or proceeding is pending or threatened against us and management is not aware of any matter that would or could have a material adverse effect on our financial condition or results of operations.

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MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Our stock is quoted on the OTC Markets’ “Pink Current Information” tier under the symbol “MJHI.” We are applying to have our common stock quoted on the OTCQB-tier of OTC Markets. We have 19,191,740 shares of our common stock outstanding as of September 20, 2019. The following table sets forth the high and low bid information for each quarter within the two most recent fiscal years as reported on Yahoo Finance. The information reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions.

 

 

Period High Low
     
Jun 1, 2017 through Aug 31, 2017 1.20 1.20
Sep 1, 2017 through Nov 30, 2017 1.20 1.10
Dec 1, 2017 through Feb 28, 2018 2.75 1.10
Mar 1, 2018 through May 31, 2018 1.45 1.25
     
Jun 1, 2018 through Aug 31, 2018 1.25 1.01
Sep 1, 2018 through Nov 30, 2018 18.25 1.01
Dec 1, 2018 through Feb 28, 2019 6.25 1.00
Mar 1, 2019 through May 31, 2019 7.00 4.00

 

During the fiscal year ended May 31, 2018, shares traded on 13 of that year’s trading days. An average of 800 shares per day traded on those 13 days. During the fiscal year ended May 31, 2019, shares traded on 136 of that year’s trading days. An average of 889 shares per day traded on those 136 days. On September 23, 2019, our stock closed at $1.99 with volume on that day of 500 shares.

 

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

 

There are currently no outstanding options or warrants to purchase MJ HARVEST, INC. common stock. We do not have any convertible debentures outstanding that permit the holder to convert the outstanding obligation into shares of our common stock. The number of holders of record of shares of our common stock is one hundred thirteen (113). There have been no cash dividends declared on our common stock. Dividends are declared at the sole discretion of our Board of Directors. We have not adopted any stock option or stock bonus plans.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

This discussion and analysis should be read in conjunction with our financial statements included as part of this Registration Statement.

 

Business Overview

We are a development stage company currently focused on the building a portfolio of best in class products that can benefit farmers and hobbyists in their growing operations. Our first product line consists of the DeBudder Lids and EDGE. The Debudder is used to strip buds off of stems for a variety of plants, including hemp and cannabis. We are also building an international network of distributors that can service our customers with rapid deliveries of products stocked in country. Currently, we are actively seeking additional products to expand our portfolio and are adding international distributors as we find them.

 

Corporate Overview

 

The Company develops, acquires, and distributes agricultural and horticultural tools and implements for sale primarily to growers and operators in the hemp and cannabis space. In 2017, the Company acquired a 51% interest in G4 Products LLC, which owns the intellectual property for a manual debudder product line marketed under the Original 420 Brand as the Debudder Bucket Lid and Edge. The Company also organized AgroExports LLC to serve as the international distribution arm for sales of agricultural and horticultural tools and implements, and also created www.procannagro.com for online sales of its products.

In September 2018, the Company filed a Notification of Change with FINRA and OTC Markets to obtain approval of a name change to MJ Harvest, Inc. from EM Energy, Inc., and a change of trading symbol to MJHI from RZPK. Following approval of the change by FINRA and OTC Markets, the Company filed amended and restated articles of incorporation with the State of Nevada to reflect the name change with an effective date of September 18, 2018. These changes were made in order to align our corporate name and ticker symbol with our short-term and long-term business focus.

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On December 7, 2018, the Company acquired the remaining 49% of G4 Products LLC, making it a wholly owned subsidiary. On April 10, 2019, the Company formed AgroExports.CA ULC (“Agro Canada”), a wholly owned Canadian subsidiary in order to facilitate online payments in the Canadian Market. Sales in Canada are currently serviced through a fulfillment center in Toronto. The Company has also created www.procanngro.com as its marketing website allowing customers to access Company products online and obtain shipments from the Company’s international distributor best able to meet the order at the lowest cost.

 

Comparative results as of and for the Years Ended May 31, 2019 and 2018

 

Results of Operations

 

Summary of Results of Operations. Since the Company adopted its current business focus on sales of agricultural and horticultural implements to hemp and cannabis growers, the Company has incurred net losses from operations. During the period, the Company has acquired the debudder product line, built an international distributor network, established an online presence for marketing products, and incurred staffing, infrastructure and sales and marketing expenses intended to provide a solid base for growing operations in coming periods. This process took longer than anticipated. The Management team spent considerable time and effort in identifying, researching and negotiating with a number of candidates for acquisitions, with the expectation that one or more acquisitions could be completed in a timely manner prior to filing this Registration Statement to enhance our public company stature by initiating reporting under the Securities Exchange Act of 1934, as amended. These potential acquisitions did not come to fruition, primarily due to unrealistic valuations expected by the target opportunity management teams. As a result, management has stepped back from the acquisition focus and is now aggressively pursuing sales growth by increasing marketing of our existing products and expansion of our product lines through distribution agreements and product licensing. We will revisit the acquisition opportunities once the Company’s shares are more actively traded. In the meantime, management will focus on growing sales of the products we have.

 

Operating Loss; Net Loss. In the year ended May 31, 2019, the Company generated a net loss from operations of $956,541 compared to a net loss of $732,305 in the year ended May 31, 2018. The increase in net loss from operations is detailed below.

 

Revenue

 

We have limited revenues since our reorganization in November 2017. Prior to November 2017, we were an exploration stage oil and gas company that owned a number of potential drill sites. In late 2017, we changed our short-term and long-term business focus to the development, acquisition, and sales of agricultural and horticultural implements for growers in the hemp and cannabis sectors. Our revenues in the year ended May 31, 2019 increased to $72,654 from $1,520 in the year earlier period, and after taking cost of goods sold into account, generated $48,057 in gross margin during our 2019 fiscal year compared to $1,184 in 2018. Our operational energies in 2019 were focused on building the distribution network, establishing the distribution centers and logistics for international distribution of product, and building an online presence for selling our products. That effort is largely in place now and we expect to see an increase in sales in the coming periods.

 

Officer and Director Compensation Expenses

 

Officer and director compensation expenses decreased from $420,195 for the year ended May 31, 2018 to $358,842 for the year ended May 31, 2019. The decrease was primarily the result of normalization of the compensation cycle to reflect services rendered in the period. In the fiscal year ended May 31, 2018, the Company was early in its reorganization process and incurred additional officer and director compensation for efforts undertaken in the reorganization. In the year ended May 31, 2019, the management team was in place for the full year and operating according to the adopted business plan which reduced the complexity and scheduling of management tasks and provided clear lines of authority and tasks to be accomplished. This allowed a reduction in officer and director compensation expense.

 

 

General and Administrative Expenses

 

General and administrative expenses increased from $19,287 for the year ended May 31, 2018 to $84,227 for the year ended May 31, 2019, primarily due to increased travel costs associated with our efforts to acquire other companies. As noted above, the Company has slowed our acquisition efforts pending completion of this registration process.

 

Professional Fees

 

Our professional fees increased during the year ended May 31, 2019 compared to the year ended May 31, 2018. Our professional fees were $383,392 for the year ended May 31, 2019 and $294,007 for the year ended May 31, 2018. These fees are largely related to fees paid for legal and accounting services, along with compensation to independent contractors. The increase in 2019 was primarily the result of increased patent work associated with the debudder product line. We expect these fees to grow steadily as our business expands. In the event we undertake an unusual transaction, such as an acquisition, securities offering, or file a registration statement, we would expect these fees to substantially increase during that period.

Impairment of Intangible Assets

During the year ended May 31, 2019, we reported an impairment of intangible assets of $178,137, compared to $0 in the year ended May 31, 2018. The impairment of intellectual property in 2019 was partially related to our acquisition of the minority interest of G4 Products LLC in the year ended May 31, 2019, and the subsequent adjustment to the carrying value of the assets at year-end based on estimates of revenue, earning capacity expected future revenues. Sales of the products derived from the intangible assets were less than originally estimated and this triggered an analysis of the carrying value of the intangible assets at yearend 2019.

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Liquidity and Capital Resources

 

Introduction

 

During the years ended May 31, 2019 and 2018, because of our operating losses, we did not generate positive operating cash flows. Our cash on hand as of May 31, 2019 was $13,592 and our monthly cash flow burn rate was approximately $40,000. Our cash on hand and our ability to cover recurring cash flow operating expenses was primarily derived from proceeds of officer and director advances. Absent additional advances from our officers and directors, we currently do not believe we will be able to satisfy our cash needs from our revenues for the coming year.

Our current assets, total assets, current liabilities, and total liabilities as of May 31, 2019 and 2018, respectively, are as follows:

Our current assets increased by $51,924 to $78,988 as of May 31, 2019 as compared to May 31, 2018. The increase in our current assets between the two periods was attributable to increases in cash, accounts receivable and inventory on hand.

Our total assets decreased by $110,714 to $250,387 as of May 31, 2019 as compared to May 31, 2018. The decrease in our total assets between the two periods was primarily attributable to the impairment of our intangible asset in the period.

Our current liabilities were essentially unchanged between our fiscal years ending May 31, 2018 and 2019 total liabilities increased by $625,827 as of May 31, 2019 as compared to May 31, 2018. A large portion of this increase was due to $539,704 in advances from related parties, as well as increases in stock-based compensation. Advances from related parties are classified as long-term liabilities and are expected to be satisfied with issuance of common stock.

We currently have positive working capital, but our existing assets and revenue sources will not cover our current monthly negative cash flows from operations. In order to continue our operations at current levels, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

 

Cash Requirements

 

We had cash available as of May 31, 2019 of $13,592 and $3,277 on May 31, 2018. Based on our revenues, cash on hand and current monthly burn rate of approximately $40, we will need to continue borrowing from our shareholders and other related parties, and/or raise money from the sales of our securities, to fund operations.

 

Sources and Uses of Cash

 

Operations. We had net cash used in operating activities of $418,931 for the year ended May 31, 2019, as compared to $119,923 for the year ended May 31, 2018. During our fiscal year ending May 31, 2019, the net cash used in operating activities consisted primarily of our net loss of ($956,541), shares issued for services of $397,125, stock based compensation of $270,000, intellectual property impairment of $178,137, and ($33,138) cash used for purchases of inventory. In 2018, the net cash used in operating activities consisted primarily of our net loss of ($732,305), offset by $134,100 proceeds of advances from related parties, shares issued for compensation of $609,500, shares issued for cash of $45,000, and reduced for ($50,000) cash used for acquisition of G4.

 

Investing. We used $69,209 in the year ended May 31, 2019 to acquire an interest in G4 ($50,000) and to acquire fixed assets ($19,209). In the year ended May 31, 2018, we used $55,900 to acquire an interest in G4 ($50,000) and for deposits on fixed assets ($5,900).

 

Financing. Our net cash provided by financing activities for the year ended May 31, 2019 was $498,455, compared to $179,100 for the year ended May 31, 2018. For the period in 2019, our financing activities related to proceeds from related party advances of $498,455. For the period in 2018, our financing activities related to proceeds from related party advances of $134,100 and stock sales of $45,000.

 

Off Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

 

We are exposed to market risks, which include interest rate changes in United States of America and commodity prices. We do not engage in financial transactions for trading or speculative purposes.

Interest Rate Risk. There may be interest charged on our accounts payable, as well as interest we charge on our accounts receivable, depending on their age. Typically, these interest rates are fixed and are not affected by changes in market interest rates. However, from time to time we may enter into debt transactions that have a variable interest rate which would leave us subject to interest rate fluctuations.

Commodity Prices. We are exposed to fluctuation in market prices for the raw materials necessary to manufacture the products we sell. To mitigate risk associated with increases in market prices and commodity availability, we will attempt to negotiate contracts with favorable terms directly with vendors. We do not believe we will enter into forward contracts or other market instruments as a means of achieving our objectives or minimizing our risk exposures on these materials.

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DIRECTORS, EXECUTIVE OFFICERS,

PROMOTERS, AND CONTROL PERSONS

 

The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. There are no family relationships among any of the directors and officers.

 

Name Age Position Incumbency Date
Patrick Bilton 58 Secretary and Director 11/3/2017
    Chief Executive Officer 1/1/2018
Brad Herr 65 Chief Financial Officer 3/24/2018
Jerry Cornwell 80 Director and President 9/20/2011
David Tobias 58 Director 11/3/2017

Patrick Bilton, CEO, Secretary and Director, age 58, manages our product development and product acquisition efforts and is focused on implementing our strategic business direction. Patrick joined MJ Harvest in 2017 and has been instrumental in establishing our existing operations while also seeking to expand our business as opportunities present themselves. Patrick sold his landscape services business in 2007 and after working with the new owners over a three-year transition period, has been since 2010 to the present, involved as a consultant in construction management, working primarily on luxury and high end residential real estate projects. Concurrently, Patrick has worked as a consultant with other public companies in their business development and merger and acquisition efforts, primarily focused on herbal and plant-based products and derivatives, including Cannabis Sativa, Inc. (symbol “CBDS”). Patrick brings a wealth of practical experience and a deep understanding of the requirements of growers of hemp and cannabis crops. With Patrick’s guidance, we are developing a portfolio of tools and implements that are used in growing and harvesting crops.

Brad Herr, CFO, age 65, manages our financial reporting functions, provides risk management oversight, and is a key member of the management team working closely with Patrick Bilton to evaluate and structure business opportunities as they arise. Brad is the sole owner of Nexit, Inc., a management services firm though which he offers business consulting services to the public, which he has been doing since ________. He also served as CFO to SponsorsOne, Inc., another publicly traded company with emerging business opportunities until April 30, 2019. Brad graduated from the University of Montana with a Bachelor of Science Degree in Business Accounting in 1977 and a Juris Doctorate in 1983. In 2005, Mr. Herr received an MBA from Gonzaga University. Brad practiced law for 13 years focusing primarily on business representation and securities law. Brad participated as legal counsel or principal in private and public offerings raising more than $75 million over his career. In 1996, Brad left the practice of law to pursue a career in business. Brad has served as CFO, COO, President and Board Member for a number of publicly traded and private companies over the last 23 years though other than as set forth herein, he holds no such positions at this time. Brad brings a diverse business development, accounting and legal background to his current positions.

 Jerry Cornwell, President and Director, age 80, is currently and has been since 1993, the managing member of two Investor Relations companies: XXX Enterprises, LLC dba Bristol Media, Ltd. and Valhalla Financial Group, LLC. The services provided to clients range from initial merger of Microcap OTC companies to NASDAQ listed companies. He was President and Chief Executive Officer of Pan Environmental Corporation from 1993 until 2000. For the prior ten years, he was a principal of Corn-Mill Enterprises, a business advisory firm involved in Mergers/Acquisitions and Capital funding. From 1974 to 1983 Mr. Cornwell was owner, President and Chief Executive Officer of J. A. Cornwell, Inc. a land reclamation and irrigation development firm, with annual revenues of $135 million. In 1982 the company was listed #7 on Inc 500 fastest growing Private Companies. In the past 30 years Mr. Cornwell has held positions as Director and/or Officer, on at least 10 other public companies, though other than as set forth herein, he does not hold any such positions at this time. He was elected to the Board of Directors by shareholders and appointed as President/CEO of the Company, then operating as Ryozanpaku International, Inc. on October 24, 2010. Jerry currently focuses on the building an active market for the Company’s shares and provides assistance in finding and evaluating business opportunities.

 David Tobias, Director, age 68, is serving as President of Wild Earth Naturals, Inc., a position he has held since May 2013. In addition, Mr. Tobias is serving as the CEO, president, secretary and director of Cannabis Sativa, Inc. (“CBDS”), a fully reporting company under the Securities Exchange Act of 1934. Mr. Tobias has been a director and officer of CBDS since July of 2013. He also served as the President of Hemp, Inc. from August 2011 to January 9, 2014. Prior to that, from October 2009 until May 2011, Mr. Tobias held the position of Vice President at Medical Marijuana Inc. where he was instrumental in bringing forward and culminating the merger between CannaBank and Medical Marijuana, Inc. Within the last five years, Mr. Tobias has also served as a member of the board of directors for Grow Capital, Inc. (“GRWC”). David’s experience with many aspects of the burgeoning marijuana trade in the United States allows him to focus on business development. His extensive contacts in the cannabis industry yield frequent business opportunities which David refers to Patrick and Brad for a detailed conceptual work-up.

Director Independence

Of our four directors, only one is an independent director, that being David Tobias. Our standard for being an independent director, is that the director is not an officer of the company, is not related to an officer or an non-independent director, and does not receive over $100,000 annually from the Company in compensation by way of consulting services or for any other reason.

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Code of Ethics

As of yet, the Company has not adopted a code of ethics. The Company expects to adopt a code of ethics prior to the time it is required to file reports pursuant to the Securities Exchange Act of 1934.

 

EXECUTIVE COMPENSATION

 

The Summary Compensation Table shows certain compensation information for services rendered as officers and directors for the fiscal years ended May 31, 2019 and 2018. The following information includes the dollar value of base salaries, and the number of shares of common stock granted and certain other compensation, if any, whether paid or deferred. No bonuses were paid to any officer or director in the periods presented, and the Company did not issue any non-equity incentive plan or option awards, or qualified or non-qualified deferred compensation. Cash and stock issued or accrued represents payments of independent contractor agreement compensation as described in “Certain Relationships and Related Party Transactions” below.

 

Year Ended May 31, 2019       Stock Issued   Accrued Compensation   Total
    Cash   Shares   Value   Shares   Value   Value
  Patrick Bilton   $ —         560,000     $ 140,000       80,000     $ 60,000     $ 200,000  
  David Tobias     —         —         —         —         —         —    
  Jerry Cornwell     —         —         —         —         —         —    
  Brad Herr     112,500       120,000       30,000       20,000       15,000       157,500  
Total for officers and directors   $ 112,500       680,000     $ 170,000       100,000     $ 75,000     $ 357,500  

 

Year Ending May 31. 2018             Stock Issued               Accrued Compensation               Total  
       Cash         Shares         Value         Shares         Value         Value   
  Patrick Bilton   $ —         1,070,000     $ 267,500       —       $ —       $ 267,500  
  David Tobias     —         220,000       55,000       —         —         55,000  
  Jerry Cornwell     —         220,000       55,000       —         —         55,000  
  Brad Herr     —         60,000       15,000       —         —         15,000  
Total for officers and directors   $ —         1,570,000     $ 392,500       —       $ —       $ 392,500  

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

None

 

Compensation of Directors

 

Our directors received compensation for their services as directors during the fiscal years ended May 31, 2019 and 2018 as set forth in the preceding table. For our fiscal year ending May 31, 2020, the directors will receive compensation in shares of common stock at the rate of $5,000 per quarter. The number of shares issuable to the directors for the director fees may be adjusted from time to time to reflect the Company’s assessment of fair value of the shares being issued at the time of issuance.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT

 

The following table sets forth, as of September 10, 2019, certain information with respect to our equity securities owned of record or beneficially by:

 

(1) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

 

(2) Unless otherwise noted, the shares indicated are beneficially owned by the individuals listed.

 

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       Number of Percentage of Total
 Share Ownership on September 10, 2019      Shares Held  Outstanding
Patrick Bilton, CEO, Secretary and Director           2,159,334 11.3%
Jerry Cornwell, President and Director           3,483,578 18.2%
Brad Herr, CFO             220,000 1.2%
David Tobias, Director           6,175,733 32.4%
All Officers and Directors as a Group         12,038,645 63.1%
         
Total Shares Issued and Outstanding         19,088,407 100.0%

 

· The shared listed for Jerry Cornwell are beneficially owned by him. A total of 1,037,317 are listed in his name and 2,446,261 are registered in the name of XXX Enterprises, LLC, and entity wholly owned by Mr. Cornwell
· The shares listed for Brad Herr are beneficially owned by him and are registered in the name of Nexit, Inc., a corporation wholly owned by Mr. Herr.

 

The issuer is not aware of any person who owns of record, or is known to own beneficially, ten percent or more of the outstanding securities of any class of the issuer, other than as set forth above. The issuer is not aware of any person who controls the issuer as specified in Section 2(a)(1) of the 1940 Act. There are no classes of stock other than common stock issued or outstanding. The Company does not have an investment advisor.

 

There are no current arrangements which will result in a change in control.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Consulting Agreements

 

The Company has independent contractor agreements with each of its officers. These agreements are described below.

 

Patrick Bilton. The Company entered into an Independent Contractor Agreement with Patrick Bilton on February 26, 2019 with an effective date of January 1, 2019. The agreement provides for a consulting fee of $20,000 per month payable in common stock at the fair value of the shares on the dates of issuance. The compensation is payable quarterly, and management currently estimates that the fair value of the Company’s common stock is $0.25 per share. The term of the agreement is for one year. The services performed by Mr. Bilton pursuant to the Agreement include serving as the Company’s Chief Executive Officer. In this capacity, Mr. Bilton oversees all strategic and tactical functions, supervises all other contractors, and coordinates these activities under the direct oversight of the Board of Directors.

 

Brad Herr. The Company entered into an Independent Contractor Agreement with Patrick Bilton on February 28, 2019 with an effective date of January 1, 2019. The agreement provides for a consulting fee of $15,000 per month payable $10,000 per month in cash and $5,000 per month in common stock at the fair value of the shares on the dates of issuance. The stock compensation is payable quarterly, and management currently estimates that the fair value of the Company’s common stock is $0.25 per share. The term of the agreement is for one year. The services performed by Mr. Herr pursuant to the Agreement include serving as the Company’s Chief Financial Officer. In this capacity, Mr. Herr manages all accounting and financial statement preparation duties, and participates with the CEO on planning and direction, drafts agreements as needed, and prepares public company reports and coordinates these activities under the direct oversight of the CEO and the Board of Directors.

 

Long-Term Incentive Plans.

 

We do not provide its officers or employees with pension, stock appreciation rights, long-term incentive or other plans and has no intention of implementing any of these plans for the foreseeable future.

 

Employee Pension, Profit Sharing or other Retirement Plans.

 

We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although it may adopt one or more of such plans in the future.

 

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION

FOR SECURITIES ACT LIABILITIES

 

Article 5 of our Articles of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders.

 

Article 6 of our Articles of Incorporation provides that, to the fullest extent permitted by the General Corporation Law of the State of Nevada we will indemnify our officers and directors from and against any and all expenses, liabilities, or other matters.

  20  

 

 

Article IX of our Bylaws further addresses indemnification of our directors and officers and allows us to indemnify our directors in the event they meet certain criteria in terms of acting in good faith and in an official capacity within the scope of their duties, when such conduct leads them to be involved in a legal action.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer 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.

 

AVAILABLE INFORMATION

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the resale of shares of our common stock by the Selling Shareholders. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us, our common stock and the Selling Shareholders, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800- SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.

 

Upon effectiveness of this registration statement, we will become subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, we will file periodic reports. Such periodic reports will be available for inspection and copying at the public reference room and website of the SEC referred to above.

 

EXPERTS

 

The financial statements of MJ HARVEST, INC. as of May 31, 2019 and May 31, 2018 and for the years ended May 31, 2019 and May 31, 2018, and the balance sheets of MJ HARVEST, INC. as of May 31, 2019 and May 31, 2018 have been included herein in reliance upon the reports of DeCoria, Maichel, and Teague, P.S., independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

  21  

 

MJ HARVEST, INC.

 

 

 

Contents

 

 

 

    Page
     
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   2
     
     
FINANCIAL STATEMENTS:    
     
Consolidated balance sheets   4
     
Consolidated statements of operations   5
     
Consolidated statements of changes in stockholders’ equity (deficit) 6
     
Consolidated statements of cash flows   7
     
Notes to consolidated financial statements   8-19

  F-1  

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders
of MJ Harvest, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of MJ Harvest, Inc. (“the Company”) as of May 31, 2019 and 2018, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2018 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The Company’s ability to continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has an accumulated deficit through May 31, 2019 and has operating losses since its inception. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described 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 audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

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

 

  F-2  

 

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.

 

DeCoria, Maichel & Teague P.S.

August 30, 2019

Spokane, Washington

 

We have served as the Company's auditor since 2016

 

  F-3  

 

 

MJ HARVEST, INC.

Consolidated Balance Sheets

May 31, 2019 and 2018

 

              2019   2018
       ASSETS 
 CURRENT ASSETS:             
   Cash     $             13,592  $            3,277
   Accounts receivable                   9,191                720
   Inventory                 56,205           23,067
     Total current assets                 78,988           27,064
                   
   Deposits                      480             5,900
   Fixed assets, net                 20,919                    -
   Intangible assets               150,000         328,137
                   
     Total Assets     $           250,387  $        361,101
                   
       LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) 
 CURRENT LIABILITIES:             
   Accounts payable      $               2,232  $          15,468
   Other current liabilities                 13,683                200
     Total current liabilities                 15,915           15,668
                   
   Compensation payable in common stock               127,125                    -
   Advances from related parties               539,704           41,249
       Total Liabilities               682,744           56,917
                   
 COMMITMENTS AND CONTINGENCIES (Note 4)             
                   
 STOCKHOLDERS’ EQUITY (DEFICIT):             
   Preferred stock, par value $0.0001, 5,000,000 shares authorized,      
     no shares issued and outstanding                          -                     -   
   Common stock, $0.0001 par value per share, 50,000,000 shares       
     authorized, 18,758,739 and 17,598,739 issued and outstanding,       
     respectively                   1,876             1,760
   Additional paid-in capital            1,784,486      1,418,227
   Accumulated deficit           (2,218,719)    (1,256,448)
     Stockholder's equity before non-controlling interest   Total stockholder's equity (deficit)              (432,357)         163,539
   Non-controlling interest                           -         140,645
       Total Stockholders' Equity (Deficit)              (432,357)         304,184
       Total Liabilities and Stockholders' Equity (Deficit)     $           250,387  $        361,101

 

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

 

 

  F-4  

 

MJ HARVEST, INC.

Consolidated Statements of Operations

For the years ended May 31, 2019 and 2018

 

            2019   2018
 REVENUE     $           72,654  $             1,520
 COST OF REVENUE               24,597                 336
     Gross profit               48,057              1,184
                 
 OPERATING EXPENSES:           
   Officer and director compensation             358,842          420,195
   General and administrative                84,227            19,287
   Impairment of intangible assets             178,137    
   Professional fees and contract services             383,392          294,007
     Total operating expenses          1,004,598          733,489
                 
 NET LOSS FROM OPERATIONS           (956,541)        (732,305)
                 
 Allocation of (gain) loss attributable to non-controlling interest               (5,730)            27,492
 NET LOSS ATTRIBUTABLE TO MJ HARVEST, INC.     $       (962,271)  $       (704,813)
                 
 NET LOSS PER COMMON SHARE - Basic and diluted     $           (0.053)  $           (0.047)
                 
   WEIGHTED AVERAGE NUMBER OF COMMON           
     SHARES OUTSTANDING - Basic and diluted        18,078,635     15,032,616

 

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

 

 

  F-5  

 

MJ HARVEST, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the years ended May 31, 2019 and 2018

 

               Additional             
       Common Stock     Paid-In     Accumulated     Non-controlling     
       Shares     Amount     Capital     Deficit     Interest     Total 
                           
 BALANCES, May 31, 2017        13,944,339  $    1,393  $      504,994  $       (551,635)  $                         -  $               (45,248)
                           
   Stock exchanged for advances from related parties             536,400          54       134,046                     -                          -               134,100
   Share based compensation          2,438,000        244       609,256                     -                          -               609,500
   Acquisition of minority interest in G4             500,000          50       124,950                     -              168,137               293,137
   Stock issued for cash             180,000          19         44,981                     -                          -                 45,000
   Net loss for the year ended May 31, 2018                         -             -                   -        (704,813)               (27,492)              (732,305)
                           
   BALANCES, May 31, 2018        17,598,739  $    1,760  $   1,418,227  $    (1,256,448)  $             140,645  $              304,184
                           
   Acquisition of minority interest in G4               80,000            8         96,367                     -             (146,375)                (50,000)
   Share based compensation          1,080,000        108       269,892                     -                          -               270,000
   Net income (loss) for the year ended May 31, 2019                         -           -                   -        (962,271)                  5,730              (956,541)
                           
   BALANCES, May 31, 2019        18,758,739  $    1,876  $   1,784,486  $    (2,218,719)  $                         -  $             (432,357)

 

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

 

 

  F-6  

 

MJ HARVEST, INC.

Consolidated Statements of Cash Flows

For the years ended May 31, 2019 and 2018

 

      2019   2018
           
 CASH FLOWS FROM OPERATING ACTIVITIES         
 Net loss   $        (956,541)  $       (732,305)
 Adjustments to reconcile net loss to net cash         
 used in operating activities:         
   Share based compensation            270,000          609,500
   Depreciation                4,190                     -
   Impairment of intangible assets            178,137                     -
   Deposits for operating expenses                 (480)    
 Changes in operating assets and liabilities:         
   Accounts receivable              (8,471)               (720)
   Inventory            (33,138)            (8,067)
   Stock issuable for compensation            127,125    
   Accounts payable and other current liabilities                   247            11,669
   NET CASH (USED IN) OPERATING ACTIVITIES          (418,931)        (119,923)
           
 CASH FLOWS FROM INVESTING ACTIVITIES         
   Cash used in acquisition of G4            (50,000)          (50,000)
   Deposits on fixed assets                       -            (5,900)
   Acquisition of fixed assets            (19,209)                     -
   NET CASH (USED) IN INVESTING ACTIVITIES            (69,209)          (55,900)
           
 CASH FLOWS FROM FINANCING ACTIVITIES         
   Stock issued for cash                       -            45,000
   Proceeds from advances from related parties            498,455          134,100
   NET CASH PROVIDED BY FINANCING ACTIVITIES            498,455          179,100
           
           
 NET CHANGE IN CASH AND CASH EQUIVALENTS              10,315              3,277
           
 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                3,277                     -
           
 CASH AND CASH EQUIVALENTS END OF YEAR   $            13,592  $             3,277
           
 Non cash financing and investing activities:         
   Stock exchanged for advances  to related parties    $                     -  $         134,100
   Stock issued for acquisition of G4   $       20,000     125,000

 

 

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

  F-7  

 

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

 

The Company develops, acquires, and distributes agricultural and horticultural tools and implements for sale primarily to growers and operators in the hemp and cannabis space. In 2017, the Company acquired a 51% interest in G4 Products LLC, which owns the intellectual property for a manual debudder product line marketed under the Original 420 Brand as the Debudder Bucket Lid and Edge. The Company also organized AgroExports LLC to serve as the international distribution arm for sales of agricultural and horticultural tools and implements, and also created www.procannagro.com for online sales of its products.

 

In September 2018, the Company filed a Notification of Change with FINRA and OTC Markets to obtain approval of a name change to MJ Harvest, Inc. and a change of trading symbol to MJHI. Following approval of the change by FINRA and OTC Markets, the Company filed amended and restated articles of incorporation with the State of Nevada to reflect the name change with an effective date of September 18, 2018.

 

On December 7, 2018, the Company acquired the remaining 51% of G4 Products LLC, making it a wholly owned subsidiary. On April 10, 2019, the Company formed AgroExports.CA ULC (“Agro Canada”), a wholly owned Canadian subsidiary in order to facilitate online payments in the Canadian Market. Sales in Canada are currently serviced through a fulfillment center in Toronto.

 

Basis of Presentation and Consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s fiscal year-end is May 31.

 

The consolidated financial statements of the Company for the year ended May 31, 2019, include the accounts of the Company and its wholly owned subsidiaries AgroExports LLC (“Agro”), G4 Products LLC (“G4”), and AgroExports.CA ULC. G4 was a 51% owned subsidiary in 2018 and the financial statements for the year ended May 31, 2019 included a non-controlling interest for G4. All intercompany transactions have been eliminated. Subsidiaries are consolidated from the date of acquisition, that being the date on which the Company has the power to govern financial and operating policies of the entities acquired. The financial statements of the subsidiaries are reported for the same reporting period as the parent, using consistent accounting policies in all material respects. Non-controlling interest in the consolidated balance sheets represents the minority members’ proportionate share of equity in G4. Consolidated net income (loss) is allocated to the Company and non-controlling interest (minority stockholder) in proportion to their percentage ownership.

 

  F-8  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, Continued:

 

Going Concern

 

The Company has an accumulated deficit of $2,218,719 which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

 

In the year ended May 31, 2018, the acquired a 51% interest in certain intangible assets and in the year ended May 31, 2019, the Company acquired the remaining 49% of the intangible assets. The intangible assets serves as a building block for the Company’s efforts to grow revenues. In the year ended 2019, the Company began generating operating revenue but the level of revenue from the current product line is not sufficient to support profitable operations with the current overhead. Additional acquisitions and business opportunities are now under consideration. Management intends to finance operating costs over the next twelve months with advances from directors and/or a private placement or public offering of common stock. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Share based compensation, impairment of long-lived assets, amortization of intangible assets, and income taxes are subject to estimates. Actual results could differ from those estimates.

 

Reclassifications

 

Certain prior period amounts have been reclassified to conform with the current year presentation.

 

New Accounting Standards

 

Revenue Recognition: In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall.  The new ASU establishes a new five step principles-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. 

 

In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.  ASU No. 2015-14 defers the effective date of ASU No. 2014-09 until annual and interim reporting periods beginning after December 15, 2017. We have performed an assessment of the impact of implementation of ASU No. 2014-09, and concluded it will not change the timing of revenue recognition or amounts of revenue recognized compared to how we recognize revenue under our current policies. ASU No. 2014-09 will require additional disclosures, where applicable, on (i) contracts with customers, (ii) significant judgments and changes in judgments in determining the timing

  F-9  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, Continued:

 

of satisfaction of performance obligations and the transaction price, and (iii) assets recognized for costs to obtain or fulfill contracts. The Company does not anticipate the disclosure requirements under the ASU to have a material change on how it presents information regarding its revenue streams as compared to existing GAAP. The Company will expand its financial statement disclosures in order to comply with the standard.

 

Leases: In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases longer than one year. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. As of May 31, 2019, the Company had no leases and the update is not expected to have a material effect on the financial statements.

 

Fair Value Measurements

 

GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

 

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).

 

Level 3 - Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The Company has no financial instruments subject to fair value measurement on a recurring basis.

 

Financial Instruments

 

The carrying amounts of cash and advances from related parties reported on the balance sheets approximate their fair value as of May 31, 2019 and 2018.

 

Cash and cash equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less when acquired to be cash equivalents.

 

  F-10  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, Continued:

 

Revenue Recognition

 

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company recognizes revenue from the sale of products and services in accordance with ASC 606,”Revenue Recognition”. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

 

· identify the contract with a customer;
· identify the performance obligations in the contract;
· determine the transaction price;
· allocate the transaction price to performance obligations in the contract; and
· recognize revenue as the performance obligation is satisfied.

 

Provision for sales incentives, discounts and returns and allowances, if applicable, are accounted for as reductions of revenue in the period the related sales are recorded. The company had no warranty costs associated with the sales of its products in the periods presented in the accompanying Consolidated Statements of Operations and no provision for warranty expenses has been included.

 

Inventory

 

Inventory consists of purchased products and are stated at the lower of cost or market, with cost being determined using the average cost method. Allowances for obsolete inventory are recognized when the inventory is determined to be unsalable through the normal course of business.

 

Fixed Assets

 

Fixed assets consist of molds used in the manufacturing process and are recorded at cost. Maintenance, repairs, and minor replacements are expensed as incurred. Gains or losses on disposition or retirement of property and equipment are recognized in operating expenses. Depreciation is computed using the straight-line method over the estimated useful lives of the molds which is five years.

 

Accounting for Acquisitions

 

We recognize and measure identifiable assets acquired and liabilities assumed in acquired entities in accordance with ASC 805, Business Combinations. The allocation of the purchase consideration for acquisitions can require extensive use of accounting estimates and judgments to allocate the purchase consideration to the assets acquired and liabilities assumed based on their respective fair values. The excess of the fair value of purchase consideration over the values of the identifiable assets and liabilities is recorded as goodwill. Critical estimates in valuing certain identifiable assets include but are not limited to expected long-term revenues; future expected operating expenses; cost of capital; assumed attrition rates; and discount rates.

 

  F-11  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, Continued:

 

Intangible Assets

 

We account for intangible assets in accordance with ASC 350 ”Intangibles-Goodwill and Other” (“ASC 350”). ASC 350 requires that intangible assets with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. Application of the intangible asset impairment test requires judgment, including the identification of intangible assets and determining their fair value. Significant judgments required to estimate the fair value of intangible assets include estimating future cash flows, determining appropriate discount rates and other assumptions. If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a fair value discounted cash flow model. Changes in estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

 

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense is included as a component of cost of product revenue. As of May 31, 2019, no amortization expense has been recognized.

 

Income taxes

 

The Company utilizes the liability method of accounting for income taxes which requires that deferred tax assets and liabilities be recorded to reflect the future tax consequences of temporary differences between the book and tax basis of various assets and liabilities.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Additionally, deferred tax assets are evaluated, and a valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. There can be no assurance that the Company’s future operations will produce sufficient earnings so that the deferred tax asset can be fully utilized. The Company currently maintains a full valuation allowance against net deferred tax assets.

 

Net Earnings (Loss) Per Share

 

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. During the years ended May 31, 2019 and 2018, the Company had no common stock equivalents outstanding.

 

Share-Based Payments

 

The fair value of common shares is determined by the management by considering a number of objective and subjective factors including data from other comparable companies, sales of common shares to unrelated third parties, the fair value of services provided for shares, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, among other

  F-12  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, Continued:

 

factors. The fair value of the underlying common shares will be determined by management until such time as the shares are listed on an established stock exchange, national market system or other quotation

system and the trading volume is sufficient to support a determination that an active market exists. The Company recognizes the fair value of goods or services received in share-based payment transactions based upon the fair value of the goods or services received when the fair value of the goods and services is a more reliable measurement of fair value than the equity instruments issued.

 

NOTE 2 –ACQUISITIONS OF G4

 

On November 17, 2017, the Company acquired a controlling 51% interest in G4 Products, LLC (“G4”), a newly formed Nevada limited liability company that owned a provisional patent on a device used in stripping buds from plants (the Product) from Original Ventures, Inc. (“Original Ventures”). On December 7, 2018, the Company acquired the remaining 49% interest in G4 from Original Ventures.

 

The Company paid $175,000 to Original Ventures for the initial 51% contributed interest in G4. The initial purchase price was paid $50,000 in cash and 500,000 in shares of the Company’s common stock with an estimated fair value at $0.25 per share, or $125,000. The sole intangible asset of G4 at the time of the acquisition was a provisional U. S. Patent application. As part of the acquisition transaction, 5,000 units of the Product were also sold to G4 at a cost of $3.00 per unit or $15,000 in the aggregate. Management estimated that the fair value of the intangible asset was $328,137, based upon the value of Original Venture’s non-controlling interest of 49% and the consideration paid by the Company. The inventory was assigned a fair value of $15,000 based upon its cost.

 

In December 2018, the Company paid an additional $50,000 in cash and 80,000 shares of Company’s common stock with an estimated fair value at $0.25 per share or $20,000. The Company’s common stock is quoted on the Pink Open Market. During the past several years minimal trading activity has taken place, primarily due to the limited number of shares in the public float and the fact that the Company does not currently know if market makers are or would be willing to make a market in the Company’s shares. Accordingly, the Company believes that no active market for the Company’s securities currently exists and estimates the fair value of its common stock based upon the most recent cash sales of shares which occurred at $0.25 per share.

 

At the time of the second acquisition of the interest in G4, the assets of G4 consisted primarily of the provisional U.S. Patent application and certain other international patent applications.

 

The G4 acquisition was undertaken because of its strategic fit with the Company’s business plan. Subsequently, the U.S. Patent and Trademark Office (“USPTO”) has issued a notice of allowance and the Company expects that patent issuance is imminent. Once the patents issue, the Company will begin amortizing the cost of the intangible asset over the life of the patent. During the provisional patent period and the patent pending period, the Company will continue to assess the value of the intangible asset and will write off all or a portion of the intangible asset if the valuation determines that the intangible asset has become impaired.

 

 

  F-13  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 –ACQUISITIONS OF G4, Continued:

 

The acquisition-related expenses incurred during the year ended May 31, 2018, and during the year ended May 31, 2019 were insignificant and are included in general and administrative expenses in the Company’s consolidated financial position and results of operations.

 

The acquisition agreement for the initial purchase of 51% of G4 and for the follow-on acquisition of the remaining 49% interest in G4 included certain earnout provisions that are described in Note 4 – Commitments and Contingencies.

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

In addition to the related party transactions discussed in Note 5, during the year ended May 31, 2018, Jerry Cornwell, the Company’s President and a director, paid expenses totaling $1,352 on behalf of the Company. This balance is included in accounts payable in the consolidated financial statements at May 31, 2019 and 2018. As of May 31, 2019, and 2018, there was also a payable to Mr. Cornwell in the amount of $15,696 that is classified as a long-term liability as it is anticipated to be settled with shares of the Company’s common stock.

 

Prior to June 1, 2017, David Tobias, a majority shareholder and director, paid expenses on behalf of the Company totaling $25,553. During the year ended May 31, 2019, Mr. Tobias advanced $50,000 to the Company for operating expenses. As of May 31, 2019 and 2018, there were advances payable to Mr. Tobias in the amounts of $75,553 and $25,553, respectively, that are classified as long-term liabilities as it is anticipated they will be settled with shares of the Company’s common stock.

 

During the year ended May 31, 2019, Patrick Bilton, a director and the Company’s Chief Executive Officer, paid expenses on behalf of the Company totaling $47,455 and also advanced $401,000 to the Company for operating expenses. As of May 31, 2019, and 2018, there were payables to Mr. Bilton in the amounts of $448,455 and $ -0-, respectively that are classified as long-term liabilities as it is anticipated they will be settled with shares of the Company’s common stock.

 

In addition, at May 31, 2019, the Company also had accrued compensation payable in common stock to Mr. Bilton in the amount of $60,000 for services which will be paid with 240,000 shares of the Company’s common stock in the year ended May 31, 2020.

 

During the year ended May 31, 2019, the Company paid Nexit, Inc., a company wholly owned by Brad Herr, the Company’s Chief Financial Officer, $112,500 and had accrued compensation payable in stock to Nexit in the amount of $15,000 for services which will be paid with 60,000 shares of the Company’s common stock.

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

 

The agreement for the acquisition of G4 from Original Ventures includes earn-out provisions that provide for Original Ventures to “earn-out” additional compensation dependent upon product sales. As of May 31, 2019 and 2018, no earnout compensation was owed by G4 to Original Ventures. The earn-out provision is applicable to sales of G4’s products for calendar years 2018-2020. The earn-out compensation due Original Ventures is based upon a calculation of sales of G4’s products less the Company’s original

  F-14  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES, Continued:

 

investment in G4. If any earnout is due to Original Ventures based on sales in calendar years 2019 and 2020, the earnout will be paid in common stock of the Company in accordance with the agreement.

 

In addition, an earn-out compensation payment of $100,000, payable in shares of the Company’s common stock, will be due Original Ventures upon the issuance of the non-provisional patent to G4. The Company received notice that the US Patent and Trademark Office has allowed the patents on the debudder products and the patents are expected to be issued before the end of September 2019. The issuance of the patents will occur in our fiscal year ending May 31, 2020 and the earnout compensation due on the issuance will be recorded when the patents are issued.

 

NOTE 5 – SHARE CAPITAL

 

The authorized capital of the Company consists of 50,000,000 common shares with a par value of $0.0001 per share, and 5,000,000 preferred shares with a par value of $0.0001 per share.

 

As of May 31, 2019 and 2018, there were 18,758,739 and 17,598,739, respectively, of shares of common stock outstanding and there were no preferred shares issued and outstanding.

 

During the year ended May 31, 2019, shares of common stock were issued to related and non-related parties for acquisitions, and services. The following table breaks out the issuances by type of transaction and by related and non-related parties:

 

  Cash   Services   Debt Repayment   Acquisitions   Total
   Shares   Value     Shares   Value     Share   Value     Shares   Value     Shares   Value 
Related Parties                            
  Patrick Bilton               -     $           -           560,000  $  140,000               -     $           -                    -     $              -           560,000  $ 140,000
  David Tobias               -                  -                     -                  -                  -                  -                    -                     -                     -                  -   
  Jerry Cornwell               -                  -                     -                  -                  -                  -                    -                     -                     -                  -   
  Brad Herr               -                  -           120,000        30,000               -                  -                    -                     -           120,000       30,000
Total for related Parties               -     $           -           680,000  $  170,000               -     $           -                    -     $              -           680,000  $ 170,000
                             
Unrelated Parties               -     $           -           400,000  $  100,000               -     $           -             80,000  $      20,000        480,000  $ 120,000
                             
Aggregate Totals               -     $           -        1,080,000  $  270,000               -     $           -             80,000  $      20,000     1,160,000  $ 290,000

 

 

In addition, the Company issued 80,000 shares of its common stock with an estimated fair value of $0.25 per share, or $20,000, in connection with its acquisition of G4 (See Note 2). The Company believes that no active market for the Company’s securities currently exists and estimates the fair value of its common stock based upon the most recent cash sales of shares.

 

The Company also accrued an aggregate of $127,125 of services payable in common stock as of May 31, 2019. This will result in the issuance of 508,500 shares of common stock in the year ending May 31, 2020. Of this amount, $75,000 was payable to related parties. See Note 2.

 

During the year ended May 31, 2018, shares of common stock were issued to related and non-related parties for cash, services, acquisitions and advances repayment. The following table breaks out the issuances by type of transaction and by related and non-related parties:

  F-15  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 5 – SHARE CAPITAL, Continued:

 

  Cash   Services   Debt Repayment   Acquisitions   Total
   Shares   Value     Shares   Value     Share   Value     Shares   Value     Shares   Value 
Related Parties                            
  Patrick Bilton               -     $          -         1,070,000  $    267,500      356,400  $    89,100                -     $            -          1,426,400  $    356,600
  David Tobias       40,000      10,000         220,000          55,000      100,000        25,000                -                   -             360,000  $      90,000
  Jerry Cornwell               -                 -            220,000          55,000        80,000        20,000                -                   -             300,000  $      75,000
  Brad Herr               -                 -              60,000          15,000                -                   -                   -                   -               60,000  $      15,000
Total for related Parties       40,000  $  10,000      1,570,000  $    392,500      536,400  $  134,100                -     $            -          2,146,400  $    536,600
                             
Unrelated Parties     140,000      35,000         868,000        217,000                -                   -          500,000  $  125,000       1,508,000        377,000
                             
Aggregate Totals     180,000  $  45,000      2,438,000  $    609,500      536,400  $  134,100       500,000  $  125,000       3,654,400  $    913,600

 

 

In addition, the Company issued 500,000 shares of its common stock with an estimated fair value of $0.25 per share, or $125,000, in connection with its acquisition of G4 (See Note 2), sold 180,000 shares of its common stock for $45,000 cash, and issued 526,400 shares to related parties in exchange for advances payable to them of $134,100. The Company believes that no active market for the Company’s securities currently exists and estimates the fair value of its common stock based upon the most recent cash sales of shares.

 

Shares issued to non-related parties in the years ended May 31, 2019 and 2018, were issued to non-employee contractors for services rendered during the periods. Share based compensation expense is recognized on non-employee awards on the date granted and based upon management’s estimate of fair value of the securities issued. The Company estimated the fair value of the common stock to be $0.25 per share at the times of issuance. The Company believes that no active market for the Company’s securities currently exists and estimates the fair value of its common stock based upon the most recent cash sales of shares.

 

NOTE 6 – INCOME TAXES

 

The Company did not recognize a tax provision or benefit for the years ended May 31, 2019 and 2018 due to ongoing net losses and a valuation allowance. At May 31, 2019, the Company had net deferred tax assets which will not be realized and are fully reserved by valuation allowances.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Act") resulting in significant modifications to existing law. The primary impact of the Act in fiscal year 2018 is a reduction of the federal statutory tax rate from 35% to the weighted average rate of 29%, based upon a 35% effective rate for the first seven months of the Company’s fiscal year, and 21% for last five months of the Company’s fiscal year 2018, consistent with Internal Revenue Code Section 15. The final impact of the Act may differ due to and among other things, changes in interpretations, assumptions made, the issuance of additional guidance, and actions the Company may take as a result of the Act. The Company’s net deferred tax asset was reduced by approximately $208,000 during the year ended May 31, 2018, which consisted primarily of the re-measurement of federal deferred tax assets and liabilities from the previous rate of 35% to the newly enacted rate of 21%.

 

The components of the Company’s net deferred tax assets at May 31 are as follows:

 

 

  F-16  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 6 – INCOME TAXES, Continued:

 

    2019   2018
Net operating loss carryforward   $ 428,522     $ 263,854  
Intangible asset     37,409       —    
 Total deferred tax assets     465,931       263,854  
Valuation allowance     (465,931 )     (263,854 )
  Net deferred tax assets   $ —       $ —    

 

During the years ended May 31, 2019 and 2018, the Company had approximately $2,218,000 and $1,256,000 of Federal net operating losses available to carryforward, respectively. These net operating losses will expire in various amounts from 2035 through 2038, with the exception of approximately $800,000, which do not expire but future usage of which is limited to 80% of taxable income in the year of usage.

The reconciliation of the federal income tax rate and the Company’s tax provision (benefit) is as follows:

 

  2019   2018
Provision (benefit) computed using the statutory rate $      (202,077)     (21)%   $      (204,396)     (29)%
Impact of change in statutory tax rate                   -        0%            133,264     20%
Change in valuation allowance          202,077     21%              71,132     9%
  Total income tax provision (benefit) $                 -        0%   $  -      0%

 

The Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns and found no positions that would require a liability for uncertain income tax benefits to be recognized. The Company is subject to possible tax examinations for the fiscal years 2014 through 2018. Prior year tax attributes could be adjusted by taxing authorities. If applicable, the Company will deduct interest and penalties as interest expense on the financial statements.

 

NOTE 7 – NON-CONTROLLING INTEREST

 

In the year ended May 31, 2018, the Company acquired a 51% interest in G4 Products LLC. The Company recognized the 49% non-controlling interest in the ownership of G4 as of the date of the acquisition. The non-controlling interest was reduced by $27492 during the year ended May 31, 2018 representing its share of the losses incurred that were attributable to the minority interest.

  F-17  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7 – NON-CONTROLLING INTEREST, Continued:

 

In December 2018, the Company acquired the remaining 49% interest in G4 for aggregate consideration of $70,000 (see Note 2). During the year ended May 31, 2019, the non-controlling interest earned $5,730 of net income prior to the Company’s acquisition of the remaining 49%.

 

As a result of the acquisition, the Company owned 100% of G4. The non-controlling interest equity balance of $146,375 less the consideration paid was eliminated through additional paid-in capital as a result.

 

NOTE 8 – IMPAIRMENT OF INTANGIBLE ASSETS

 

The Company performed a year-end impairment analysis of the carrying value of its intangible assets. The analysis was triggered by the acquisition of the non-controlling interest during the year ended May 31, 2019 and the lower than expected revenues generated from sales of its products during the year. The analysis included an evaluation of expected future revenues and earnings from the intangible assets and determined that a reasonable value for the intangible assets was $150,000 at May 31, 2019, and as a result recording an impairment loss of $178,137 for the year ended May 31, 2017.

 

Based on future earning potential from the intangible assets, the length of time remaining on the patents, and the historical sales of the product to date, management believes that the recorded value of the intangible assets totaling $150,000 is reasonable. The Company received notice of allowance for the patents and the patents are expected to issue sometime in the Fall 2019. The Company will continue to evaluate the intangible assets for additional impairments as appropriate in future periods.

 

NOTE 9 – REVENUE

 

The Company product revenue is generated exclusively though sales of its debudder products. The Company’s customers, to which trade credit terms are extended, consist of foreign and domestic companies.  Domestic sales for the fiscal year were $39,061.  Sales to foreign customers for the fiscal year were $33,593.

 

Shipments to two customers during the year ended May 31, 2019 totalled to $58,307 or 80% of sales in that year. As of May 31, 2019, there were $3,234 of accounts receivable from these customers.

 

NOTE 10 – SUBSEQUENT EVENTS

 

The Company has evaluated all events subsequent to the end of the Company’s reporting period up through the release date of these financial statements (August 30, 2019), and determined that no other events, recognized or unrecognized require disclosure in the basic financial statements. In July 2019, the Company received notice from the United State Patent and Trademark Office that its patent applications relating the debudder products had been allowed. The Company expects the patents to be issued before

  F-18  

 

MJ HARVEST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 10 – SUBSEQUENT EVENTS, Continued:

 

the end of September 2019, and the issuance will trigger an earnout distribution of $100,000, payable in the Company’s common stock, to the inventor pursuant to the agreement for the acquisition of G4. The Company has also entered into a verbal commitment to pursue development of a hemp clone farm in Florida as soon as the State of Florida approves the regulatory provisions governing hemp cultivation. Florida has drafted the regulations, solicited comment, and is expected to approve the regulatory framework later this fall. Upon approval, the Company intends to formalize its relationship with the landowner for development of the hemp cloning operation and commence the operation as soon as possible. The Company continues to actively seek new product distribution arrangements with third parties and is in the process of formalizing agreements with several product companies that will expand the Company’s product portfolio in the fiscal year ending May 31, 2020.

  F-19  

 

 

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

 

We will pay all expenses in connection with the registration and sale of the common stock by the Selling Shareholders, who may be deemed to be underwriters in connection with their offering of shares. The estimated expenses of issuance and distribution are set forth below:

 

Registration Fees (Estimated)     100  
Transfer Agent Fees (Estimated)     2,900  
Costs of Printing and Engraving (Estimated)     2,000  
Legal Fees (Estimated)     20,000  
Accounting and Audit Fees (Estimated)     15,000  
Total   $ 40,000  

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Article 5 of our Articles of Incorporation provides that, to the fullest extent permitted by law, no director or officer shall be personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders.

 

Article 6 of our Articles of Incorporation provides that, to the fullest extent permitted by the General Corporation Law of the State of Nevada we will indemnify our officers and directors from and against any and all expenses, liabilities, or other matters.

 

Article VIII of our Bylaws further addresses indemnification of our directors and officers and allows us to indemnify our directors in the event they meet certain criteria in terms of acting in good faith and in an official capacity within the scope of their duties, when such conduct leads them to be involved in a legal action.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer 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.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

Common Stock Sales

 

On December 22, 2017, we sold an aggregate of 100,000 shares of our common stock to one unrelated investor for an aggregate of $25,000, or $0.25 per share. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make this determination we relied on the representations of the purchaser contained in the securities purchase agreement signed by the purchaser, which indicated the purchaser was knowledgeable about our management and our operations, was a sophisticated investor, and understood the purchase was part of a private placement.

 

On May 31, 2018, we sold an aggregate of 80,000 shares of our common stock to one unrelated investor for an aggregate of $20,000, or $0.25 per share. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. One investor was a director and the other was our legal counsel, and both indicated that they were knowledgeable about our management and our operations, were sophisticated investors, and understood the purchase was part of a private placement.

 

Common Stock Issued for Services

 

On July 11, 2019, we granted 329,668 shares of common stock to five consultants and three directors for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the consultant purchasers contained in their consulting agreements and the fact the consultants, although not employed by the Company, was familiar with the company, its operations and its management. The directors were related parties with full knowledge of our operations.

 

On February 23, 2019, we granted 132,000 shares of common stock to a consultant for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchaser contained in the consulting agreement signed by the purchaser and the fact the consultant, although not employed by the Company, was familiar with the company, its operations and its management.

 

On February 5, 2019, we granted an aggregate of 679,000 shares of common stock to four consultants for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers contained in the consulting agreements signed by the purchasers and the fact the consultants, although not employed by the Company, were familiar with the company, its operations and its management.

  II-1  

 

 

On October 26, 2018, we granted 150,000 shares of common stock to a consultant for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchaser contained in the consulting agreement signed by the purchaser and the fact the consultant, although not employed by the Company, was familiar with the company, its operations and its management.

 

On July 18, 2018, we granted an aggregate of 119,000 shares of common stock to three consultants for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers contained in the consulting agreements signed by the purchasers and the fact the consultants, although not employed by the Company, were familiar with the company, its operations and its management.

 

On May 31, 2018, we granted an aggregate of 460,000 shares of common stock to four consultants for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers contained in the consulting agreements signed by the purchasers and the fact the consultants, although not employed by the Company, were familiar with the company, its operations and its management.

 

On April 18, 2018, we granted an aggregate of 119,000 shares of common stock to three consultants for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers contained in the consulting agreements signed by the purchasers and the fact the consultants, although not employed by the Company, were familiar with the company, its operations and its management.

 

On January 15, 2018, we granted an aggregate of 1,800,000 shares of common stock to six consultants for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers and the fact the consultants, although not employed by the Company, were familiar with the company, its operations and its management.

 

On December 22, 2017, we granted an aggregate of 59,000 shares of common stock to two consultants for services performed. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers contained in the consulting agreements signed by the purchasers and the fact the consultants, although not employed by the Company, were familiar with the company, its operations and its management.

 

Common Stock Issued for Amounts Owed

 

On May 31, 2018, we granted 256,400 shares of common stock to one officer/director as repayment for operating capital advanced in connection with company business. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers and the fact the consultants, while not employed by the Company, were familiar with the company, its operations and its management.

 

On January 15, 2018, we granted an aggregate of 280,000 shares of common stock to three individuals as repayment for travel and hotel expenses and advances made for acquisition capital in connection with company business. The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make that determination we relied on the representations of the purchasers and the fact the consultants, while not employed by the Company, were familiar with the company, its operations and its management.

 

 

Common Stock Issued for Acquisition

 

On December 7, 2018, we issued a total of 80,000 shares of common stock to one company for an acquisition of the 49% minority interest held by that company in our consolidated subsidiary G4 Products LLC. Following this acquisition, G4 Products LLC became a wholly owned subsidiary of the Company. The total fair value of the common stock was $20,000 based on an estimate of the fair value of our stock at the Closing Date ($0.25 per share). The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make this determination we relied on the representations of the purchaser contained in the Stock Purchase Agreement by and between MJ HARVEST, INC. and Original Ventures, Inc., signed by a duly authorized officer of the seller, which indicated the purchasers were knowledgeable about our management and operations.

 

On November 17, 2017, we issued a total of 500,000 shares of common stock to one company pursuant to the closing of an acquisition of the 51% of G4 Products LLC. The total fair value of the common stock was $125,000 based on an estimate of the fair value of our stock at the Closing Date ($0.25 per share). The issuance was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. To make this determination we relied on the representations of the purchaser contained in the Stock Purchase Agreement by and between MJ Harvest, Inc. and Original Ventures, Inc., signed by a duly authorized officer of the seller, which indicated the purchasers were knowledgeable about our management and operations.

 

The issuance of the securities under this section were all made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended. The exemption was available since each issuance was to a limited number of persons and did not involve any public offering.

  II-2  

 

 

EXHIBITS

 

   
3.1* Articles of Incorporation of MJ Harvest, Inc.
   
3.2* Bylaws of MJ Harvest, Inc.
   
5.1* Legal Opinion of Legal Counsel
   
10.1* Independent Contractor Agreement with Patrick Bilton effective January 1, 2019
   
10.2* Independent Contractor Agreement with Brad Herr effective January 1, 2019
   
10.3* Securities Purchase Agreement by and between MJ Harvest, Inc. (fka EM Energy, Inc). and Original Ventures, Inc. dated November 7, 2017
   
10.4* Securities Purchase Agreement by and between MJ Harvest, Inc. and Original Ventures, Inc. dated December 7, 2018
   
21.1* Subsidiaries of Registrant
   
23.1* Consent of DeCoria Maichel & Teague, P.S.
   
23.2 Consent of Legal Counsel (included in Exhibit 5.1)

 

*        Included herewith.

 

 

 

 

 

 

 

 

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  II-3  

 


 

Undertakings

 

A.      Insofar as indemnification for liabilities arising under the Securities Act of 1933 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 Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by our director, officer or controlling person 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, we will, unless in the opinion of our 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 Securities Act of 1933 and will be governed by the final adjudication of such issue.

 

B.       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:

 

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

 

(b)                                 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) (Section 230.424(b) of Regulation S-K) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(c)                             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 the 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.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, in the locations indicated.

 

MJ HARVEST, INC.

/s/ Patrick Bilton 10/02/2019

By: Patrick Bilton Date

Its: Chief Executive Officer (Principal Executive Officer), Secretary and Director

Signed at __West Palm Beach, Florida________________________________________

 

/s/ Brad E. Herr 10/02/2019

 By: Brad E. Herr Date

Its: Chief Financial Officer (Principal Financial Officer)

Signed at Spokane, Washington

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates stated.

 

 

/s/ Patrick Bilton 10/02/2019

By: Patrick Bilton Date

Its: Chief Executive Officer (Principal Executive Officer), Secretary, and Director

 

/s/ David Tobias 10/02/2019

 By: David Tobias, Director Date

 

/s/ Jerry Cornwell 10/02/2019

 By: Jerry Cornwell, President and Director Date

  II-4  

 

Exhibit 3.1

 

AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MJ HARVEST, INC.

 

The undersigned person of legal age and holding a position as a duly authorized officer of the Corporation, hereby adopts the following RESTATED ARTICLES OF INCORPORATION for the purpose of continuing a corporation under the Nevada Private Corporation Acts (Chapter 78 of the Nevada Revised Statues).

 

ARTICLE 1. NAME.

 

The name of the corporation is MJ HARVEST, INC.

 

ARTICLE 2. PURPOSES.

 

This corporation is organized for the following purposes:

 

(a)       To develop, manufacture, assemble, and market general products and services, as the Board of Directors of the Corporation shall, from time to time determine.

 

(b)       When deemed appropriate by the Board of Directors of the Company, to engage in any business, trade or activity which may lawfully be conducted by a corporation organized under the Nevada Private Corporations Act.

 

(c)       To engage in all such activities as are incidental or conducive to the attainment of the purposes of this corporation or any of them and to exercise any and all powers authorized or permitted to be done by a corporation under any laws that may be now or hereafter applicable or available to this corporation.

 

This Article 2 shall be broadly construed as the purposes and powers of the corporation, and the matters expressed in each clause shall not be limited or restricted by reference to or inference from the terms of any other clauses. Nothing contained in these clauses shall be deemed in any way to limit or exclude any power, right or privilege given to this corporation by law or otherwise.

 

ARTICLE 3. SHARES.

 

This corporation shall have authority to issue two classes of stock, designated as Common Stock and Preferred Stock.

 

The total number of shares of Common Stock that the corporation will have authority to issue is Fifty Million (50,000,000). Each share of Common Stock shall have a par value of $0.0001 per share. All of the Common Stock authorized herein shall have equal voting rights and powers without restrictions in preference.

 

MJ Harvest, Inc. - Amended and Restated Articles of Incorporation Page 1

 

 

 

 

The total number of shares of Preferred Stock that the corporation will have authority to issue is Five Million (5,000,000). Each share of Preferred Stock will have a stated value of $0.0001 per share. The authorized but unissued shares of Preferred Stock may be divided into, and issued in, designated series, from time to time, by one or more resolutions adopted by the Board of Directors. The Directors, in their sole discretion, shall have the power to determine the relative powers, preferences, and rights of each series of preferred stock.

 

ARTICLE 4. PRE-EMPTIVE RIGHTS.

 

Shareholders of this corporation shall have no pre-emptive rights to acquire additional shares or treasury shares issued by the corporation, or any securities convertible into, or carrying or evidencing any right or option to purchase any such shares.

 

ARTICLE 5. DIRECTOR LIABILITY.

 

A director of this corporation shall not be personally liable to the corporation or its shareholders for monetary damages for conduct as a director, except as provided in NRS 78.138(3) and (7). If the Nevada Private Corporations Act (the “Act”) is amended to authorize corporate action further eliminating or limiting the personal liability directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Act, as so amended. Any repeal or modification of the forgoing paragraph by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.

 

ARTICLE 6. INDEMNIFICATION

 

The corporation shall indemnify its directors against all liability, damage, or expense resulting from the fact that such person is or was a director, to the maximum extent and in all circumstances permitted by law; except that the corporation shall not indemnify a director against liability, damage, or expense resulting from the director’s gross negligence.

 

ARTICLE 7. VOTING.

 

The holders of any of the corporation’s capital stock shall possess voting power for the election of directors and for all other purposes, subject to such limitations as may be imposed by law and by any provision of the Articles of Incorporation in the exercise of their voting power. Cumulative voting for the election of directors is hereby expressly prohibited. The holders of Common Stock shall be entitled to one vote for each share held. All of the Common Stock authorized shall have equal voting rights without restriction.

 

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ARTICLE 8. AMENDMENTS TO ARTICLES OF INCORPORATION.

 

This corporation reserves the right to amend or repeal any provisions contained in these Articles of Incorporation in any manner now or hereafter permitted by statute. All rights of the shareholders of this corporation are subject to this reservation.

 

ARTICLE 9. ACTION BY MAJORITY CONSENT OF SHAREHOLDERS.

 

Any action required or permitted to be taken at a shareholders’ meeting may be taken without a meeting or a vote if the action is taken by the shareholders of record, or otherwise entitled to vote, in the aggregate not less than the minimum number of votes that would be necessary to authorize or take such action at which a meeting of all of the shares entitled to vote on the action were present and voted. NRS 78.320(2).

 

Where action is authorized by written consent, no meeting of the shareholders need be called and no notice of the action need be given. NRS 78.320(3).

 

ARTICLE 10. SHAREHOLDER APPROVAL.

 

The affirmative vote of a majority of all of the votes entitled to be cast on the matter shall be sufficient, valid, and effective, after due consideration and reconsideration of such action by the Board of Directors, as required by law, to approve and authorize the following acts of the corporation:

 

a.        An amendment to these Articles of Incorporation;

 

b.       The merger of this corporation into another corporation or the merger of one or more corporations into this corporation;

 

c.       The acquisition by another corporation of all of the outstanding shares of one or more classes or series of this corporation; or

 

d.       The sale, lease, exchange, or other disposition by this corporation of all, or substantially all, of its property other than in the usual course of business.

 

ARTICLE 11. REGULATION OF INTERNAL AFFAIRS.

 

The provisions for the regulation of the internal affairs of the corporation shall be set forth in the Bylaws.

 

ARTICLE 12. BYLAWS.

 

The Board of Directors shall have the power to adopt, amend or repeal the Bylaws for this corporation, subject to the power of the shareholders to amend or repeal such Bylaws.

 

MJ Harvest, Inc. - Amended and Restated Articles of Incorporation Page 3

 

 

 

 

ARTICLE 13. BOARD OF DIRECTORS.

 

The number of directors constituting the Board of Directors of this corporation may be increased or decreased from time to time in the manner specified in the Bylaws of this corporation: provided, however, that the number shall not be less than three (3) directors or more than seven (9). In the case of a vacancy in the Board of Directors because of a director’s resignation. removal, or other departure from the board, or because of an increase in the number of directors, the remaining directors, by majority vote, may elect a successor to hold office until the election and qualification of a successor at the annual shareholders meeting or a special meeting called for that purpose.

 

ARTICLE 14. REGISTERED OFFICE AND AGENT.

 

The name and address of the Registered Office and Registered Agent of this corporation is:

 

The Corporation Trust
Company of Nevada
701 S. Carson Street
Carson City, NV 89701

 

IN WITNESS WHEREOF. the undersigned. being the duly authorized Officer of this corporation. executed these Amended and Restated Articles of Incorporation and certified to the truth of the facts herein stated this 20th day of August, 2018

 

 
  Patrick Bilton, CEO

 

MJ Harvest, Inc. - Amended and Restated Articles of Incorporation Page 4

 

 

 

 

 

 

 

 

Exhibit 3.2

 

BY-LAWS OF 

MJ HARVEST, INC.

(hereinafter called the “Corporation”)

 

ARTICLE I OFFICES

 

Section 1.1 Registered Office. The registered office of the corporation shall be established and maintained at the office of The Corporation Trust Company of Nevada, at 701 S Carson St, Ste 200, Carson City, Nevada 89701; The Corporation Trust Company of Nevada shall be the registered agent of the corporation in charge thereof. The registered office and registered agent may be changed from time to time by action of the board of directors of the Corporation (the “Board of Directors”) and the appropriate filing by the corporation in the office of the Secretary of State of the State of Nevada.

 

Section 1.02. Principal Office. The principal office for the transaction of the business of the Corporation shall be at 9205 West Russell Road, Bldg. 3, Las Vegas, NV 89148. The Board of Directors is hereby granted full power and authority to change said principal office from one location to another.

 

Section 1.3 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Nevada, as the Board of Directors may from time to time determine.

 

ARTICLE II MEETINGS OF STOCKHOLDERS

 

Section 2.1 Annual Meetings. The Annual Meeting of stockholders of the Corporation (“Stockholders”) for purposes of the Nevada Revised Statutes (“NRS”) 78.330 shall be held on such date and at such time as shall be designated from time to time by the Board of Directors. The election of directors and any other proper business may be transacted at the Annual Meeting of Stockholders.

 

Section 2.2 Special Meetings. A Special meeting of the stockholders (a “Special Meeting”) for any purpose or purposes may be called by the president of the Corporation, the Board of Directors or a committee of the Board of Directors that has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors or in these by-laws (“By- Laws”), include the power to call such meetings. Such request shall state the purpose or purposes of the proposed meeting. Unless otherwise prescribed by law, the articles of incorporation of the Corporation, as amended and restated from time to time (the “Articles of Incorporation”) or these By- Laws, a Special Meeting may not be called by any other person or persons. No business may be transacted at any Special Meeting other than such business as may be designated in the notice (or any supplement thereto) calling such meeting.

 

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Section 2.3 Place of Meetings. The president, the Board of Directors, or a committee of the Board of Directors, as the case may be, may designate the time and place, either within or without the State of Nevada, for any Annual Meeting or for any Special Meeting of the Stockholders called by the president, the Board of Directors, or a committee of the Board of Directors. The Board of Directors may, in its sole discretion, determine that any meeting of the stockholders shall be held by means of electronic communications or other available technology in accordance with Section 2.17.

 

Section 2.4 Notice. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, the means of electronic communication, if any, and, in the case of a Special Meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to notice of and to vote at such meeting, and shall be delivered in accordance with NRS 78.370.

 

Section 2.5 Adjournments. Any meeting of the stockholders may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than sixty (60) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting in accordance with the requirements of Section 2.4 hereof shall be given to each stockholder of record (including the new record date) entitled to notice of and to vote at the meeting.

 

Section 2.6 Quorum. Unless otherwise required by applicable law or the Articles of Incorporation, the holders of one-third (1/3rd) of the Corporation’s capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, in the manner provided in Section 2.5 hereof, until a quorum shall be present or represented.

 

Section 2.7 Voting. Unless otherwise required by law, the Articles of Incorporation or these By-Laws or permitted by the rules of any stock exchange on which the Corporation’s shares are listed and traded, any question brought before any meeting of the stockholders, other than the election of directors, shall be decided by the vote of the holders of a majority of the total number of votes of the Corporation’s capital stock represented at the meeting and entitled to vote on such question, voting as a single class. Unless otherwise provided in the Articles of Incorporation, and subject to Section 2.11(a), each stockholder represented at a meeting of the stockholders shall be entitled to cast one (1) vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy as provided in Section 2.8. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of the stockholders, in such officer’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

 

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Section 2.8 Proxies. Each stockholder entitled to vote at a meeting of the stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder as proxy, but no such proxy shall be voted upon after three years from its date of creation, unless such proxy provides for a longer period, which may not exceed seven years from the date of its creation. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, the following shall constitute a valid means by which a stockholder may grant such authority:

 

(a) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.

 

(b) A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of an electronic record to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive the transmission, provided that any such electronic record must either set forth or be submitted with information from which it can be determined that the electronic record was authorized by the stockholder. If it is determined that such electronic record is valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information on which they relied.

 

Any copy, facsimile or other electronic telecommunication or other reliable reproduction of the writing or electronic record authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or electronic record for any and all purposes for which the original writing or electronic record could be used; provided, however, that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or electronic record.

 

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Section 2.9 Consent of Stockholders in Lieu of Meeting.

 

(a) Unless otherwise provided in the Articles of Incorporation, any action required or permitted to be taken at any Annual or Special Meeting of Stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation’s principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded, to the attention of the Secretary of the Corporation. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this Section 2.9 to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to the Corporation’s principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded, to the attention of the Secretary of the Corporation. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation as provided above in this Section 2.9.

 

(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be less than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent settingforth the action taken or proposed to be taken is delivered to the Corporation’s principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded, to the attention of the Secretary of the Corporation. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.

 

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(c) In the event of the delivery, in the manner provided by this Section 2.9, to the Corporation of the requisite written consent or consents to take corporate action and/or any related revocation or revocations, the Corporation shall engage independent inspectors of elections for the purpose of performing promptly a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, no action by written consent without a meeting shall be effective until such date as the independent inspectors certify to the Corporation that the consents delivered to the Corporation in accordance with this Section 2.9 represent at least a minimum number of votes that would be necessary to take the corporate action. Nothing contained in this Section 2.9(c) shall in any way be construed to suggest or imply that the board of directors or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspectors, or to take any other action (including, without limitation, the commencement, prosecution, or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

 

Section 2.10 List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days but not more than sixty

(60) days, before every meeting of the stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting (i) either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held or (ii) during ordinary business hours, at the principal place of business of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present.

 

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Section 2.11 Record Date.

 

(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of the stockholders shall be at the close of business on the day before the day on which the first notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation’s principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of the stockholders are recorded, to the attention of the Secretary of the Corporation. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

 

Section 2.12 Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 2.10 or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders.

 

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Section 2.13 Conduct of Meetings. Meetings of stockholders shall be presided over by the chairman of the Board of Directors (the “Chairman”), or, in the absence of the Chairman, by the vice chairman of the Board of Directors, if any, or if there be no vice chairman or in the absence of the vice chairman, by the chief executive officer, if any, or if there be no chief executive officer or in the absence of the chief executive officer, by the president, or, in the absence of the president, or, in the absence of any of the foregoing persons, by a chairman designated by the Board of Directors, or by a chairman chosen at the meeting by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast. The individual acting as chairman of the meeting may delegate any or all of his or her authority and responsibilities as such to any director or officer of the Corporation present in person at the meeting. The secretary, or in the absence of the secretary an assistant secretary, shall act as secretary of the meeting, but in the absence of the secretary and any assistant secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, (i) the establishment of procedures for the maintenance of order and safety, (ii) the establishment of an agenda or order of business for the meeting, (iii) limitation on participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies and such other persons as the chairman of the meeting shall permit, (iv) limitation on the time allotted for consideration of each agenda item and for questions or comments by meeting participants, (v) restrictions on entry to such meeting after the time prescribed for the commencement thereof, and (vi) the opening and closing of the voting polls. The Board of Directors, in its discretion, or the chairman of the meeting, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot.

 

Section 2.14 Inspectors of Election. In advance of any meeting of the stockholders, the Board of Directors, by resolution, the Chairman or the president shall appoint one or more inspectors to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of the stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by applicable law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector or inspectors may (i) ascertain the number of shares outstanding and the voting power of each; (ii) determine the number of shares represented at a meeting and the validity of proxies or ballots; (iii) count all votes and ballots; (iv) determine any challenges made to any determination made by the inspector(s); and (v) certify the determination of the number of shares represented at the meeting and the count of all votes and ballots.

 

Section 2.15 Nature of Business at Meetings of Stockholders. Only such business (other than nominations for election to the Board of Directors and the election of directors, which must comply with the provisions of Section 2.16) may be transacted at an Annual Meeting of Stockholders as is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the Annual Meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) otherwise properly brought before the Annual Meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.15 and on the record date for the determination of stockholders entitled to notice of and to vote at such Annual Meeting and (ii) who complies with the notice procedures set forth in this Section 2.15.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

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In addition to any other applicable requirements, for business to be properly brought before an Annual Meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

 

To be timely, a stockholder’s notice to the Secretary must be delivered to or be mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one-hundred and twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; provided, however, that in the event that the Annual Meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure of the date of the Annual Meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an Annual Meeting, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information: (a) as to each matter such stockholder proposes to bring before the Annual Meeting, a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, and (b) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the proposal is being made, (i) the name and address of such person, (ii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (B) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; (iii) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such person, or any affiliates or associates of such person, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such person or any affiliates or associates of such person, in such business, including any anticipated benefit therefrom to such person, or any affiliates or associates of such person, (iv) a representation that the stockholder giving notice intends to appear in person or by proxy at the Annual Meeting to bring such business before the meeting; and (v) any other information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such person with respect to the proposed business to be brought by such person before the Annual Meeting pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

P a g e  8 | 25

 

 

 

 

A stockholder providing notice of business proposed to be brought before an Annual Meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.15 shall be true and correct as of the record date for determining the stockholders entitled to receive notice of the Annual Meeting and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of the Annual Meeting.

 

No business shall be conducted at the Annual Meeting of Stockholders except business brought before the Annual Meeting in accordance with the procedures set forth in this Section 2.15; provided, however, that, once business has been properly brought before the Annual Meeting in accordance with such procedures, nothing in this Section 2.15 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of an Annual Meeting determines that business was not properly brought before the Annual Meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

 

Nothing contained in this Section 2.15 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act (or any successor provision of law).

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

P a g e  9 | 25

 

 

 

 

Section 2.16 Nomination of Directors. Only natural persons of at least 18 years of age who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Articles of Incorporation with respect to the right of holders of preferred stock, if any, of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any Annual Meeting of Stockholders, or at any Special Meeting of Stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.16 and on the record date for the determination of stockholders entitled to notice of and to vote at such Annual Meeting or Special Meeting and (ii) who complies with the notice procedures set forth in this Section 2.16.

 

In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary must be delivered to or be mailed and received at the principal executive offices of the Corporation (a) in the case of an Annual Meeting, not less than ninety (90) days nor more than one-hundred and twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; provided, however, that in the event that the Annual Meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure of the date of the Annual Meeting was made, whichever first occurs; and (b) in the case of a Special Meeting of Stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the Special Meeting was mailed or public disclosure of the date of the Special Meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an Annual Meeting or a Special Meeting called for the purpose of electing directors, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

P a g e  10 | 25

 

 

 

 

To be in proper written form, a stockholder’s notice to the Secretary must set forth the following information: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of such person and that such person is a natural person of at least 18 years of age, (ii) the principal occupation or employment of such person, (iii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (B) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; and (iv) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, and the beneficial owner, if any, on whose behalf the nomination is being made, (i) the name and record address of the stockholder giving the notice and the name and principal place of business of such beneficial owner; (ii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (B) the name of each nominee holder of shares of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; (iii) a description of all agreements, arrangements, or understandings (whether written or oral) between such person, or any affiliates or associates of such person, and any proposed nominee or any other person or persons (including their names) pursuant to which the nomination(s) are being made by such person, and any material interest of such person, or any affiliates or associates of such person, in such nomination, including any anticipated benefit therefrom to such person, or any affiliates or associates of such person; (iv) a representation that the stockholder giving notice intends to appear in person or by proxy at the Annual Meeting or Special Meeting to nominate the persons named in its notice; and (v) any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

 

A stockholder providing notice of any nomination proposed to be made at an Annual Meeting or Special Meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.16 shall be true and correct as of the record date for determining the stockholders entitled to receive notice of the Annual Meeting or Special Meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such Annual Meeting or Special Meeting.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

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No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.16. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

 

Section 2.17 Meetings Through Electronic Communications. Stockholders may participate in a meeting of the stockholders by any means of electronic communications, videoconferencing, teleconferencing or other available technology permitted under the NRS (including, without limitation, a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other) and utilized by the Corporation. If any such means are utilized, the Corporation shall, to the extent required under the NRS, implement reasonable measures to (a) verify the identity of each person participating through such means as a stockholder and (b) provide the stockholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. Participation in a meeting pursuant to this Section 2.17 constitutes presence in person at the meeting.

 

ARTICLE III DIRECTORS

 

Section 3.1 Number, Election and Term of Directors. The Board of Directors shall consist of not less than one nor more than seven members, the exact number of which shall be fixed from time to time by the Board of Directors. No decrease in the number of authorized directors constituting the Board of Directors of the Corporation shall shorten the term of any incumbent director. Except as provided in Section 3.2, directors shall be elected by a plurality of the votes cast at each Annual Meeting of Stockholders and each director so elected shall hold office until the next Annual Meeting of Stockholders and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation or removal. Directors must be natural persons of at least 18 years of age but need not be stockholders of the Corporation or residents of the State of Nevada.

 

Section 3.2 Vacancies. Unless otherwise required in the Articles of Incorporation, vacancies on the Board of Directors or any committee thereof arising through death, resignation, removal, an increase in the number of directors constituting the Board of Directors or such committee or otherwise may be filled only by a majority of the remaining directors then in office, though less than a quorum, or by a sole remaining director. The directors so chosen shall, in the case of the Board of Directors, hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier death, resignation or removal and, in the case of any committee of the Board of Directors, shall hold office until their successors are duly appointed by the Board of Directors or until their earlier death, resignation or removal.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

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Section 3.3 Duties and Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws required to be exercised or done by the stockholders.

 

Section 3.4 Meetings. The Board of Directors and any committee thereof may hold meetings, both regular and special, either within or without the State of Nevada. Regular meetings of the Board of Directors or any committee thereof may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors or such committee, respectively. Special meetings of the Board of Directors may be called by the Chairman, if any, or the president. Special meetings of any committee of the Board of Directors may be called by the chairman of such committee, if any, the president, or any director serving on such committee. Notice thereof stating the place, date and hour of the meeting shall be given to each director (or, in the case of a committee, to each member of such committee) either by mail not less than seventy-two (72) hours before the date of the meeting, by telephone or electronic mail on twenty-four (24) hours’ notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.

 

Section 3.5 Organization. At each meeting of the Board of Directors or any committee thereof, the Chairman of the Board of Directors or the chairman of such committee, as the case may be, or, in his or her absence or if there be none, a director chosen by a majority of the directors present, shall act as chairman. Except as provided below, the Secretary of the Corporation shall act as secretary at each meeting of the Board of Directors and of each committee thereof. In case the Secretary shall be absent from any meeting of the Board of Directors or of any committee thereof, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the absence from any such meeting of the Secretary and all the Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting. Notwithstanding the foregoing, the members of each committee of the Board of Directors may appoint any person to act as secretary of any meeting of such committee and the Secretary or any Assistant Secretary of the Corporation may, but need not if such committee so elects, serve in such capacity.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

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Section 3.6 Resignations and Removals of Directors. Any director of the Corporation may resign from the Board of Directors or any committee thereof at any time, by giving notice in writing to the Chairman of the Board of Directors, if any, the president or the secretary of the Corporation and, in the case of a committee, to the chairman of such committee, if any. Such resignation shall take effect at the time therein specified or, if no time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise required by applicable law and subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any director or the entire Board of Directors may be removed from office at any time, with or without cause, and only by the affirmative vote of the holders of at least two-thirds (2/3) of the combined voting power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors, voting together as a single class. Any director serving on a committee of the Board of Directors may be removed from such committee at any time by the Board of Directors.

 

Section 3.7 Quorum and Voting.

 

(a) Except as otherwise required or permitted by the Articles of Incorporation, the NRS or the rules and regulations of any securities exchange or quotation system on which the Corporation’s securities are listed or quoted for trading, at all meetings of the Board of Directors or any committee thereof, a majority of the entire Board of Directors or a majority of the directors constituting such committee, as the case may be, shall constitute a quorum for the transaction of business and the act of a majority of the directors or committee members present at any meeting at which there is a quorum shall be the act of the Board of Directors or such committee, as applicable. If a quorum shall not be present at any meeting of the Board of Directors or any committee thereof, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present.

 

(b) Each director shall have one vote for any action required or permitted to be taken at any meeting of the Board or any committee thereof or without a meeting as provided herein. In accordance with NRS 78.330, all directors and classes of directors shall have the same voting rights.

 

Section 3.8 Actions of the Board by Written Consent. Unless otherwise provided in the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.

 

Section 3.9 Meetings by Means of Conference Telephone. Unless otherwise provided in the Articles of Incorporation or these By-Laws, members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.9 shall constitute presence in person at such meeting.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

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Section 3.10 Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Each member of a committee must meet the requirements for membership, if any, imposed by applicable law and the rules and regulations of any securities exchange or quotation system on which the securities of the Corporation are listed or quoted for trading. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. Subject to the rules and regulations of any securities exchange or quotation system on which the securities of the Corporation are listed or quoted for trading, in the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another qualified member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep regular minutes and report to the Board of Directors when required. Notwithstanding anything to the contrary contained in this Article III, the resolution of the Board of Directors establishing any committee of the Board of Directors and/or the charter of any such committee may establish requirements or procedures relating to the governance and/or operation of such committee that are different from, or in addition to, those set forth in these By-Laws and, to the extent that there is any inconsistency between these By-Laws and any such resolution or charter, the terms of such resolution or charter shall be controlling; provided that it complies with the NRS.

 

Section 3.11 Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary for service as director, payable in cash or securities. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for service as committee members.

 

B y l a w s   –   F e b r u a r y   1 ,   2 0 1 8

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Section 3.12 Interested Directors. Subject to compliance with NRS 78.140, no contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because any such director’s or officer’s vote is counted for such purpose if: (i) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders holding a majority of the voting power (the votes of the common or interested directors may be counted); (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders; and (iv) is in compliance with NRS 78.140. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction as set forth herein.

 

Section 3.13 Duty of Care of Directors and Officers. As provided by NRS 78.138, directors and officers of the Corporation in exercising their powers and discharging their duties shall (a) act honestly and in good faith with a view to the best interests of the Corporation; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. As provided in NRS 78.138(7), every director and officer of the Corporation shall be liable for a breach of his fiduciary duties and any breach involving intentional misconduct, fraud or a knowing violation of law.

 

ARTICLE IV OFFICERS

 

Section 4.1 General. The officers of the Corporation shall consist of a chief executive officer, president, chief operating officer, chief financial officer and a secretary, each of whom shall be elected by the Board. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board. All officers must be natural persons and any natural person may hold two or more offices, except that in the event that the Corporation shall have more than one director, the offices of president and secretary shall be held by different persons.

 

Section 4.2 Election, Qualification and Term of Office. Each of the officers shall be elected by the Board. None of said officers need be a director. Except as hereinafter provided or subject to the express provisions of a contract authorized by the Board of Directors, each of said officers shall hold office from the date of his/her election until the next annual meeting of the Board and until his/her successor shall have been duly elected and qualified or until his or her removal or resignation.

 

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Section 4.3 Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the president or any vice president or any other officer authorized to do so by the Board of Directors and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.

 

Section 4.4 Removal. The Board of Directors shall have the right to remove, with or without cause, any officer whenever in its judgment the best interests of the Corporation will be served thereby.

 

Section 4.5 Resignation. Any officer may resign at any time by giving notice to the Board, the president or the secretary. Any such resignation shall take effect at the date of receipt of such notice or at any later date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

Section 4.6 Vacancies. The Board of Directors shall fill any office which becomes vacant with a successor who shall hold office for the unexpired term and until his/her successor shall have been duly elected and qualified or until his or her removal or resignation.

 

Section 4.7 Powers and Duties. The powers and duties of the respective corporate officers shall be determined by the Board.

 

Section 4.8 Salaries. The salaries of all executive officers of the Corporation shall be fixed by the Board of Directors or by such committee of the Board of Directors as may be designated from time to time by a resolution adopted by a majority of the Board of Directors.

 

Section 4.9 Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

 

ARTICLE V STOCK

 

Section 5.1 Shares of Stock. The shares of capital stock of the Corporation may be certificated or uncertificated (i.e., book-entry). Furthermore, the Corporation may issue shares of its capital stock in uncertificated or book-entry form in connection with new share issuances, the transfer of shares and the replacement of shares represented by lost, destroyed or mutilated certificates as provided in Section 5.3. However, every holder of capital stock of the Corporation theretofore represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to have a certificate for shares of capital stock of the Corporation signed by, or in the name of the Corporation by, (a) the Chairman, the chief executive officer or the president, and (b) the chief financial officer or the secretary, certifying the number of shares owned by such stockholder in the Corporation.

 

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Section 5.2 Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

 

Section 5.3 Lost Certificates. Unless otherwise provided in the Articles of Incorporation or these By-laws, the Board of Directors may direct a new certificate or uncertificated shares be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner’s legal representative, to identify the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate or uncertificated shares.

 

Section 5.4 Transfers. Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these By-Laws. Transfers of stock shall be made only on the books of the Corporation, and in the case of certificated shares of stock, only by the person named in the certificate or by such person’s attorney lawfully constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; or, in the case of uncertificated shares of stock, upon receipt of proper transfer instructions from the registered holder of the shares or by such person’s attorney lawfully constituted in writing, and upon payment of all necessary transfer taxes and compliance with appropriate procedures for transferring shares in uncertificated form; provided, however, that such surrender and endorsement, compliance or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. With respect to certificated shares of stock, every certificate exchanged, returned or surrendered to the Corporation shall be marked “Cancelled,” with the date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.

 

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Section 5.5 Regulations. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with these By-Laws, concerning the issue, transfer and registration of certificates for shares or uncertificated shares of the stock of the Corporation.

 

Section 5.6 Dividend Record Date. Subject to compliance with NRS 78.288 and 78.300, and the Articles of Incorporation, in order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

Section 5.7 Record Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law.

 

Section 5.8 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors.

 

Section 5.9 Consideration for Shares. The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the Corporation including, without limitation, cash, services performed or other securities of the Corporation. When the Corporation receives the consideration for which the Board of Directors authorized the issuance of shares, such shares shall be fully paid and non-assessable (if non-assessable stock) and the stockholders shall not be liable to the Corporation or to its creditors in respect thereof.

 

ARTICLE VI NOTICES

 

Section 6.1 Notices. Whenever written notice is required by the NRS, the Articles of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail in accordance with the NRS, and as permitted thereby, addressed to such director, member of a committee or stockholder, at such person’s address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by electronic transmission (by fax, electronic mail, or posting on electronic network).

 

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Section 6.2 Waivers of Notice. Whenever any notice is required by applicable law, the Articles of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to notice, or by transmission of an electronic record by that person, whether before or after the time stated therein, shall be deemed equivalent thereto.

 

Attendance of a person at a meeting, present in person or represented by proxy, shall constitute a waiver of notice of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any Annual or Special Meeting of Stockholders or any regular or special meeting of the directors or members of a committee of directors need be specified in any written waiver of notice unless so required by law, the Articles of Incorporation or these By-Laws.

 

ARTICLE VII GENERAL PROVISIONS

 

Section 7.1 Dividends. Dividends upon the capital stock of the Corporation, subject to the requirements of the NRS and the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting of the Board of Directors (or any action by written consent in lieu thereof in accordance with Section 3.8 hereof), and may be paid in cash or in property other than shares. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for purchasing any of the shares of capital stock, warrants, rights, options, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

 

Section 7.2 Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

 

Section 7.3 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

 

Section 7.4 Corporate Seal. The Corporation is not required to have or maintain a corporate seal.

 

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ARTICLE VIII INDEMNIFICATION

 

Section 8.1 Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation. Subject to Section 8.3 and to the fullest extent permitted by the NRS, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.

 

Section 8.2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 8.3 and to the fullest extent permitted by the NRS, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court in which such action or suit was brought deem proper.

 

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Section 8.3 Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as permitted by the NRS and authorized in the specific case upon a determination that indemnification of the present or former director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 8.1 or Section 8.2, as the case may be. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the Corporation. To the extent, however, that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.

 

Section 8.4 Good Faith Defined. For purposes of any determination under Section 8.3, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person’s conduct was unlawful, if such person’s action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The provisions of this Section 8.4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 8.1 or Section 8.2, as the case may be.

 

Section 8.5 Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 8.3, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Nevada for indemnification to the extent otherwise permissible under Section 8.1 or Section 8.2. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 8.1 or Section 8.2, as the case may be. Neither a contrary determination in the specific case under Section 8.3 nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 8.5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

 

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Section 8.6 Expenses Payable in Advance. Expenses (including attorneys’ fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.

 

Section 8.7 Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Section 8.1 and Section 8.2 shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 8.1 or Section 8.2 but whom the Corporation has the power or obligation to indemnify under the provisions of the NRS, or otherwise.

 

Section 8.8 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VIII.

 

Section 8.9 Certain Definitions. For purposes of this Article VIII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

 

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The term “another enterprise” as used in this Article VIII shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. For purposes of this Article VIII, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VIII.

 

Section 8.10 Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

Section 8.11 Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 8.5), the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors.

 

Section 8.12 Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation.

 

ARTICLE IX MISCELLANEOUS

 

Section 9.1 Acquisition of Controlling Interest Statute Opt–Out. The provisions of NRS 78.378 to 78.3793, inclusive, shall not apply to the Corporation or to an acquisition of a “controlling interest” (as defined in NRS 78.3785).

 

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Section 9.2 Forum for Adjudication of Disputes. To the fullest extent permitted by law, and unless the Corporation consents in writing to the selection of an alternative forum, the state and federal courts for Clark County, Nevada shall, to the fullest extent permitted by law, be the sole and exclusive forum for each of the following: (a) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (b) any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action arising or asserting a claim arising pursuant to any provision of NRS Chapters 78 or 92A or any provision of the Articles of Incorporation or these By-laws or (d) any action asserting a claim governed by the internal affairs doctrine, including, without limitation, any action to interpret, apply, enforce or determine the validity of the Articles of Incorporation or these By-laws. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Section 9.2.

 

ARTICLE X AMENDMENTS

 

Section 10.1 Amendments. These By-Laws may be altered, amended or repealed at any meeting of the Board of Directors, provided notice of the proposed change was given in the notice of the meeting not less than two days prior to the meeting, or such notice was waived. Notwithstanding the foregoing sentence, these By-laws may be amended or repealed in any respect, and new by-laws may be adopted, in each case by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting power of the Corporation, voting together as a single class.

 

CERTIFICATION OF SECRETARY

 

The undersigned, as the duly elected Secretary of MJ Harvest, Inc., a Nevada corporation (the “Corporation”), does hereby certify that the Board of Directors of the Corporation adopted the foregoing By-laws as of February 1, 2018.

 

  (GRAPHIC)  
  Patrick Bilton, Secretary  

 

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Gary R. Henrie

Attorney at Law

Licensed in Nevada and Utah

 

General Delivery Telephone:  307-200-9415

Alpine, Wyoming 83128 E-mail:  grhlaw@hotmail.com 

 

 

October 2, 2019

 

MJ Harvest, Inc.

9205 West Russell Road, Suite 240

Las Vegas, NV 89139

 

Re: MJ Harvest, Inc., Registration Statement on Form S-1

 

Ladies and Gentlemen:

 

I have acted as securities counsel for MJ Harvest, Inc., a Nevada corporation (the "Company"), for the purpose of issuing this opinion letter in connection with the registration statement on Form S-1 (the "Registration Statement") to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended. The Registration Statement relates to the offering of 2,614,413 shares of the Company’s common stock by selling stockholders.

 

In rendering the opinion set forth below, I have reviewed: (a) the Registration Statement; (b) the Company's Articles of Incorporation; (c) the Company's Bylaws; (d) a certificate signed by an executive officer of the Company; and (e) such statutes, records and other documents as I have deemed relevant. In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, and conformity with the originals of all documents submitted to me as copies thereof and the truthfulness of statements set forth in such documents. In addition, I have made such other examinations of law and fact, as I have deemed relevant in order to form a basis for the opinions hereinafter expressed.

 

Based upon the foregoing, I am of the opinion that the 2,614,413 shares of common stock to be sold by the selling shareholders are legally issued, fully paid and non-assessable and will remain legally issued, fully paid and non-assessable in the hands of any subsequent purchaser. This opinion is based on Nevada general corporate law, all applicable Nevada statutory provisions and reported judicial decisions interpreting these laws.

 

Very truly yours,

 

/s/ Gary R. Henrie

_______________________________________

Gary R. Henrie, Esq.

 

 
 

 

Gary R. Henrie

Attorney at Law

Licensed and the States of Utah and Nevada

 

General Delivery Telephone:  307-200-9415 

Alpine, Wyoming 83128 E-mail:  grhlaw@hotmail.com 

 

 

 

I hereby consent to the use of my opinion in the body of the Registration Statement and as an Exhibit to the Registration Statement and to all references to myself under the caption Legal Matters in the Registration Statement.

 

Very truly yours,

 

 

/s/ Gary R. Henrie

_____________________________________

Gary R. Henrie, Esq.


 

DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

Exhibit 10.1

 

INDEPENDENT CONTRACTOR AGREEMENT

 

This Independent Contractor Agreement (the “Agreement”) is between Patrick Bilton, an individual residing at 755 Hibiscus Street, Boca Raton, FL 33486 (the “Representative”) and MJ Harvest, Inc., a Nevada corporation located at 9205 West Russell Road, Suite 249, Las Vegas, NV 89139 (the “Company”).

 

The Company wishes to engage the Representative as an independent contractor to serve in the capacity specified in Exhibit A and the Representative wishes to serve in that capacity in accordance with the terms described in this Agreement.

 

The Company’s business is briefly described in Exhibit B and the services to be provided by Representative are intended by the parties to be in furtherance of the Company’s business.

 

The parties therefore agree as follows:

 

1. ENGAGEMENT

 

(a) Engagement. The Company retains the Representative to provide, and the Representative shall provide, the services described in Exhibit A (collectively, the “Services”).

 

(b) Obligations of the Company. The Company shall be responsible for meeting the obligations set forth in Exhibit A, which obligations are necessary for Representative to perform the Services.

 

2. TERM AND TERMINATION.

 

(a) Term. This agreement will become effective as of January 1, 2019 and will expire on December 31, 2019 (the “Term”) unless sooner terminated in accordance with the provisions of this Agreement.

 

(b) Termination. This agreement may be terminated:

 

(i) by either party immediately for a material breach of any provision of this agreement by the other party, if the other party’s material breach is not cured within 5 days of receipt of written notice of the breach; or

 

(ii) by either at any time and for any reason, or no reason, upon thirty days prior notice of termination.

 

(c) Effect of Termination. After the termination of this agreement for any reason, the Company shall promptly pay the Representative for Services rendered through the effective date of the termination in accordance with the Compensation provisions set forth in Exhibit C. No other compensation, of any nature or type, will be payable after the termination of this agreement.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

3. COMPENSATION.

 

(a) Compensation. The Representative’s compensation for the Services shall consist of payments set forth in Exhibit C (the “Compensation”).

 

(b) No Other Compensation. The compensation set out above will be the Representative’s sole compensation under this agreement.

 

(c) Expenses. Any ordinary and necessary expenses incurred by the Representative in the performance of this agreement shall be the Representative’s sole responsibility unless the Company first agrees in writing to reimburse those expenses.

 

(d) Taxes. The Representative is solely responsible for the payment of all income, social security, employment-related, or other taxes incurred as a result of the performance of the Services by the Representative under this agreement, and for all obligations, reports, and timely notifications relating to those taxes. The Company has no obligation to pay or withhold any sums for those taxes. The Company will file an annual 1099 with the IRS reporting Representative income.

 

(e) Other Benefits. The Representative has no claim against the Company under this agreement or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind.

 

4. NATURE OF RELATIONSHIP.

 

The relationship of the parties under this agreement is one of independent contractors, and no joint venture, partnership, agency, employer-employee, or similar relationship is created in or by this agreement. Neither party may assume or create obligations on the other party’s behalf, nor may either party take any action that creates the appearance of such authority.

 

5. BEST EFFORTS.

 

During the Term, the Representative shall exert best efforts to Services described in Exhibit B.

 

6. CONFIDENTIAL INFORMATION.

 

(a) Confidentiality. During the Term, the Representative may have access to or receive certain information of or about the Company that the Company designates as confidential or that, under the circumstances surrounding disclosure, ought to be treated as confidential by the Representative (“Confidential Information”). Confidential Information includes information relating to the Company or its current or proposed business, financial statements, budgets and projections, customer identifying information, potential and intended customers, employers, products, computer programs, specifications, manuals, software, analyses, strategies, marketing plans, business plans, and other confidential information, provided orally, in writing, by drawings, or by any other media. The Representative will treat the Confidential Information as confidential and will not disclose it to any third party or use it for any purpose but to fulfill obligations in this agreement. In addition, the Representative shall use due care and diligence to prevent the unauthorized use or disclosure of such information.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

(b) Exceptions. The obligations and restrictions in subsection (a) do not apply to that part of the Confidential Information the Representative demonstrates:

 

(i) was or becomes generally publicly available other than as a result of a disclosure by the Representative in violation of this agreement;

 

(ii) was or becomes available to the Representative on a non-confidential basis before its disclosure to the Representative by the Company, but only if:

 

A. the source of such information is not bound by a confidentiality agreement with the Company or is not otherwise prohibited from transmitting the information to the Representative by a contractual, legal, fiduciary, or other obligation; and

 

B. the Representative provides the Company with written notice of prior possession either (I) before the effective date of this agreement or (II) if the Representative later becomes aware (through disclosure to the Representative) of any aspect of the Confidential Information as to which the Representative had prior possession, promptly on the Representative so becoming aware;

 

(iii) is requested or legally compelled (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand, or similar processes), or is required by a regulatory body, to be disclosed. However, the Representative shall:

 

A. provide the Company with prompt notice of these requests or requirements before making a disclosure so that the Company may seek an appropriate protective order or other appropriate remedy; and

 

B. provide reasonable assistance to the Company in obtaining any protective order.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

If a protective order or other remedy is not obtained or the Company grants a waiver under this agreement, the Representative may furnish that portion (and only that portion) of the Confidential Information that, in the written opinion of counsel reasonably acceptable to the Company, the Representative is legally compelled or otherwise required to disclose. However, the Representative shall make reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any part of the Confidential Information disclosed in this way; or

 

(iv) was developed by the Representative independently, not arising out of the services performed by Representative in connection with this agreement and without breach of this agreement.

 

(c) Remedy. Money damages may not be a sufficient remedy for any breach of this section by the Representative and, in addition to all other remedies, the Company may seek (and may be entitled to) as a result of such breach, specific performance and injunctive or other equitable relief as a remedy.

 

7. CONFLICT OF INTEREST AND NON-CIRCUMVENTION.

 

The Representative warrants to the Company that Representative shall not take any action that would serve to promote a competing business at the expense of Company’s business. Representative further agrees that it shall not attempt to induce, lure, incent or in any way propose or accept a direct relationship with any company or product or brand that would compete with the Company’s business, products, or brands. If such a relationship is found to exist, Company may take appropriate action to ameliorate the competitive relationship, up to and including termination of this Agreement.

 

8. OTHER ACTIVITIES.

 

During the Term, the Representative may engage in other independent contracting activities, except that the Representative may not accept work, enter into contracts, or accept obligations inconsistent or incompatible with the Representative’s obligations or the scope of Services to be rendered for the Company under this agreement.

 

9. RETURN OF PROPERTY.

 

Within ten (10) days of the termination of this agreement, the Representative shall return to the Company, retaining no copies or notes, all Company products (including Products), samples, models, property, and documents relating to the Company’s business including reports, abstracts, lists, correspondence, information, computer files, computer disks, and other materials and copies of those materials obtained by the Representative during and in connection with Representative’s work with the Company. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork or creative work, notebooks, and similar items relating to the Company’s business, whether prepared by the Representative or by others, remain the Company’s exclusive property.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

10. INDEMNIFICATION.

 

(a) Of Representative by Company. At all times after the effective date of this agreement, the Company shall indemnify the Representative from all damages, liabilities, expenses, claims, or judgments (including interest, penalties, reasonable attorneys’ fees, accounting fees, and expert witness fees) (collectively, the “Claims”) that the Representative may incur and that arise from:

 

(i) the Company’s breach of Representative’s obligations or representations under this agreement; or

 

(ii) the negligent, intentional, or other acts of the Company or its employees.

 

However, the Company is not obligated to indemnify the Representative if any of these Claims result from the Representative’s own actions or inactions or a customer’s negligence.

 

(b) Of Company by Representative. At all times after the effective date of this agreement, the Representative shall indemnify the Company and its subcontractors, officers, members, managers, employees, owners, sub licensees, affiliates, subsidiaries, successors, and assigns (collectively, the “Company Indemnitees”) from all damages, liabilities, expenses, claims, or judgments (including interest, penalties, reasonable attorneys’ fees, accounting fees, and expert witness fees) (collectively, the “Claims”) that any Company Indemnitee may incur and that arise from:

 

(i) the Representative’s gross negligence or willful misconduct arising from the Representative’s carrying out of Representative’s obligations under this agreement;

 

(ii) the Representative’s breach of any of Representative’s obligations or representations under this agreement; or

 

(iii) the Representative’s breach of Representative’s express representation that Representative is an independent contractor and in compliance with all applicable laws related to work as an independent contractor. If a regulatory body or court of competent jurisdiction finds that the Representative is not an independent contractor or is not in compliance with applicable laws related to work as an independent contractor, based on the Representative’s own actions, the Representative will assume full responsibility and liability for all taxes, assessments, and penalties imposed against the Representative or the Company resulting from that contrary interpretation, including taxes, assessments, and penalties that would have been deducted from the Representative’s earnings if the Representative had been on the Company’s payroll and employed as a Company employee.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

11. FORCE MAJEURE.

 

A party will be not be considered in breach or in default because of, and will not be liable to the other party for, any delay or failure to perform its obligations under this agreement by reason of fire, earthquake, flood, explosion, strike, riot, war, terrorism, or similar event beyond that party’s reasonable control (each a “Force Majeure Event”). However, if a Force Majeure Event occurs, the affected party shall, as soon as practicable:

 

(a) notify the other party of the Force Majeure Event and its impact on performance under this agreement; and

 

(b) use reasonable efforts to resolve any issues resulting from the Force Majeure Event and perform its obligations under this agreement.

 

12. GOVERNING LAW; ATTORNEYS’ FEES.

 

(a) Choice of Law. The laws of the state of Nevada govern this agreement (without giving effect to its conflicts of law principles).

 

(b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in Clark County, Nevada.

 

(c) Attorneys’ Fees. If either party employs attorneys to enforce any rights arising out of or relating to this agreement, the losing party shall reimburse the prevailing party for its reasonable attorneys’ fees.

 

13. AMENDMENTS.

 

No amendment to this agreement will be effective unless it is in writing and signed by a party or its authorized representative.

 

14. ASSIGNMENT AND DELEGATION.

 

(a) No Assignment. Neither party may assign any of its rights under this agreement, except with the prior written consent of the other party, which consent may not be unreasonably withheld. All voluntary assignments of rights are limited by this subsection.

 

(b) No Delegation. Neither party may delegate any performance under this agreement, except with the prior written consent of the other party, which consent may not be unreasonably withheld.

 

(c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

15. COUNTERPARTS; ELECTRONIC SIGNATURES.

 

(a) Counterparts. The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.

 

(b) Electronic Signatures. This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party’s signature is delivered by facsimile, e-mail, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.

 

16. SEVERABILITY.

 

If any provision contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if the invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this agreement to be unreasonable.

 

17. NOTICES.

 

(a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this agreement shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this agreement: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.

 

(b) Addresses. A party shall address notices under this section to a party at the following addresses:

 

If to the Company: MJ Harvest, Inc.
  9205 W. Russell Rd., Suite 240
  Las Vegas, NV 89139
   
  E-mail: patrick@oldflorestacorp.com

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

If to the Representative: Patrick Bilton
  755 Hibiscus Street
  Boca Raton, FL 33486
   
  E-mail: patrick@oldflorestacorp.com

 

(c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.

 

18. WAIVER.

 

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.

 

19. ENTIRE AGREEMENT.

 

This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties’ agreement with respect to its subject matter. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement’s effectiveness.

 

20. HEADINGS.

 

The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement’s construction or interpretation.

 

21. EFFECTIVENESS.

 

This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party’s signature) will be deemed the date of this agreement.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

22. NECESSARY ACTS; FURTHER ASSURANCES.

 

Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.

 

Each party is signing this agreement on the date stated opposite that party’s signature.

 

COMPANY   REPRESENTATIVE
         
By:   By:  
Its: CFO      
         
Date: 2/26/2019   Date: 2/25/2019

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

EXHIBIT A

SERVICES

 

REPRENTATIVE SERVICES. Services to be provided under this Agreement are as follows:

 

1) Acting as the CEO, an officer position with the Company. Consultant, will report to the Board of Directors of the Company and work with the leadership team and Board of Directors.

2) Work with the other officers and executive management team and the Board of Directors on strategy and ensure the implementation of this strategy occurs.

3) Directly assist management and other employees of the company on all strategic and tactical matters as they relate to overseeing the Company’s operations, technology and/or product development, financial activities, including budget management, forecasting needs and securing of new funding.

4) Assist in all capital raising, government grant and loan proposals

5) Establish yearly objectives, budgets, and meeting agendas.

6) Attend Company meetings and events as required to fulfill the Services; Attend periodic management team calls. attend the financial review and budget review meetings. board meetings as necessary. and participate in the strategic planning process.

7) Guide the preparation of corporate governance documents in accord with public company best practices.

8) Consult on structure of acquisition agreements for future products and technology to meet Company objectives.

9) Perform such other duties as may be assigned by the Board of Directors from time-to-time.

 

COMPANY’S OBLIGATIONS. The Company shall:

 

10) Provide Representative with sufficient resources and Board level support to allow Representative to effectively accomplish the tasks assigned.

11) Communicate with Representative as needed to maintain a common understanding of the Company’s goals and operating parameters, including fund availability and strategic direction.

 

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DocuSign Envelope ID: EFFF5545-FF2C-4D2F-AAB5-45425C2D797E

 

EXHIBIT B

 

PURPOSE OF THE INDEPENDENT CONTRACTOR AGREEMENT

 

As set out in EXHIBIT A, Representative is being retained by the Company to serve as CHIEF FINANCIAL OFFICER for the Company. In that capacity, the Representative will be responsible for performing the services set out in Exhibit A. For purposes of this Agreement, the following additional description and provisions are applicable to the sales activities of Representative.

 

BUSINESS DESCRIPTION

 

The Company acquires, develops and markets products and technologies that benefit agricultural. Currently, the Company has acquired 5-gallon and 20 liter versions of the DeBudder Lid used in harvesting cannabis and other budded plants. The DeBudder product line also includes the DeBudder Edge for mounting on flat surfaces. The DeBudder products are branded under the name “Original 420.” The DeBudder lid products are patent pending. The Company recently added the TRIM BAG product line to its port folio.

 

The Company also recently launched ProCannaGro.com, the Company’s website for product distribution and sales. ProCannaGro.com will serve as the portal for the ever-expanding products offered by the Company. The website will serve as the platform for direct to consumer marketing of the world’s best harvest and cultivation tools worldwide. The Company will fill orders through authorized distributors and local shops where our customers are located.

 

IMPORTANCE

 

The CEO serves as a key member of the executive management team and is responsible for all aspects of the overall business direction and the implementation of the business plan. The CEO works closely with the Board of Directors to develop the company’s direction and to establish goals and performance metrics to measure progress toward those goals. The CEO also has primary responsibility for supervising the management team and communicating with the management team to assure that everyone is working toward the same result.

 

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EXHIBIT C

 

COMPENSATION

 

As full compensation for the Services, the Company shall pay Representative as follows:

 

a) Total Compensation. Representative will earn total compensation of $240,000 for the contract term, of which 0% shall be payable monthly in cash and 100% shall be payable as stock compensation, as detailed further in subsections (b) and (c) below, provided however, that at such time as the Company receives at least $500,000 in funding through a private placement or public offering, the percentages will be adjusted to 50% cash compensation and 50% stock compensation.

 

b) Cash Payments. At such time as cash compensation is payable to Representative, the Company shall pay Representative $120,000 in cash in arrears payable in 12 monthly installments of $10,000 each on the last day of each calendar month through the end of the term of this agreement, or the termination date if sooner terminated in accordance with its terms.

 

c) Stock Payments. The Company shall initially pay Representative $240,000 in restricted shares of the Company’s common stock, par value $0.0001 (“Common Stock”) during the Term, payable in four (4) quarterly installments based upon the Calculated Value (defined below) and to be issued by the end of each calendar quarter in which such shares were earned (the “Stock Compensation”). At such time as the cash compensation commences for Representative, the compensation payable in shares of stock will be adjusted down by the amount of cash compensation paid. Initially, the “Calculated Value” for any issuance of stock hereunder shall be the lesser of: (i) the most recent price per share set forth by the Company’s Board of Directors for issuance to consultants during such calendar quarter, or (ii) 60% of the average closing price for the Company’s shares during the five trading days immediately preceding the Valuation Date. At such time as the average trading volume of the shares in the applicable trading market exceeds 5,000 shares per day, for at least twenty business days, the Calculated Value will thereafter be determined as set forth in (ii) of this Paragraph. The Board has established the Calculated value for the first quarter of calendar 2019 to be $1.00 per share. The “Valuation Date” is the date such shares are authorized for issuance by the Company’s Board of Directors. Issuance of the shares of common stock hereunder will be subject to the following additional provisions:

 

i) Common Stock issued hereunder shall be deemed earned upon issuance for the services provided herein.

 

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ii) The shares of Common Stock paid to Contractor as compensation are referred to herein collectively as the “Compensation Shares”. The Compensation Shares are restricted securities within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended. Furthermore, Contractor and the Company agree that the Compensation Shares shall be subject to lock-up/leak-out restrictions set forth below.

 

iii) Except as otherwise expressly provided herein, and except as Contractor may be otherwise restricted from selling shares of Common Stock under applicable federal or state securities laws, rules and regulations and Securities and Exchange Commission (the “SEC”) interpretations thereof, the Shareholder may only sell the Common Stock represented by the Compensation Shares subject to the following conditions, commencing on the date of this Agreement and terminating thirty-six months thereafter (the “Lock-Up Period”).

 

(1) During the first twelve months of the Initial Lock-Up Period no sales of Common Stock shall be made by the Shareholder. After the first twelve months of the Initial Lock-Up Period, the Shareholder may sell the shares of Common Stock derived from the Initial Shares only under the following conditions:

 

(2) the Shareholder shall sell no more than five percent (5%) of the Shareholder’s Common Stock per month;

 

(3) on any single trading day, the Shareholder is limited to sell no more than the greater of (i) five percent (5%) of the daily volume of the Corporation’s common stock on such trading day; or (ii) 2,500 shares;

 

iv) Shareholder agrees that all sales of Common Stock will be made at no less than the best “asked” prices, and no sales will be made at the “bid” prices, unless the price per share of such sale exceeds the closing price of the Corporation’s common stock on the previous trading day;

 

v) Except as otherwise provided herein, all Common Stock shall be sold by the Shareholder in “broker’s transactions” and in compliance with the “manner of sale” requirements as those terms are defined in Rule 144 of the SEC during the all Lock-Up periods.

 

vi) An appropriate legend describing this Agreement shall be imprinted on each stock certificate representing Common Stock covered hereby, and the transfer records of the Corporation’s transfer agent shall reflect such restrictions.

 

d) Contractor acknowledges that he/she/it will receive an IRS Form 1099-MISC from the Company, and that Contractor shall be solely responsible for all federal, state, and local taxes, as set out in the Agreement.

 

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DocuSign Envelope ID: C3EAF9AB-A1EC-4135-988C-83D1B72B73E8

 

Exhibit 10.2

 

INDEPENDENT CONTRACTOR AGREEMENT

 

This Independent Contractor Agreement (the “Agreement”) is between Nexit, Inc. a Washington corporation solely owned by Brad E. Herr, located at P.O. Box 30417, Spokane, WA 99223 (the “Representative”) and MJ Harvest, Inc., a Nevada corporation located at 9205 West Russell Road, Suite 249, Las Vegas, NV 89139 (the “Company”).

 

The Company wishes to engage the Representative as an independent contractor to serve in the capacity specified in Exhibit A and the Representative wishes to serve in that capacity in accordance with the terms described in this Agreement.

 

The Company’s business is briefly described in Exhibit B and the services to be provided by Representative are intended by the parties to be in furtherance of the Company’s business.

 

The parties therefore agree as follows:

 

1. ENGAGEMENT

 

(a) Engagement. The Company retains the Representative to provide, and the Representative shall provide, the services described in Exhibit A (collectively, the “Services”).

 

(b) Obligations of the Company. The Company shall be responsible for meeting the obligations set forth in Exhibit A, which obligations are necessary for Representative to perform the Services.

 

2. TERM AND TERMINATION.

 

(a) Term. This agreement will become effective as of January 1, 2019 and will expire on December 31, 2019 (the “Term”) unless sooner terminated in accordance with the provisions of this Agreement.

 

(b) Termination. This agreement may be terminated:

 

(i) by either party immediately for a material breach of any provision of this agreement by the other party, if the other party’s material breach is not cured within 5 days of receipt of written notice of the breach; or

 

(ii) by either at any time and for any reason, or no reason, upon thirty days prior notice of termination.

 

(c) Effect of Termination. After the termination of this agreement for any reason, the Company shall promptly pay the Representative for Services rendered through the effective date of the termination in accordance with the Compensation provisions set forth in Exhibit C. No other compensation, of any nature or type, will be payable after the termination of this agreement.

 

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DocuSign Envelope ID: C3EAF9AB-A1EC-4135-988C-83D1B72B73E8

 

3. COMPENSATION.

 

(a) Compensation. The Representative’s compensation for the Services shall consist of payments set forth in Exhibit C (the “Compensation”).

 

(b) No Other Compensation. The compensation set out above will be the Representative’s sole compensation under this agreement.

 

(c) Expenses. Any ordinary and necessary expenses incurred by the Representative in the performance of this agreement shall be the Representative’s sole responsibility unless the Company first agrees in writing to reimburse those expenses.

 

(d) Taxes. The Representative is solely responsible for the payment of all income, social security, employment-related, or other taxes incurred as a result of the performance of the Services by the Representative under this agreement, and for all obligations, reports, and timely notifications relating to those taxes. The Company has no obligation to pay or withhold any sums for those taxes. The Company will file an annual 1099 with the IRS reporting Representative income.

 

(e) Other Benefits. The Representative has no claim against the Company under this agreement or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind.

 

4. NATURE OF RELATIONSHIP.

 

The relationship of the parties under this agreement is one of independent contractors, and no joint venture, partnership, agency, employer-employee, or similar relationship is created in or by this agreement. Neither party may assume or create obligations on the other party’s behalf, nor may either party take any action that creates the appearance of such authority.

 

5. BEST EFFORTS.

 

During the Term, the Representative shall exert best efforts to Services described in Exhibit B.

 

6. CONFIDENTIAL INFORMATION.

 

(a) Confidentiality. During the Term, the Representative may have access to or receive certain information of or about the Company that the Company designates as confidential or that, under the circumstances surrounding disclosure, ought to be treated as confidential by the Representative (“Confidential Information”). Confidential Information includes information relating to the Company or its current or proposed business, financial statements, budgets and projections, customer identifying information, potential and intended customers, employers, products, computer programs, specifications, manuals, software, analyses, strategies, marketing plans, business plans, and other confidential information, provided orally, in writing, by drawings, or by any other media. The Representative will treat the Confidential Information as confidential and will not disclose it to any third party or use it for any purpose but to fulfill obligations in this agreement. In addition, the Representative shall use due care and diligence to prevent the unauthorized use or disclosure of such information.

 

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(b) Exceptions. The obligations and restrictions in subsection (a) do not apply to that part of the Confidential Information the Representative demonstrates:

 

(i) was or becomes generally publicly available other than as a result of a disclosure by the Representative in violation of this agreement;

 

(ii) was or becomes available to the Representative on a non-confidential basis before its disclosure to the Representative by the Company, but only if:

 

A. the source of such information is not bound by a confidentiality agreement with the Company or is not otherwise prohibited from transmitting the information to the Representative by a contractual, legal, fiduciary, or other obligation; and

 

B. the Representative provides the Company with written notice of prior possession either (I) before the effective date of this agreement or (II) if the Representative later becomes aware (through disclosure to the Representative) of any aspect of the Confidential Information as to which the Representative had prior possession, promptly on the Representative so becoming aware;

 

(iii) is requested or legally compelled (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand, or similar processes), or is required by a regulatory body, to be disclosed. However, the Representative shall:

 

A. provide the Company with prompt notice of these requests or requirements before making a disclosure so that the Company may seek an appropriate protective order or other appropriate remedy; and

 

B. provide reasonable assistance to the Company in obtaining any protective order.

 

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If a protective order or other remedy is not obtained or the Company grants a waiver under this agreement, the Representative may furnish that portion (and only that portion) of the Confidential Information that, in the written opinion of counsel reasonably acceptable to the Company, the Representative is legally compelled or otherwise required to disclose. However, the Representative shall make reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any part of the Confidential Information disclosed in this way; or

 

(iv) was developed by the Representative independently, not arising out of the services performed by Representative in connection with this agreement and without breach of this agreement.

 

(c) Remedy. Money damages may not be a sufficient remedy for any breach of this section by the Representative and, in addition to all other remedies, the Company may seek (and may be entitled to) as a result of such breach, specific performance and injunctive or other equitable relief as a remedy.

 

7. CONFLICT OF INTEREST AND NON-CIRCUMVENTION.

 

The Representative warrants to the Company that Representative shall not take any action that would serve to promote a competing business at the expense of Company’s business. Representative further agrees that it shall not attempt to induce, lure, incent or in any way propose or accept a direct relationship with any company or product or brand that would compete with the Company’s business, products, or brands. If such a relationship is found to exist, Company may take appropriate action to ameliorate the competitive relationship, up to and including termination of this Agreement.

 

8. OTHER ACTIVITIES.

 

During the Term, the Representative may engage in other independent contracting activities, except that the Representative may not accept work, enter into contracts, or accept obligations inconsistent or incompatible with the Representative’s obligations or the scope of Services to be rendered for the Company under this agreement.

 

9. RETURN OF PROPERTY.

 

Within ten (10) days of the termination of this agreement, the Representative shall return to the Company, retaining no copies or notes, all Company products (including Products), samples, models, property, and documents relating to the Company’s business including reports, abstracts, lists, correspondence, information, computer files, computer disks, and other materials and copies of those materials obtained by the Representative during and in connection with Representative’s work with the Company. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork or creative work, notebooks, and similar items relating to the Company’s business, whether prepared by the Representative or by others, remain the Company’s exclusive property.

 

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10. INDEMNIFICATION.

 

(a) Of Representative by Company. At all times after the effective date of this agreement, the Company shall indemnify the Representative from all damages, liabilities, expenses, claims, or judgments (including interest, penalties, reasonable attorneys’ fees, accounting fees, and expert witness fees) (collectively, the “Claims”) that the Representative may incur and that arise from:

 

(i) the Company’s breach of Representative’s obligations or representations under this agreement; or

 

(ii) the negligent, intentional, or other acts of the Company or its employees.

 

However, the Company is not obligated to indemnify the Representative if any of these Claims result from the Representative’s own actions or inactions or a customer’s negligence.

 

(b) Of Company by Representative. At all times after the effective date of this agreement, the Representative shall indemnify the Company and its subcontractors, officers, members, managers, employees, owners, sub licensees, affiliates, subsidiaries, successors, and assigns (collectively, the “Company Indemnitees”) from all damages, liabilities, expenses, claims, or judgments (including interest, penalties, reasonable attorneys’ fees, accounting fees, and expert witness fees) (collectively, the “Claims”) that any Company Indemnitee may incur and that arise from:

 

(i) the Representative’s gross negligence or willful misconduct arising from the Representative’s carrying out of Representative’s obligations under this agreement;

 

(ii) the Representative’s breach of any of Representative’s obligations or representations under this agreement; or

 

(iii) the Representative’s breach of Representative’s express representation that Representative is an independent contractor and in compliance with all applicable laws related to work as an independent contractor. If a regulatory body or court of competent jurisdiction finds that the Representative is not an independent contractor or is not in compliance with applicable laws related to work as an independent contractor, based on the Representative’s own actions, the Representative will assume full responsibility and liability for all taxes, assessments, and penalties imposed against the Representative or the Company resulting from that contrary interpretation, including taxes, assessments, and penalties that would have been deducted from the Representative’s earnings if the Representative had been on the Company’s payroll and employed as a Company employee.

 

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DocuSign Envelope ID: C3EAF9AB-A1EC-4135-988C-83D1B72B73E8

 

11. FORCE MAJEURE.

 

A party will be not be considered in breach or in default because of, and will not be liable to the other party for, any delay or failure to perform its obligations under this agreement by reason of fire, earthquake, flood, explosion, strike, riot, war, terrorism, or similar event beyond that party’s reasonable control (each a “Force Majeure Event”). However, if a Force Majeure Event occurs, the affected party shall, as soon as practicable:

 

(a) notify the other party of the Force Majeure Event and its impact on performance under this agreement; and

 

(b) use reasonable efforts to resolve any issues resulting from the Force Majeure Event and perform its obligations under this agreement.

 

12. GOVERNING LAW; ATTORNEYS’ FEES.

 

(a) Choice of Law. The laws of the state of Nevada govern this agreement (without giving effect to its conflicts of law principles).

 

(b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in Clark County, Nevada.

 

(c) Attorneys’ Fees. If either party employs attorneys to enforce any rights arising out of or relating to this agreement, the losing party shall reimburse the prevailing party for its reasonable attorneys’ fees.

 

13. AMENDMENTS.

 

No amendment to this agreement will be effective unless it is in writing and signed by a party or its authorized representative.

 

14. ASSIGNMENT AND DELEGATION.

 

(a) No Assignment. Neither party may assign any of its rights under this agreement, except with the prior written consent of the other party, which consent may not be unreasonably withheld. All voluntary assignments of rights are limited by this subsection.

 

(b) No Delegation. Neither party may delegate any performance under this agreement, except with the prior written consent of the other party, which consent may not be unreasonably withheld.

 

(c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.

 

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DocuSign Envelope ID: C3EAF9AB-A1EC-4135-988C-83D1B72B73E8

 

15. COUNTERPARTS; ELECTRONIC SIGNATURES.

 

(a) Counterparts. The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.

 

(b) Electronic Signatures. This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party’s signature is delivered by facsimile, e-mail, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.

 

16. SEVERABILITY.

 

If any provision contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if the invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this agreement to be unreasonable.

 

17. NOTICES.

 

(a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this agreement shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this agreement: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.

 

(b) Addresses. A party shall address notices under this section to a party at the following addresses:

 

If to the Company: MJ Harvest, Inc.
  9205 W. Russell Rd., Suite 240
  Las Vegas, NV 89139
   
  E-mail: patrick@oldflorestacorp.com

 

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If to the Representative: Nexit, Inc.
  Brad E. Herr, President
  P.O. Box 30417
  Spokane, WA 99223
   
  E-mail: brad.herr@nexit-opp.com

 

(c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.

 

18. WAIVER.

 

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.

 

19. ENTIRE AGREEMENT.

 

This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties’ agreement with respect to its subject matter. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement’s effectiveness.

 

20. HEADINGS.

 

The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement’s construction or interpretation.

 

21. EFFECTIVENESS.

 

This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party’s signature) will be deemed the date of this agreement.

 

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22. NECESSARY ACTS; FURTHER ASSURANCES.

 

Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.

 

Each party is signing this agreement on the date stated opposite that party’s signature.

 

                 
COMPANY   REPRESENTATIVE
             
By:   (GRAPHIC)   By:   (GRAPHIC)
Its:   Patrick Bilton          
             
Date:      2/28/2019   Date:      2/25/2019  

 

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EXHIBIT A
SERVICES

 

REPRENTATIVE SERVICES. Services to be provided under this Agreement are as follows:

 

1) Acting as the CFO, an officer position with the Company and as a Business and Financial Consultant, will report to the CEO and the Board of Directors of the Company and work with the leadership team and Board of Directors.

2) Work with the CEO, President and Chairman of the Board on strategy and ensure the implementation of this strategy occurs.

3) Directly assist management and other employees of the company on all strategic and tactical matters as they relate to overseeing the Company's operations, technology and/or product development, financial activities, including budget management, forecasting needs and securing of new funding.

4) Assist in all capital raising, government grant and loan proposals

5) Ensure all regulatory filings and compliance reports are made on time with the applicable regulatory bodies having oversight on the Company's activities.

6) Assist in establishing yearly objectives, budgets, and meeting agendas. and selecting and engaging outside consultants (auditors. investment advisors).

7) Attend Company meetings and events as required to fulfill the Services; Attend periodic management team calls. attend the financial review and budget review meetings. board meetings as necessary. and participate in the strategic planning process.

8) Assist in preparation of contracts, acquisition agreements loan agreements. and other operational agreements as assigned from time-to-time by the President.

9) Prepare a due diligence package in anticipation of filing an S-1 registration statement after completion of the annual audit for twelve-month period ending May 31. 2018.

10) Prepare corporate governance documents in accord with public company best practices.

11) Consult on structure of acquisition agreements for future products and technology to minimize issues in connection with the S-1 filing.

12) Assist with offering document preparation for a private offering as instructed by the President.

13) Prepare the audit package to facilitate the annual audit as of May 31, 2018.

14) Work with the auditors to change the fiscal year end to December 31 of each year.

15) Establish a DropBox location for maintaining corporate records.

 

COMPANY’S OBLIGATIONS. The Company shall:

 

16) Provide Representative with sufficient resources and Executive Management support to allow Representative to effectively accomplish the tasks assigned.

17) Communicate with Representative as needed to maintain a common understanding of the Company’s goals and operating parameters, including fund availability and strategic direction.

 

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EXHIBIT B

 

PURPOSE OF THE INDEPENDENT CONTRACTOR AGREEMENT

 

As set out in EXHIBIT A, Representative is being retained by the Company to serve as CHIEF FINANCIAL OFFICER for the Company. In that capacity, the Representative will be responsible for performing the services set out in Exhibit A. For purposes of this Agreement, the following additional description and provisions are applicable to the sales activities of Representative.

 

BUSINESS DESCRIPTION

 

The Company acquires, develops and markets products and technologies that benefit agricultural. Currently, the Company has acquired 5-gallon and 20 liter versions of the DeBudder Lid used in harvesting cannabis and other budded plants. The DeBudder product line also includes the DeBudder Edge for mounting on flat surfaces. The DeBudder products are branded under the name “Original 420.” The DeBudder lid products are patent pending. The Company recently added the TRIM BAG product line to its port folio.

 

The Company also recently launched ProCannaGro.com, the Company’s website for product distribution and sales. ProCannaGro.com will serve as the portal for the ever-expanding products offered by the Company. The website will serve as the platform for direct to consumer marketing of the world’s best harvest and cultivation tools worldwide. The Company will fill orders through authorized distributors and local shops where our customers are located.

 

IMPORTANCE

 

The CFO serves as a key member of the executive management team and is responsible for all aspects of the financial health of the business. The CFO works closely with the CEO to develop and implement the strategic plan and interacts directly with the Board of Directors keep the Board appraised of business developments. The CFO also has primary responsibility for preparing and filing quarterly and annual reports with the OTC Markets, and preparing registration statements and/or private placement memoranda for review by the Company’s legal counsel.

 

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EXHIBIT C

 

COMPENSATION

 

As full compensation for the Services, the Company shall pay Representative as follows:

 

a) Total Compensation. Representative will earn total compensation of $180,000 for the contract term, of which 66 & 2/3 % shall be payable monthly in cash and 33 & 1/3 % shall be payable as stock compensation, as detailed further in subsections (b) and (c) below.

 

b) Cash Payments. The Company shall pay Representative $120,000 in cash in arrears payable in 24 semi-monthly installments of $5,000 each on the 15th and last days of each calendar month from January 2019 to December 2019, unless sooner terminated in accordance with the Agreement.

 

c) Stock Payments. The Company shall pay Representative $60,000 in restricted shares of the Company’s common stock, par value $0.0001 (“Common Stock”) during the Term, payable in four (4) quarterly installments based upon the Calculated Value (defined below) and to be issued by the end of each calendar quarter in which such shares were earned (the “Stock Compensation”). Initially, the “Calculated Value” for any issuance of stock hereunder shall be the lesser of: (i) the most recent price per share set forth by the Company’s Board of Directors for issuance to consultants during such calendar quarter, or (ii) 60% of the average closing price for the Company’s shares during the five trading days immediately preceding the Valuation Date. At such time as the average trading volume of the shares in the applicable trading market exceeds 5,000 shares per day, for at least twenty business days, the Calculated Value will thereafter be determined as set forth in (ii) of this Paragraph. The Board has established the Calculated value for the first quarter of calendar 2019 to be $1.00 per share. The “Valuation Date” is the date such shares are authorized for issuance by the Company’s Board of Directors. Issuance of the shares of common stock hereunder will be subject to the following additional provisions:

 

i) Common Stock issued hereunder shall be deemed earned upon issuance for the services provided herein.

 

ii) The shares of Common Stock paid to Contractor as compensation are referred to herein collectively as the “Compensation Shares”. The Compensation Shares are restricted securities within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended. Furthermore, Contractor and the Company agree that the Compensation Shares shall be subject to lock-up/leak-out restrictions set forth below.

 

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iii) Except as otherwise expressly provided herein, and except as Contractor may be otherwise restricted from selling shares of Common Stock under applicable federal or state securities laws, rules and regulations and Securities and Exchange Commission (the “SEC”) interpretations thereof, the Shareholder may only sell the Common Stock represented by the Compensation Shares subject to the following conditions, commencing on the date of this Agreement and terminating thirty-six months thereafter (the “Lock-Up Period”).

 

(1) During the first twelve months of the Initial Lock-Up Period no sales of Common Stock shall be made by the Shareholder. After the first twelve months of the Initial Lock-Up Period, the Shareholder may sell the shares of Common Stock derived from the Initial Shares only under the following conditions:

 

(2) the Shareholder shall sell no more than five percent (5%) of the Shareholder’s Common Stock per month;

 

(3) on any single trading day, the Shareholder is limited to sell no more than the greater of (i) five percent (5%) of the daily volume of the Corporation’s common stock on such trading day; or (ii) 2,500 shares;

 

iv) Shareholder agrees that all sales of Common Stock will be made at no less than the best “asked” prices, and no sales will be made at the “bid” prices, unless the price per share of such sale exceeds the closing price of the Corporation’s common stock on the previous trading day;

 

v) Except as otherwise provided herein, all Common Stock shall be sold by the Shareholder in “broker’s transactions” and in compliance with the “manner of sale” requirements as those terms are defined in Rule 144 of the SEC during the all Lock-Up periods.

 

vi) An appropriate legend describing this Agreement shall be imprinted on each stock certificate representing Common Stock covered hereby, and the transfer records of the Corporation’s transfer agent shall reflect such restrictions.

 

d) Contractor acknowledges that he/she/it will receive an IRS Form 1099-MISC from the Company, and that Contractor shall be solely responsible for all federal, state, and local taxes, as set out in the Agreement.

 

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Exhibit 10.3

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into this 7th day of November, 2017, by and among the Original Ventures, Inc., a California corporation (“Seller”) and EM Energy Inc., a Nevada corporation (hereinafter referred to as “EME” or the “Buyer”), as follows:

 

Premises

 

A.       Seller owns G4 Products, LLC, a Nevada limited liability company (the “Company”).

 

B.       The Company owns the DeBudder Bucket Lid (the “DeBudder Lid”) and all associated intellectual property, including Provisional Patent Application No. 62502422, associated trade secrets, trademarks, and modifications thereto (the “Intellectual Property”).

 

C.       The Buyer wishes to acquire certain rights to the DeBudder Lid and Intellectual Property via acquisition of the Company;

 

D.       Seller is willing to sell a controlling interest in the Company, as long as Seller receives an exclusive license to sell the DeBudder Lid in the United States; and

 

E.        Buyer desires to acquire, and Seller desires to sell, a controlling interest in the Company upon the terms and conditions set forth herein.

 

Agreement

 

BASED, upon the foregoing premises, which are incorporated herein by this reference, and for and in consideration of the mutual promises and covenants hereinafter set forth, and other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, it is agreed as follows:

 

ARTICLE I
PURCHASE AND SALE

 

1.01        Purchase and Sale of Membership Units. Buyer agrees to purchase from Seller and Seller agree to sell to Buyer five thousand one hundred (5,100) membership units of the Company (“Units”), equivalent to a 51% membership interest in the Company, for a purchase price of one hundred seventy-five thousand dollars ($175,000) (the “Purchase Price”), payable as follows:

(1) $50,000 cash, previously paid to Seller (defined in Section 2.13 as the Deposit).

(2) $125,000, payable as 500,000 shares of EME common stock, par value $0.001 (“EME Stock”) at discounted price of $0.25 per share (the “Initial Shares”).

 

Except as otherwise set forth herein, all of the Initial Shares shall be subject to the Lock-up/Leak-out Agreement attached hereto as Exhibit B.

 

1.02        Earn-out. Seller will be entitled to earn-out compensation based upon the financial results of the Company for calendar years 2018, 2019 and 2020 as follows:

 

(a)          Earn-Out for 2018. The amount of the Seller’s earn-out for the 2018 calendar year shall be the Company’s 2018 sales revenue for the DeBudder Lid, multiplied by fifty-one percent (51%), less the Purchase Price (the “2018 Earn-Out Payment”). For example, if the 2018 sales of the DeBudder Lid equal $1,000,000, then the 2018 Earn-Out Payment would equal $845,000 ($2,000,000 Sales x 51% - $175,000 Purchase Price). The 2018 Earn-Out Payment shall be paid in shares of EME common stock on or before March 15, 2019 based upon the average closing price of EME Stock during the ten (10) trading days prior to authorization of such issuance by EME.

 

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(b)          Earn-Out for 2019. The amount of the Seller’s earn-out for the 2019 calendar year shall be the Company’s 2019 sales revenue for the DeBudder Lid, multiplied by fifty-one percent (51%), less the Purchase Price and any previously earned earn-outs (the “2019 Earn-Out Payment”). For example, if the 2019 sales of the DeBudder Lid equal $4,000,000 and the 2018 Earn-Out was $845,000, then the 2019 Earn-Out Payment would equal $1,020,000 ($4,000,000 Sales x 51% - $175,000 Purchase Price — $845,000 2018 Earn-Out). The 2019 Earn-Out Payment shall be paid in shares of EME common stock on or before March 15, 2020 based upon the average closing price of EME Stock during the ten (10) trading days prior to authorization of such issuance by EME.

 

(c)           Earn-Out for 2020. The amount of the Seller’s earn-out for the 2020 calendar year shall be the Company’s 2020 sales revenue for the DeBudder Lid, multiplied by fifty-one percent (51%), less the Purchase Price and any previously earned earn-outs (the “2020 Earn-Out Payment”). For example, if the 2020 sales of the DeBudder Lid equal $5,000,000, the 2018 Earn-Out was $895,000 and 2019 Earn-Out was 1,020,000, then the 2020 Earn-Out Payment would equal $510,000 ($5,000,000 Sales x 51% - $175,000 Purchase Price — $845,000 2018 Earn-Out - $1,020,000 2019 Earn-Out). The 2020 Earn-Out Payment shall be paid in shares of EME common stock on or before March 15, 2021 based upon the average closing price of EME Stock during the ten (10) trading days prior to authorization of such issuance by EME.

 

(d)           Earn-Out for Patent Approval. Seller shall be entitled to an additional earn-out payment of Hundred Thousand ($100,000) Dollars in EME Stock, upon the United States Patent and Trademark Office’s issuance of a non-provisional patent for the DeBudder Lid based upon Provisional Patent Application No. 62502422 (the “Patent”) within 42 months after Closing (the “Patent Earn-Out Payment”). The Patent Earn-Out Payment shall be made within 120 days after issuance of the Patent and shall be payable in EME Stock based upon the average closing price of EME Stock during the ten (10) trading days prior to authorization of such share issuance by EME.

 

1.03         Lock-up/Leak-out Agreement. All EME Stock issued to the Seller pursuant to this Agreement will be restricted stock and subject to a lock-up/leak-out agreement in the form attached hereto as Exhibit B (the “Lock-up/Leak-out Agreement”). Specifically, the Lock-up/Leak-out Agreement includes the following terms:

 

(1) No sales of the Initial Shares within the first twelve (12) months;

(2) After twelve (12) months, a maximum of five percent (5%) the Initial Shares may be sold each month;

(3) No sales of any Earn-Out Shares within the first six (6) months of issuance;

(4) After six (6) months, a maximum of five percent (5%) of any issued Earn-Out Shares may be sold each month.

(5) On any single trading day, Seller limited to sell no more than the greater of (i) 2,500 shares of EME Stock, or (ii) five percent (5%) of the daily volume of EME Stock on such trading day; and

(6) All sales will be made at no less than the best “asked” prices, and no sales will be made at the “bid” prices, unless the price per share of such sale exceeds the previous trading day’s closing price.

 

1.04           Assignment of Intellectual Property. On or before Closing, the Intellectual Property will be assigned to the Company, to the satisfaction of the Buyer.

 

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1.05             Buyer’s Due Diligence. Buyer shall have 10 days from the Effective Date, (such period being the “Due Diligence Period”) to inspect the books and records of the Company, review economic data, inspect and analyze the Company’s intellectual property, and to otherwise conduct such due diligence review of the Company as Buyer deems appropriate. In the event that Buyer provides Seller with written notification of objection (the “Notice of Objection”) within the Due Diligence Period, then this Agreement will terminate. If Buyer fails to provide Seller with the Notice of Objection within the Due Diligence Period, then the Parties will proceed to Closing as set forth below.

 

1.06             Closing. The purchase and sale of the shares contemplated herein shall take place at a closing (the “Closing”), to be held on or before November 17, 2017 in San Jose, California upon the completion of Buyer’s due diligence, or at such earlier date and location as shall be determined by the Buyer and the Seller.

 

1.07             Closing Conditions. The following are the deliverables at Closing:

 

(1) The Seller shall deliver to the Buyer a written assignment of fifty-one percent (51%) membership interest in the Company and the Company shall transfer to Buyer 5,100 of Seller’s membership units in the Company;

 

(2) The Buyer shall deliver to Seller certificates of 500,000 shares of EME restricted common stock;

 

(3) Each Seller shall deliver to Buyer signed Lock-up/Leak-out Agreements in the form attached hereto as Exhibit B;

 

(4) Seller shall have caused the Intellectual Property to be assigned to the Company, to the satisfaction of the Buyer.

 

(5) Seller shall have caused cause its manufacturer of DeBudder Lids to become the Company’s manufacturer for the DeBudder Lids.

 

(6) Buyer and Seller shall execute all other form exhibits to this Agreement.

 

1.08             Closing Representations. All representations, covenants and warranties of the Buyer and Seller contained in this Agreement shall be true and correct on and as of the Closing date with the same effect as though the same had been made on and as of such date.

 

1.09            Post-Closing Obligations. At and at any time after the Closing, the parties shall duly execute, acknowledge and deliver all such further assignments, conveyances, instruments and documents, and shall take such other action consistent with the terms of this Agreement to carry out the transactions contemplated by this Agreement.

 

ARTICLE II
ADDITIONAL TERMS & CONDITIONS

 

2.01             Manufacturing of Products. Seller will cause its manufacturer of DeBudder Lids to become the manufacturer of the Company’s DeBudder Lids prior to Closing. Upon Closing, the Company will manufacture, or have manufactured, the DeBudder Lids for sale exclusively to Buyer (for international sales) and Seller (for U.S. sales), and the Seller shall cease any manufacturing of the DeBudder Lids. The parties agree and acknowledge that the Company shall have the right to manufacture DeBudder Bucket Lids which fit on various bucket sizes for international distribution and that such alternate size DeBudder Bucket Lids shall be included within the definition of “DeBudder Lid” herein.

 

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2.02             Exclusive Distribution Agreements. Upon Closing, the Company will sign exclusive licensing agreements with (i) Seller for the sale of DeBudder Lids within the United States and (ii) Buyer for the sale of Debudder Lids worldwide, excluding the United States. Each party may sell to master distributors, distributors, wholesalers, retailers and the public, within the scope of their license agreements. The Buyer and Seller agree upon the form of master distribution agreements set forth in Exhibit C and Exhibit D, attached hereto.

 

2.03             Branding License. Seller shall grant the Company a non-exclusive right to use the Seller’s “Original 420 Brand”, associated trademarks and logos in conjunction with the manufacturing and sale of the DeBudder Lids for a 20-year term.

 

2.04            Contingent Royalty. Buyer shall pay to Seller in cash, as a contingent royalty for use of “Original 420 Brand” and other good and valuable consideration, the amount in which the quarterly unit sales of DeBudder Lids from the Company to Seller (U.S. Sales) multiplied by $6, exceeds the total amount allocable to Owner during such quarter based upon Owner’s 49% ownership of the Company, if any.

 

2.05            Patent Funding. At Closing, Buyer will fund non-provisional patent applications with the USPTO and a PCT application. These patent applications will be processed by Lapple Ubell IP Law, LLP. Additional U.S. and international patent applications may be funded by the Company or Buyer at their sole discretion.

 

2.06            Company Distributions. Buyer and Seller agree that the Company shall make quarterly distributions of net proceeds from the sale of DeBudder Lids to the Company’s shareholders, unless two- thirds (2/3) of such shareholder’s consent in writing to withhold distributions for a specific time-period. Distributions of net proceeds may be made more frequently than quarterly without shareholder consent.

 

2.07            Right of First Refusal of Seller. For a period of five (5) years, before EME may sell any ownership interest in the Company to a third party (other than an affiliated company), EME shall first offer the such ownership interest to Seller on the same terms and conditions as are offered by the third party. Seller shall have 45 days during which to accept said offer. If Seller do not accept said offer within said period, EME shall be free to accept the third-party offer. If EME does not enter into an agreement with the third party on said terms and conditions and close the transaction within 90 days, EME’s right to sell such ownership interest to the third party shall expire and the procedure described in this Section shall again be applicable.

 

2.08            Right of First Refusal of Buyer. For a period of five (5) years, before any Seller or the Company may sell any ownership interest in the Company to a third party (other than an affiliated company), or otherwise dilute the ownership of EME to fifty percent (50%) or less of the Company, the Seller or Company (as applicable) shall first offer the such ownership interest to EME on the same terms and conditions as are offered by the third party. EME shall have 45 days during which to accept said offer. If EME does not accept said offer within said period, the Seller or Company (as applicable) shall be free to accept the third-party offer. If the Seller or Company (as applicable) does not enter into an agreement with the third party on said terms and conditions and close the transaction within 90 days, the Seller’s or Company’s (as applicable) right to sell such ownership interest to the third party shall expire and the procedure described in this Section shall again be applicable.

 

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2.09            Good Faith; Change of Control. Buyer and Seller agree to proceed in good faith with the spirit and intent of this Agreement and exhibits. In the event that there is a change of control of the Buyer, then the Buyer must re-affirm its commitment to the Company and to the international sales of the DeBudder Lids within 90 days of such change of control. If Buyer materially fails to act in good faith or to re-affirm its commitment after a change of control of EME, then Seller will have the right to re-acquire the Intellectual Property in exchange for (i) the return of any deposits or advancements made to Seller, (ii) return of all EME common stock distributed to Seller as part of the Purchase Price and Earn-Outs; and (iii) Seller’s waiver of any earn-out amounts earned. Should any shares of EME not be returnable because they were previously sold by Seller, then Seller shall return in cash, the dollar value attributable to such shares at issuance.

 

2.10            Periodic Financial Statements and Audit Cooperation. For so long as the Company is consolidated with Buyer for financial statement purposes, and thereafter to the extent necessary for the purpose of preparing financial statements or completing a financial statement audit, the Company and the Seller shall use their reasonable best efforts to provide to Buyer or to Buyer’s Auditor such information as is reasonably needed to complete the preparation of financial statements or the completion of an audit or review of Buyer’s annual and quarterly financial statements in a timely manner to enable Buyer to meet its timetable for the preparing, filing and public dissemination of Buyer’s financial statements.

 

2.11            Annual Budget; Semi-Annual Review. For so long as the Company is consolidated with Buyer for financial statement purposes, and thereafter to the extent the Company is indebted to Buyer, the Company and Buyer shall use their reasonable best efforts to provide to Buyer with a detailed annual business plan and budget. On or before July 15th of each calendar year, the Company and the Seller shall use their reasonable best efforts to update and updated 6-month budget for the Company.

 

2.12            Initial Deposit. EME has already provided Seller with a good faith deposit in the amount of Fifty Thousand ($50,000) Dollars (the “Deposit”) so that Seller could procure an additional 5,000 DeBudder Lids. In the event that the Company has less than 5,000 DeBudder Lids in inventory at Closing, then the Seller shall be responsible for the cost of bringing the Company’s inventory of Lids to 5,000 units. In the event that a Closing does not occur, the Deposit shall be repaid to Buyer within 3 months after a written request for return of the Deposit from Buyer. In the event, repayment is not made within such three-month period, then Seller may seek reimbursement through its security interest in the proceeds from the sales of DeBudder Lids by Seller and the Company.

 

ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE BUYER

 

As an inducement to, and to obtain the reliance of the Seller in connection with the issuance of EME Stock, Buyer represents and warrants as follows:

 

3.01        Private Offering. The offer, offer for sale, and sale of the shares of EME Stock have not been and will not be registered with the SEC. The shares of EME Stock shall be offered for sale and sold pursuant to the exemptions from the registration requirements of Section 5 of the Securities Act, as amended, and as such, will be deemed “restricted securities” limiting the shares ability to be resold.

 

3.02        Approval of Agreement. Buyer has full corporate power, authority, and legal right and has taken, or will take, all action required by law, its articles of incorporation, bylaws, and otherwise to execute and deliver this Agreement and to consummate the transactions herein contemplated including the issuance of the shares of the EME Stock. The board of directors of the Buyer has authorized and approved the execution, delivery, and performance of this Agreement and the transactions contemplated hereby including the issuance of the EME Stock.

 

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3.03        Legal Right. The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a material breach or violation of any of the terms and provisions of, or constitute a default under, any statute (except federal and state securities laws, compliance with which is elsewhere provided for in particular detail), indenture, mortgage or other agreement or instrument to which the Buyer is a party or by which it is bound by any order, rule or regulation directed to such party or its affiliates by any court or governmental agency or body having jurisdiction over them; and no other consent, approval, authorization or action is required for the consummation of the transactions herein contemplated other than such as have been obtained.

 

3.04        Validly Issued. The EME Stock, when issued, will be duly authorized, validly issued, and non-assessable.

 

3.05        Organization. The Buyer has been duly organized and is now, and always during the period of the offer and sale will be, a validly existing corporation under the laws of the state of Nevada lawfully qualified to conduct the business for which it was organized and which it proposes to conduct.

 

3.06        Capitalization. The Buyer currently has an authorized capitalization of 50,000,000 shares of common stock, $0.001 par value and no shares of preferred stock. The Buyer currently has 13,929,934 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.

 

3.07        Title and Related Matters. Except as disclosed, or disclosed in the most recent balance sheet of the Buyer and the notes thereto, the Buyer has good and marketable title to all of its properties, inventory, interests in properties, and assets, which are reflected in the most recent balance sheet of the Buyer or acquired after that date (except properties, interests in properties, and assets sold or otherwise disposed of since such date in the ordinary course of business), free and clear of all mortgages, liens, pledges, charges, or encumbrances, except (i) statutory liens or claims not yet delinquent; and (ii) such imperfections of title and easements as do not, and will not, materially detract from, or interfere with, the present or proposed use of the properties subject thereto or affected thereby or otherwise materially impair present business operations on such properties.

 

3.09        Litigation and Proceedings. Other than as disclosed to Seller or as otherwise set forth in our public reports, there are no actions, suits, or proceedings pending, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. The Buyer does not have any knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE SELLER

 

As an inducement to, and to obtain the reliance of the Buyer in connection with its purchase of Units, Seller represents and warrants as follows:

 

4.01        Private Offering. The offer, offer for sale, and sale of Units have not been and will not be registered with the SEC. The Units shall be offered for sale and sold pursuant to the exemptions from the registration requirements of Section 5 of the Securities Act, as amended, and as such, will be deemed “restricted securities” limiting the Units ability to be resold.

 

4.02        Approval of Agreement. Seller, and if required, the Company, have full corporate power, authority, and legal right and has taken, or will take, all action required by law, its articles of organization, articles of incorporation, operating agreement, bylaws, and otherwise to execute and deliver this Agreement and to consummate the transactions herein contemplated including the sale and transfer of the Units. The execution, delivery, and performance of this Agreement and the transactions contemplated hereby, have been duly authorized by Seller, and if required, by the Company.

 

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4.03        Legal Right. The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a material breach or violation of any of the terms and provisions of, or constitute a default under, any statute (except federal and state securities laws, compliance with which is elsewhere provided for in particular detail), indenture, mortgage or other agreement or instrument to which the Company is a party or by which it is bound by any order, rule or regulation directed to such party or its affiliates by any court or governmental agency or body having jurisdiction over them; and no other consent, approval, authorization or action is required for the consummation of the transactions herein contemplated other than such as have been obtained.

 

4.04        Organization. The Company has been duly organized and is now, and always during the period of the offer and sale will be, a validly existing company under the laws of the State of Nevada, lawfully qualified to conduct the business for which it was organized and which it proposes to conduct.

 

4.05        Intellectual Property. The Seller and/or the Company owns, exclusively, all right, title and interest in and to the intellectual property of the Company (collectively, the “Company Intellectual Property”), free and clear of encumbrances. To the best knowledge of Seller, the Company is in full compliance with all legal requirements applicable to the Company Intellectual Property and the Company’s ownership and use thereof. To the best knowledge of Seller, the Company Intellectual Property, licensed or used by the Company or proposed to be used, and the Company’s conduct of its business as currently and formerly conducted and proposed to be conducted have not, do not and will not infringe, violate or misappropriate the Intellectual Property of any person. The Company has not received any communication, and no action has been instituted, settled or, to the Company’s knowledge, threatened that alleges any such infringement, violation or misappropriation, and none of the Company Intellectual Property are subject to any outstanding governmental order.

 

4.06        Disclosure Information. Seller have received all the information Seller considers necessary or appropriate for deciding whether or not to purchase the shares of EME Stock. Seller further represent that they have had an opportunity to ask questions and receive answers from the Buyer regarding the terms and conditions of the offering of the shares of EME Stock. The foregoing, however, does not limit or modify the representations and warranties of the Buyer in Article III of this Agreement or the right of Seller to rely thereon.

 

4.07        Investment Experience. Seller are investors in securities of companies in the development stage and acknowledge that they are able to fend for themselves, can bear the economic risk of their investment, and have such knowledge and experience in financial or business matters that they are capable of evaluating the merits and risks of the investment in the shares of EME Stock.

 

4.08        Acknowledgment. Seller acknowledge that an investment in the shares of EME Stock involves substantial risk.

 

4.09        Knowledge of Buyer. Seller are aware, through their own extensive due diligence of all material information respecting the past, present and proposed business operations of the Buyer, including, but not limited to, its technology, its management, its financial position, or otherwise; and that the purchase price being paid for the EME Stock bears no relationship to assets, book value or other established criteria of value. Seller have conducted their own investigation of the risks and merits of an investment in the Buyer, and to the extent desired, including, but not limited to a review of the Buyer’s books and records, financial and Seller have had the opportunity to discuss this documentation with the directors and executive officers of the Buyer; to ask questions of these directors and executive officers; and that to the extent requested, all such questions have been answered to its satisfaction.

 

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4.10        Informed Decision. The Seller have had an opportunity to consult with their independent legal, tax and financial advisors, and together with such advisors, have evaluated the transactions contemplated in this Agreement and have independently determined to agree to the terms and conditions of this Agreement. No representation is being or has been made by the Seller, the Buyer or either of their respective advisors to the Seller regarding the tax, financial, legal or other effects to the Seller or its stockholders of the transactions contemplated in this Agreement. The Seller are familiar with and understand the business and financial condition, operations and prospects of the Buyer and Seller and are sufficiently informed and sophisticated enough to make a decision regarding the transactions contemplated by this Agreement.

 

4.11        Purchasing Entirely for Own Account. The shares to be acquired by the Seller will be acquired for investment for the Seller’ own respective accounts, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Seller have no present intention of selling, granting any participation in, or otherwise distributing the same. Neither of the presently has any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Buyer shares of EME Stock.

 

4.12        Litigation and Proceedings. Other than as disclosed in writing to Buyer, the Company and any related entity have no actions, suits, or proceedings pending, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. The Seller have no knowledge of any default on their part with respect to any judgment, order, writ, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

ARTICLE V
SPECIAL COVENANTS

 

5.01        Assignment of Inventions. Prior to Closing, Wade Atteberry and Seller shall have assigned to the Company the Intellectual Property and all inventions, trade secrets, and patents which relate to the DeBudder Lid.

 

5.02        Maximum Outstanding Shares/No Convertible Securities. Prior to Closing, the Company will have no more than 10,000 Units issued and outstanding. Immediately after Closing, there shall be no more than 10,000 Units issued and outstanding. Furthermore, the Company warrants that the Company has not issued nor agreed to issue any securities which may convert to Units, other than as contemplated by this Agreement. Furthermore, the Seller and the Company agree that no Units shall be issued by the Company without shareholder approval during the first three years after Closing.

 

5.03        Business Activities of the Company.

 

(a) From and after the date of this Agreement until the Closing date and except as set forth herein or as permitted or contemplated by this Agreement, Seller warrant that the Company will:

 

(i)          Carry on its business in substantially the same manner as it has heretofore;

 

(ii)         Maintain in full force and effect insurance comparable in amount and in scope of coverage to that now maintained by it;

 

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(iii)       Perform in all material respects all of its obligations under material contracts, leases, and instruments relating to or affecting its assets, properties, and business;

 

(iv)        Use its best efforts to maintain and preserve it business organization intact, to retain its key employees, and to maintain its relationships with its material suppliers and customers;

 

(v)         Except to the extent that noncompliance is not material or adverse to the respective party, duly and timely file for all taxable periods ending on or prior to the Closing date all federal, state, county, and local tax returns required to be filed by or on behalf of such entity or for which such entity may be held responsible and shall pay, or cause to pay, all taxes required to be shown as due and payable on such returns, as well as all installments of tax due and payable during the period commencing on the date of this Agreement and ending on the Closing date; and

 

(vi)        Fully comply with and perform in all material respects all obligations and duties imposed on it by all federal and state laws and all rules, regulations, and orders imposed by federal or state governmental authorities.

 

(b)           From and after the date of this Agreement and except as provided herein until the Closing date, Seller warrant that the Company will not:

 

(i)          Make any change in its articles of incorporation or bylaws, other than expressly provided for herein;

 

(ii)         Enter into or amend any material contract, agreement, or other instrument, except in the ordinary course of business; and

 

(iii)        Enter into any agreement for the sale of the Company’s securities without the prior approval of the other party.

 

5.05        Access to Books and Records of the Company. Until the Closing date, the Seller will afford to Buyer and its authorized representatives full access to the properties, books, and records of the Company in order that Buyer may have full opportunity to make such reasonable investigation as it shall desire to make of the affairs of the Company and will furnish the Buyer with such additional financial and other information as to the business and properties of the Company as Buyer shall from time to time reasonably request.

 

5.06        Access to Books and Records of Buyer. Until the Closing date, the Buyer will afford to Seller and its authorized representatives full access to the properties, books, and records of the Buyer in order that Seller may have full opportunity to make such reasonable investigation as it shall desire to make of the affairs of Buyer and will furnish the Seller with such additional financial and other information as to the business and properties of the Buyer as Seller shall from time to time reasonably request.

 

5.07        Purchase and Sale of Stock. The Buyer and Seller agree and understand that the consummation of this Agreement including the purchase, sale and exchange of the Units and shares of EME Stock as contemplated hereby, constitute the offer and sale of securities under the Securities Act and applicable state statutes. The Buyer and Seller agree such transactions shall be consummated in reliance on exemptions from the registration and prospectus delivery requirements of such statutes which depend, among other items, on the circumstances under which such securities are acquired.

 

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(a)           In connection therewith, the parties represent and warrant that:

 

(i)          neither the SEC nor the securities commission of any state or other federal agency has made any determination as to the merits of acquiring the Units or EME Stock, and that this transaction involves certain risks.

 

(ii)         they have received and read the Agreement and understand the risks related to the consummation of the transactions herein contemplated.

 

(iii)        they have such knowledge and experience in business and financial matters that it is capable of evaluating each business.

 

(iv)        they have been provided with copies of all materials and information requested by them or their representatives, including any information requested to verify any information furnished (to the extent such information is available or can be obtained without unreasonable effort or expense), and the parties have been provided the opportunity for direct communication regarding the transactions contemplated hereby.

 

(v)         all information which Seller has provided to the Buyer or their representatives concerning their suitability and intent to hold shares in EME Stock following the transactions contemplated hereby is complete, accurate, and correct.

 

(vi)        the shares of EME Stock to be acquired by the Seller under the terms of this Agreement will be acquired for the Seller’s own account, for investment, and not with the present intention of resale or distribution of all or any part of the securities. Seller agrees that it will refrain from transferring or otherwise disposing of any of the shares, or any interest therein, in such manner as to violate the Securities Act or any applicable state securities law regulating the disposition thereof.

 

(vii)       the Units to be acquired by the Buyer under the terms of this Agreement will be acquired for the Buyer’s own account, for investment, and not with the present intention of resale or distribution of all or any part of the securities. Buyer agrees that it will refrain from transferring or otherwise disposing of any of the shares, or any interest therein, in such manner as to violate the Securities Act or any applicable state securities law regulating the disposition thereof.

 

(viii)     neither party has not offered or sold any securities of the other party, or any interest in this Agreement and have no present intention of dividing the shares to be received or the rights under this Agreement with others or of reselling or otherwise disposing of any portion of such stock or rights, either currently or after the passage of a fixed or determinable period of time or on the occurrence or nonoccurrence of any predetermined event or circumstance.

 

(ix)        the Units and EME Stock have not been registered, but are being acquired by reason of a specific exemption under the Securities Act as well as under certain state statutes for transactions not involving any public offering and that any disposition of the subject shares may, under certain circumstances, be inconsistent with this exemption and may make a Seller an “underwriter,” within the meaning of the Securities Act. It is understood that the definition of “underwriter” focuses upon the concept of “distribution” and that any subsequent disposition of the subject shares can only be effected in transactions which are not considered distributions. Generally, the term “distribution” is considered synonymous with “public offering” or any other offer or sale involving general solicitation or general advertising. Under present law, in determining whether a distribution occurs when securities are sold into the public market, under certain circumstances one must consider the availability of public information regarding the issuer, a holding period for the securities sufficient to assure that the persons desiring to sell the securities without registration first bear the economic risk of their investment, and a limitation on the number of securities which the stockholder is permitted to sell and on the manner of sale, thereby reducing the potential impact of the sale on the trading markets. These criteria are set forth specifically in rule 144 promulgated under the Securities Act.

 

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(viii)     the shares of EME Stock and Units must be held and may not be sold, transferred, or otherwise disposed of for value unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Buyer is not under any obligation to register the shares of EME Stock under the Securities Act, except as set forth in this Agreement. The Buyer is not under any obligation to make rule 144 available, except as may be expressly agreed to by it in writing in this Agreement, and in the event rule 144 is not available, or some other disclosure exemption may be required before a Seller can sell, transfer, or otherwise dispose of such shares of EME Stock without registration under the Securities Act. The registrar and transfer agent for Buyer and Seller will maintain a stop transfer order against the registration or transfer of the shares of EME Stock and Units respectively, and the certificates representing the shares of such stock will bear a legend in substantially the following form so restricting the sale of such securities:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND ARE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.

 

(ix)        The Buyer may refuse to register further transfers or resales of the shares of EME Stock in the absence of compliance with rule 144 unless a Seller furnish the Buyer with a “no-action” or interpretive letter from the SEC or an opinion of counsel reasonably acceptable to the Buyer stating that the transfer is proper. Further, unless such letter or opinion states that the shares of EME Stock are free of any restrictions under the Securities Act, the Buyer may refuse to transfer the securities to any transferee who does not furnish in writing to the Buyer the same representations and agree to the same conditions with respect to such shares of EME Stock as set forth herein. The Buyer may also refuse to transfer the shares of EME Stock if any circumstances are present reasonably indicating that the transferee’s representations are not accurate.

 

(b)          In connection with the transaction contemplated by this Agreement, the Buyer and Seller shall each file, with the assistance of the other and their respective legal counsel, such notices, applications, reports, or other instruments as may be deemed by them to be necessary or appropriate in an effort to document reliance on such exemptions, and the appropriate regulatory authority in the states where Buyer reside unless an exemption requiring no filing is available in such jurisdictions, all to the extent and in the manner as may be deemed by such parties to be appropriate.

 

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(c)           In order to more fully document reliance on the exemptions as provided herein, the Buyer and Seller shall execute and deliver to the other, at or prior to the Closing, such further letters of representation, acknowledgment, suitability, or the like as the Buyer or Seller (or their respective counsel) may reasonably request in connection with reliance on exemptions from registration under such securities laws including but not limited to an investment letter.

 

(d)          The Buyer and Seller acknowledge that the basis for relying on exemptions from registration or qualifications are factual, depending on the conduct of the various parties, and that no legal opinion or other assurance will be required or given to the effect that the transactions contemplated hereby are in fact exempt from registration or qualification.

 

5.08        No Representation Regarding Tax Treatment. No representation or warranty is being made by any party to any other regarding the treatment of this transaction for federal or state income taxation. Each party has relied exclusively on its own legal, accounting, and other tax adviser regarding the treatment of this transaction for federal and state income taxes and on no representation, warranty, or assurance from any other party or such other party’s legal, accounting, or other adviser.

 

5.09        Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement.

 

ARTICLE VI
INDEMNIFICATION

 

6.01        Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the second anniversary of the Closing Date. All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

 

6.02        Indemnification By Company. Subject to the other terms and conditions of this Article VI, the Company shall indemnify and defend EME against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, EME based upon, arising out of, with respect to or by reason of: any inaccuracy in or breach of any of the representations or warranties of the Company contained in this Agreement or in any certificate or instrument delivered by or on behalf of the Company pursuant to this Agreement; or any breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Company pursuant to this Agreement.

 

ARTICLE VII
MISCELLANEOUS

 

7.01        Public Statements. Subject to their respective legal obligations (including requirements of stock exchanges and other similar regulatory bodies), the Seller and Buyer shall consult with one another, and use reasonable best efforts to agree upon the text of any press release, before issuing any such press release or otherwise making public statements with respect to the transactions and in making any filing with any federal or state governmental or regulatory agency or with any securities exchange with respect thereto.

 

7.02        Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred

 

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7.03 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7.03):

 

   
If to EM Energy, Inc.: Patrick Bilton
  EM Energy, Inc.
  P.O. Box 6295
  West Palm Beach, FL 33405
   
with a copy to: McGee Law Firm, LLC
  5635 N. Scottsdale Road, Suite 170
  Scottsdale, AZ 85250
   
If to Seller: Original Ventures, Inc.
  14938 Camden Ave., Suite 121
  San Jose, CA 95124
   
If to the Company  
  G4 Products, LLC
  4938 Camden Ave., Suite 121
  San Jose, CA 95124

 

7.04        Entire Agreement. This Agreement represents the entire agreement between the parties relating to the subject matter hereof. All previous agreements between the parties, whether written or oral, have been merged into this Agreement. This Agreement alone fully and completely expresses the agreement of the parties relating to the subject matter hereof. There are no other courses of dealing, understandings, agreements, representations, or warranties, written or oral, except as set forth herein.

 

7.05        Attorney’s Fees. In the event that any party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the breaching party or parties shall reimburse the nonbreaching party or parties for all costs, including reasonable attorneys’ fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.

 

7.06        Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

7.07        Amendment or Waiver. Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and such remedies may be enforced concurrently, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. At any time prior to the Closing, this Agreement may be amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance thereof may be extended by a writing signed by the party or parties for whose benefit the provision is intended.

 

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7.08        Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Buyer and Seller and their successors. Nothing expressed in this Agreement is intended to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under this Agreement.

 

7.09        Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder hereof.

 

7.10        Captions. The captions or headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provisions hereof.

 

7.11        Applicable Law. The Buyer and Seller hereby agree this Agreement shall be governed by and construed and enforced under and in accordance with the laws of the State of Nevada and all subject matter and in persona jurisdiction shall be the state courts of Nevada and as such the Buyer and Seller irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Nevada and of the United States of America located in Nevada for any actions, suits or proceedings arising out of or relating to this Agreement and the Buyer and Seller agree not to commence any action, suite or proceedings

 

IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to be executed by their respective officers, hereunto duly authorized, as of the date first above written.

       
BUYER:   SELLER:  
EM ENERGY, INC.   ORIGINAL VENTURES, INC.
         
By:   (GRAPHIC)     (GRAPHIC)  
  Patrick Bilton, its CEO   Wade Atteberry, its President  

 

Agreed to and acknowledged by:   THE COMPANY
    G4 Products, LLC, a Nevada limited liability company
       
    By:   (GRAPHIC)  
      Wade Atteberry, its Manager

 

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EXHIBIT A

 

Intentionally Omitted

 

 

EXHIBIT B
LOCK-UP/LEAK-OUT AGREEMENT

 

THIS LOCK-UP/LEAK-OUT AGREEMENT (the “Agreement”) is between EM Energy, Inc., a Nevada corporation (the “Corporation”), and [Shareholder Name] (the “Shareholder”). For all purposes of this Agreement, “Shareholder” includes any “affiliate, controlling person of Shareholder, agent, representative or other person with whom Shareholder is acting in concert.

 

Premise

 

WHEREAS, it is intended that the shares of common stock of the Corporation covered by this Agreement shall include any shares of common stock of the Corporation distributable to the Shareholder pursuant to that Securities Purchase Agreement dated November 7, 2017 between the Corporation and the Shareholder (the “Purchase Agreement”) regarding the Corporation’s acquisition of a majority interest in G4 Products, LLC, a Nevada limited liability company, including all stock certificates (or any successor stock certificate issued on the transfer of such stock certificates) issued to the Shareholder in connection with the Purchase Agreement (the “Common Stock”); and

 

WHEREAS, the execution and delivery of this Agreement was a condition of the Purchase Agreement and the issuance of the Common Stock covered hereby.

 

Agreement

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.            Initial Lock-Up/Leak-Out. Except as otherwise expressly provided herein, and except as the Shareholder may be otherwise restricted from selling shares of Common Stock under applicable federal or state securities laws, rules and regulations and Securities and Exchange Commission (the “SEC”) interpretations thereof, the Shareholder may only sell the Common Stock represented by the Shareholder’s Purchase Shares (as defined in the Purchase Agreement) subject to the following conditions, commencing on the date of this Agreement and terminating thirty-six months from the date of this Agreement (the “Initial Lock-Up Period”). During the first twelve months of the Initial Lock-Up Period no sales of Common Stock shall be made by the Shareholder. After the first twelve months of the Initial Lock-Up Period, the Shareholder may sell the shares of Common Stock derived from the Initial Shares only under the following conditions:

 

1.1 the Shareholder shall sell no more than five percent (5%) of the Shareholder’s Initial Shares per month;

 

2

 

2.             Earn-Out Lock-up/Leak-Out. Except as otherwise expressly provided herein, and except as the Shareholder may be otherwise restricted from selling shares of Common Stock under applicable federal or state securities laws, rules and regulations and SEC interpretations thereof, the Shareholder may only sell shares of Common Stock received by Shareholder as a result of the earn-out provisions of Section 1.04 of the Purchase Agreement (“Earn-Out Shares”) subject to the following conditions, commencing on the date of the issuance of any such shares and terminating 30 months from the date of such issuance (the “Earn-Out Lock-Up Period”). During the first six months of the Earn-out Lock-Up Period no sales of Earn-Out Shares shall be made by the Shareholder. After the first six months of the Earn-Out Lock-Up Period, if then allowed under Rule 144, the Shareholder may sell the shares of Earn-Out Shares only under the following conditions:

 

2.1 During the 6th through the 30th month of the Earn-Out Lockup Period, the Shareholder shall sell no more than five percent (5%) of the Shareholder’s Earn-Out Shares per month.

 

3.             Additional Limitations applicable to both Purchase Shares and Earn-Out Shares.

 

3.1 On any single trading day, the Shareholder is limited to sell no more than the greater of (i) five percent (5%) of the daily volume of the Corporation’s common stock on such trading day; or (ii) 2,500 shares.

 

3.2 Shareholder agrees that all sales of Common Stock will be made at no less than the best “asked” prices, and no sales will be made at the “bid” prices, unless the price per share of such sale exceeds the closing price of the Corporation’s common stock on the previous trading day;

 

3.3 Except as otherwise provided herein, all Common Stock shall be sold by the Shareholder in “broker’s transactions” and in compliance with the “manner of sale” requirements as those terms are defined in Rule 144 of the SEC during the all Lock-Up periods.

 

3.4 An appropriate legend describing this Agreement shall be imprinted on each stock certificate representing Common Stock covered hereby, and the transfer records of the Corporation’s transfer agent shall reflect such restrictions.

 

4.             The delivery of a duly executed copy of a broker/dealer agreement by the Shareholder’s broker and a duly executed seller’s resale agreement by the Shareholder in the forms to be approved by legal counsel for the Corporation shall be satisfactory evidence for all purposes of this Agreement that the Shareholder and the broker will comply with the “brokers’ transactions” and “manner of sale” requirements of this Agreement, and no further evidence thereof will be required of the Shareholder; provided, however, the Corporation may confirm such compliance with any Shareholder and the Shareholder’s broker, to the extent that it deems reasonably required or necessary to assure compliance with this Agreement; and provided, however, that the Shareholder can otherwise provide satisfactory evidence to the Corporation of such compliance, subject to the Corporation’s acceptance of any such alternative compliance evidence.

 

5.             The Shareholder agrees to provide brokerage account statements identifying all trades of the Common Stock within 15 days after written request by the Corporation. If any such brokerage statements are not available at the time of the request, such brokerage account statements shall be delivered to the Corporation within 15 days after they become available.

 

4.             Notwithstanding anything to the contrary set forth herein, the Corporation may, in its sole discretion and in good faith, at any time and from time to time, waive any of the conditions or restrictions contained herein to increase the liquidity of the Common Stock or if such waiver would otherwise be in the best interests of the development of the trading market for the Common Stock.

 

5.             The Shareholder shall not, directly or through an affiliate engage in any open market Short Sales (as defined below) of any shares of Corporation’s common stock. As used herein, “Short Sale” has the meaning provided in Rule 3b-3 under the Securities Exchange Act of 1934, as amended.

 

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6.             Except as otherwise provided in this Agreement or any other agreements between the parties, the Shareholder shall be entitled to their respective beneficial rights of ownership of the Common Stock, including the right to vote the Common Stock for any and all purposes.

 

7.             The number of shares of Common Stock included in any allotment that can be sold by the Shareholder hereunder shall be appropriately adjusted should the Corporation make a dividend or distribution, undergo a forward split or a reverse split or otherwise reclassify its shares of Common Stock.

 

8.             This Agreement may be executed in any number of counterparts with the same force and effect as if all parties had executed the same document.

 

9.             All notices, instructions or other communications required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by certified mail, return receipt requested, overnight delivery or hand-delivered to all parties to this Agreement, to the Corporation, at its principal corporate office, and to the Shareholder, at the address on the books and records of the Corporation. All notices shall be deemed to be given on the same day if delivered by hand or on the following business day if sent by overnight delivery or the second business day following the date of mailing.

 

10.           The resale restrictions on the Common Stock set forth in this Agreement shall be in addition to all other restrictions on transfer imposed by applicable United States and state securities laws, rules and regulations.

 

11.           The Corporation or the Shareholder who fails to fully adhere to the terms and conditions of this Agreement shall be liable to every other party for any damages suffered by any party by reason of any such breach of the terms and conditions hereof. The Shareholder agrees that in the event of a breach of any of the terms and conditions of this Agreement by the Shareholder, that in addition to all other remedies that may be available in law or in equity to the non-defaulting parties, a preliminary and permanent injunction, without bond or surety, and an order of a court requiring such Shareholder to cease and desist from violating the terms and conditions of this Agreement and specifically requiring the Shareholder to perform his/her/its obligations hereunder is fair and reasonable by reason of the inability of the parties to this Agreement to presently determine the type, extent or amount of damages that the Corporation or any non-defaulting Shareholder may suffer as a result of any breach or continuation thereof.

 

12.           This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof, and may not be amended except by a written instrument executed by the parties hereto and approved by a majority of the members of the Board of Directors of the Corporation.

 

13.           This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada applicable to contracts entered into and to be performed wholly within said State; and the Corporation and the Shareholder agree that any action based upon this Agreement may be brought in the United States federal and state courts situated in Nevada only, and that shall each submit to the jurisdiction of such courts for all purposes hereunder.

 

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14.         In the event of default hereunder, the non-defaulting parties shall be entitled to recover reasonable attorney’s fees incurred in the enforcement of this Agreement.

 

15.        This Agreement shall be binding upon any successors or assigns of the Common Stock, without qualification, and in the event of any exchange of the Common Stock under a merger or reorganization or other transaction of the Corporation by which the Common Stock is subject to exchange for other securities in any manner, this Agreement shall remain if full force and effect and shall apply to any securities received or receivable in exchange for such Common Stock, without qualification.

 

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the day and year first above written.

         
      EM Energy, Inc.
         
Date: 11/7/2017 . By /s/ Patrick Bilton
        Patrick Bilton, President
         
Date: 11/7/2017 . Shareholder
         
      /s/ Wade Atteberry, President
      [Shareholder Name]
        Original Ventures, Inc.

 

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EXHIBIT C

 

MASTER DISTRIBUTORSHIP AGREEMENT

 

This Master Distributorship Agreement is entered into and effective as of November ____, 2017, by and between G4 Products, LLC, a Nevada limited liability company (the “Company”) and Original Ventures, Inc., a California corporation (“Distributor”).

 

Recitals:

   

A.        The Company owns the patent pending DeBudder Bucket Lid and holds the right to manufacture and sell the Products (defined below);

 

B.        Distributor desires to be the exclusive master distributor for the Products in the United States; and

 

C.        The Company and Distributor agree that such master distributorship agreement for the Products will be on the following terms and conditions.

 

Agreement:

   

Now, Therefore, the parties hereby agree as follows:

 

1. General Terms.

 

1.1 Appointment and Acceptance. The Company hereby appoints Distributor as its master distributor for the sale of Products in the United States as set forth in this Agreement.

 

Distributor accepts such appointment and agrees to act in such a capacity as described in this Agreement and to be bound by all terms herein. Distributor further agrees to work and develop to the satisfaction of the Company sales of Products.

 

1.2 Distributor Not Made Agent or Legal Representative of the Company. It is agreed that this Agreement does not establish Distributor as the agent or legal representative of the Company for any purpose whatsoever. Distributor is not granted any right or authority to assume or to create any obligation or responsibility, express or implied, on behalf of or in the name of the Company or to bind the Company in any manner or thing whatsoever.

 

1.3 Right to Name and Good Will. Distributor is entitled to the use of the words “DeBudder Bucket Lid”, “DeBudder Lid”, and “The Original 420 Brand” including associated logos, in conjunction with the marketing, sales and distribution of the Products.

 

Upon termination or expiration of this Agreement, Distributor will discontinue the use of such words, and thereafter will not use, either directly or indirectly, in connection with its business, such words, or any other name, title or expression so nearly resembling the same as would be likely to lead to confusion or uncertainty or to deceive the public.

 

 

1.4 Sub-Distribution. Distributor shall have the right to enter into sub-distribution agreements within the Territory during the Term. The Company’s approval is required for any sub-distribution agreement with terms that may conflict with any terms in this Agreement.

 

2. Products and Services.

 

2.1 Products. The “Products” shall refer to the following goods sold by the Company pursuant to this Agreement to Distributor and to which Distributor takes title:

 

(a) DeBudder Bucket Lid, patent pending No. 62502422; and

 

(b) ancillary or accessory products to the foregoing,

 

(c) the repair and replacement parts for the foregoing.

 

2.2 Change of Models or Design. the Company reserves the right to change the design of any Products and to add or delete models at any time without notice to Distributor. If any such change is made, there will be no obligation on the Company to make such changes upon any Products previously shipped or to be shipped upon the orders of Distributor given to the Company prior to the date of the change, or to install or furnish any other or different parts than were thereon, when shipment was made.

 

2.3 Warranty. THE COMPANY WARRANTS THAT PRODUCTS SOLD BY IT TO DISTRIBUTOR SHALL BE DESCRIBED IN THE SALES CONTRACTS BETWEEN THE PARTIES THERETO AND THAT ALL PRODUCTS SOLD BY IT TO DISTRIBUTOR SHALL BE FREE FROM DEFECTS IN WORKMANSHIP OR MATERIALS, BUT THERE ARE NO WARRANTIES WHICH EXTEND BEYOND SUCH DESCRIPTION. THE COMPANY HEREBY EXCLUDES ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE AND ANY WARRANTY WHICH MIGHT OTHERWISE ARISE FROM THE COURSE OF DEALING BETWEEN THE PARTIES HERETO OR FROM ANY USAGE OF TRADE.

 

2.4 Evidence of the Quality, Condition and Quantity of Products. Upon delivery of Products to Distributor (or upon shipment if drop shipped), the clean bill of lading, express receipt, or similar delivery document shall serve as conclusive evidence of the quality, condition and quantity of Products.

 

3. Price and Payment.

 

3.1 Purchase Price. All Lids shall be sold to Distributor by the Company at a set price of $10.00 per Lid, FOB San Jose, California (the “Price”). The price of any additional shipping or any drop shipping requested by Distributor shall be in addition to the Price.

 

3.2 Change of Price. the Company reserves the right to change the prices of its Products in the event the cost for such Products increase by more than sixty percent (60%) from the Company’s costs as of the date of this Agreement. However, the Company shall serve upon Distributor written notice of a price increase at least sixty (60) days before such increased prices take effect, and Distributor agrees to purchase Products at such increased price.

 

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3.3 Expenses. Distributor shall be liable for and agrees to pay the following expenses to the extent they are associated with Products:

 

(a) Property taxes;

 

(b) Storage and warehousing expenses;

 

(c) Customs clearance, import duties and other fees related to the importation of the Products into the Territory.

 

(d) Advertising and similar types of marketing expenses initiated by Distributor;

 

(e) Excise and sales taxes on transactions between the Company and Distributor; and

 

(f) All costs necessary to comply with the terms of an export license (or other applicable export controls) for each Product, if any.

 

3.4 Payment by Distributor. Distributor agrees to pay the Company for Products purchased pursuant to this Agreement within thirty (30) days after Products are delivered to Distributor, or its agent. Payment for any Product sent directly to Distributor’s customers via drop shipping shall be made in full to the Company prior to shipment of such Product, including the cost of such drop shipping.

 

4. Territory.

 

4.1 Territory. Distributor shall have the exclusive right to sell the Products within the United States, hereinafter the “Territory.”

 

4.2 Minimum Amounts. Distributor shall use its best efforts, endeavors and facilities to introduce and promote the sale of Products in the United States. To this end, Distributor must maintain a sales level of 5,000 units per year, commencing on January 1, 2020. Failure to maintain such a sales level shall give the Company the right to cancel this Agreement.

 

5. Orders.

 

5.1 Accepting and Filling Orders. All orders received by the Company from Distributor for Products are subject to acceptance by the Company.

 

Distributor expressly releases the Company from liability for any loss or damage arising from the failure of the Company to fill any order of Distributor. If the Company shall fail for reasons beyond its control to make shipments of any orders, such orders shall not be subject to immediate cancellation but shall be satisfied by shipment upon 30 days from the date called for. Any portions of such orders remaining unshipped after such 30 days may be cancelled upon written notice to the Company if received by the Company before shipment.

 

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5.2 Advance Shipment. the Company shall have the right to make shipments in advance of Distributor’s requirements, but for such shipments Distributor shall have the right to make payments in the month called for in its orders.

 

5.3 Drop Shipping. Distributor may request that the Company fulfill its customer’s orders via drop shipping and the Company will fulfill such requests within 30 days, subject to Distributor’s prepayment for such Product pursuant to Section 3.3.

 

6. Maintaining and Inspecting Records.

 

6.1 Maintaining, Inspecting and Furnishing Records. In order that the Company may have a complete record of the quantity and type of Products sold or in inventory, Distributor agrees to furnish monthly, or at such intervals as agreed upon by the Company and Distributor, a report of all Distributor’s sales of Products.

 

Distributor also agrees to keep accurate records of all contracts and accounts covered by this Agreement, and to permit examination of such contracts and accounts by the Company or its agents at any time during Distributor’s business hours. The right of the Company to examine such accounts and contracts shall cease one year after termination of this Agreement.

 

6.2 Secrecy. Distributor agrees that it shall keep secret and shall not divulge to any person, firm or corporation other than the Company any information acquired by it directly or indirectly in the course of business which is or may be in any way prejudicial to the interests of the Company. This article shall survive the duration of this Agreement, and shall not be affected by the termination of this Agreement.

 

7. Returns, Claims and Disputes.

 

7.1 Return of Products for Repair or Credit. Distributor agrees that it will follow and be governed by any rules and regulations of the Company then in force when returning any Products for repair or credit, and that settlement made thereunder shall be final.

 

7.2 Notice of Claims. If Distributor shall have reason to believe it has any claim against the Company in respect to any transaction growing out of this Agreement, it shall in writing notify the Company within 30 days after Distributor knows or has reason to know the basis of any such claim. If Distributor fails to comply with the stipulations of this article, such claims shall be deemed to be waived and absolutely barred. The provisions of this article shall survive the termination of other portions of this Agreement.

 

7.3 Distributor’s Damages. In the event of a breach of this Agreement by the Company, Distributor’s exclusive remedy and the Company’s limit of liability shall be for Distributor’s actual damages which shall in no event exceed the price specified herein of the Products with respect to which damages occurred. the Company shall in no event be liable to Distributor (i) on account of any such breach unless Distributor shall have demanded arbitration of such breach within one year after the cause of action accrued or (i) for Distributor’s manufacturing costs, injury to good will, or other incidental or consequential damages.

 

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8. Duration and Termination.

 

8.1 Duration of Agreement. This Agreement shall begin on the date hereof and continue in force and govern all transactions and relations between the parties hereto until December 31, 2037. By mutual consent of the Company and Distributor, this Agreement may be renewed in the manner and to the extent agreed upon by the parties.

 

8.2 Termination. The Distributor may cancel or terminate this Agreement at any time with or without cause, provided the Distributor gives provides the Company with written notice at least ninety (90) days prior to the effective date of such termination. The Company may not cancel or terminate the agreement without cause. For the purposes of this Agreement, “cause” shall include a (i) material breach of this agreement, including a failure under Section 4.2; (ii) failure to comply with any state or federal law or regulation and such violation is not corrected within Sixty (60) calendar days after notice of such violation by the applicable state or federal regulator, or the other party; (iii) the voluntary petition under any bankruptcy, reorganization, or insolvency law of any jurisdiction; and (iv) the failure of Distributor to pay for Product within 90 days after written demand from the Company.

 

8.3 Company’s Right to Repurchase When Agreement Terminates or Expires. In case of the termination or expiration of this Agreement, the Company may at its option repurchase from Distributor within a reasonable time after such termination or expiration, any or all of the Products on hand in Distributor’s place of business or in the possession of Distributor, at the net price paid by or due from Distributor to the Company. Upon demand and tender by the Company of the repurchase price, Distributor shall be obligated to and hereby agrees to deliver such Products to the Company at Distributor’s expense. the Company, however, reserves the right to reject any products not in first class condition.

 

Any Products sold by Distributor previous to the termination or expiration of this Agreement, but not yet delivered or installed, may be delivered or installed by the Company, and all expenses thereof may be charged to Distributor’s account and deducted at the time of final settlement.

 

8.4 Subrogation of the Company to Distributor’s Rights Against Third Parties. In case of the termination or expiration of this Agreement, the Company shall thereupon at its option immediately be surrogated to any or all the agreements, rights and relations of Distributor with or against dealers, salespersons, representatives, purchasers and other third persons with regard to the sale of Products, and all agreements between Distributor and such third persons shall contain a clause to make this provision effective in favor of the Company.

 

9. Miscellaneous Terms.

 

9.1 Sales Form. For each sale by the Company to Distributor of Products, Distributor agrees to accept and be bound by the terms of the sale contract form which is then used by the Company. In case of conflict between this Agreement and said form, Distributor and the Company agree that the terms of this Agreement shall prevail.

 

9.2 Agreement Non-Assignable; Binding Effect. No party shall assign any of its rights or obligations under this Agreement, whether by operation of law or otherwise, without obtaining the prior consent of the other parties to this Agreement. Subject to the foregoing, all of the provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties to this Agreement and their respective heirs, legal representatives, successors and assigns.

 

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9.3 Amendment; Waiver. This Agreement may be amended, modified or superseded only by a written instrument signed by all of the parties to this Agreement. No party shall be deemed to have waived compliance by another party of any provision of this Agreement unless such waiver is contained in a written instrument signed by the waiving party and no waiver that may be given by a party will be applicable except in the specific instance for which it is given. The failure of any party to enforce at any time any of the provisions of this Agreement or to exercise any right or option contained in this Agreement or to require at any time performance of any of the provisions of this Agreement by any of the other parties shall not be construed to be a waiver of such provisions and shall not affect the validity of this Agreement or any of its provisions or the right of such party thereafter to enforce each provision of this Agreement. No course of dealing shall operate as a waiver or modification of any provision of this Agreement or otherwise prejudice such party’s rights, powers and remedies.

 

9.4 Arbitration. If any dispute shall arise between the parties hereto as to their rights or liabilities under this Agreement, the dispute shall be exclusively determined, and the dispute shall be settled, by arbitration in accordance with the American Arbitration Association (“AAA”) Commercial Arbitration Rules then in effect. The arbitration shall be conducted by one arbitrator, who shall be appointed by AAA from a panel of at least 10 qualified arbitrators. Each party shall have the right to strike three names from the panel proposed by the AAA. The arbitrators are not empowered to award any damages, including punitive damages, in excess of compensatory damages and each party hereto hereby irrevocably waives the right to receive any damages in excess of compensatory damages. The parties to the arbitration shall furnish each other with the originals or true copies of all books, records and other documents in their possession which may be requested by the other party. No additional discovery shall be permitted. Any decision or award of the arbitrator shall be final and binding upon the parties. Judgment on the award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award or any order of enforcement, as the case may be. The arbitrator may grant injunctive relief, including temporary, preliminary, permanent and mandatory injunctive relief. The arbitrator is empowered to apportion the costs and expenses of arbitration, including costs of investigation and reasonable attorneys’ fees, among the parties in such manner as the arbitrator shall deem reasonable. In the conduct of the arbitration:

 

(a) Summaries of any expert testimony, along with copies of all documents to be submitted as exhibits, shall be exchanged at least 10 days before the arbitration under procedures set up by the arbitrator.

 

(b) Each party’s presentation at the arbitration hearing shall be limited to a maximum of five hours, and the hearing shall be completed within a maximum of five days.

 

(c) The arbitration decision shall be rendered no later than 30 days after the final day of the hearing.

 

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(d) The arbitration shall be held in Las Vegas, Nevada and governed by the laws of the State of Nevada and the United States Arbitration Act, 9 U.S.C. §§ 1–16.

 

9.5 Confidentiality of Agreement. Unless otherwise required by law, no party shall disclose the terms of this Agreement to any person other than a party’s counsel and its other representatives or such other third parties with whom it must communicate to consummate the transactions described in this Agreement.

 

9.6 Confidentiality of Certain Information.

 

(a) The parties and their respective agents and employees shall hold and keep confidential all information which is proprietary in nature and non-public or confidential, in whole or in part (“Confidential Information”) which any of them may receive from any other party concerning such other party. Failure to mark any of the Confidential Information as non-public, proprietary or confidential shall not affect its status as Confidential Information under the terms of this Agreement. Confidential Information shall not include any information in the possession of the receiving party (a) that is developed by such party without reference to and independent of any Confidential Information, (b) is learned from a third party not under any duty of confidence to the disclosing party, or (c) becomes part of the public domain through no fault of the receiving party.

 

(b) None of the parties nor their respective agents or employees shall, without the prior consent of the disclosing party, disclose or use any such Confidential Information, in whole or in part, except in connection with the performance of the transactions described in this Agreement. Unless otherwise required by law, none of the parties shall disclose any Confidential Information acquired as a result of this Agreement to any person or entity, other than its respective counsel and other representatives, and such other third parties (such as bankers and lessors) with whom it must communicate to consummate the transactions described by this Agreement, all of whom must agree to keep the Confidential Information confidential.

 

9.7 Consent to Jurisdiction. Each of the parties consents and voluntarily submits to personal jurisdiction in the State of Arizona and in the courts in such state located in Clark County and the United States District Court for the District of Nevada in any proceeding arising out of or relating to this Agreement, and agrees that all claims raised in such proceeding may be heard and determined in such court. Each of the parties further consents and agrees that such party may be served with process in the same manner as a notice may be given under this Agreement.

 

9.8 Construction and Interpretation of Agreement.

 

(a) Headings. Section titles or captions in this Agreement are included for purposes of convenience only and shall not be considered a part of this Agreement in construing or interpreting any of its provisions. All references in this Agreement to Sections shall refer to Sections of this Agreement unless the context clearly otherwise requires.

 

(b) Use of “Including.” When used in this Agreement, the word “including” shall have its normal common meaning and any list of items that may follow such word shall not be deemed to represent a complete list.

 

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(c) Joint Drafting of Agreement. The parties have participated jointly in the negotiation and drafting of this Agreement. If any ambiguity or question of intent or interpretation arises, no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

(d) Number and Gender. Unless the context otherwise requires, when used in this Agreement, the singular shall include the plural, the plural shall include the singular, and all nouns, pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, as the identity of the person or persons may require.

 

(e) No Third Party Beneficiaries. The parties do not intend that this Agreement shall confer on any third party any right, remedy or benefit or that any third party shall have any right to enforce any provision of this Agreement.

 

9.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

9.10 Cumulative Remedies; Specific Performance. No right or remedy conferred upon or reserved to any of the parties under the terms of this Agreement is intended to be, nor shall it be deemed, exclusive of any other right or remedy provided in this Agreement or by law or equity, but each shall be cumulative of every other right or remedy. The parties understand and acknowledge that a party would be damaged irreparably by reason of a failure of another party to perform any obligation under this Agreement. Accordingly, if any party attempts to enforce the provisions of this Agreement by specific performance (including preliminary or permanent injunctive relief), the party against whom such action or proceeding is brought waives the claim or defense that the other party has an adequate remedy at law.

 

9.11 Consequential Damages Excluded. Notwithstanding anything to the contrary elsewhere in this Agreement or at law, no party shall, in any event, be liable to the other party for any indirect or consequential damages, including without limitation, loss of revenue, cost of capital, loss of business reputation or opportunity and costs arising under or in connection with this Agreement.

 

9.12 Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties related to its subject matter and supersedes all prior proposals, understandings, agreements, correspondence, arrangements and contemporaneous oral agreements relating to the subject matter of this Agreement. No representation, promise, inducement or statement of intention has been made by any party which has not been embodied in this Agreement. This Agreement may be modified only by a written instrument signed by the parties hereto.

 

9.13 Expenses. Except as otherwise expressly provided for in this Agreement, each party shall bear its own expenses incurred in connection with the preparation, execution and performance of its obligations under this Agreement, including all fees and expenses of agents, representatives, counsel and accountants.

 

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9.14 Force Majeure. No party shall be responsible for any loss or damage to any of the other parties if that party is unable to fulfill any part of its obligations (other than the payment of money) under this Agreement, or is prevented or delayed from fulfilling such obligation, due to flood, earthquake or other act of God, war or hostilities, invasion, rebellion, insurrection, riot, strike, lockout, or any other cause beyond the control of the party (“Force Majeure”). If a Force Majeure occurs, the party affected shall notify the other parties immediately. The rights and obligations of a party shall be suspended only for the duration and extent of the Force Majeure and once the Force Majeure ceases to exist, the rights and obligations of the parties shall continue in full force and effect.

 

9.15 Further Assurances. Each party shall execute and deliver such additional documents or take such additional actions as may be requested by another party to this Agreement if such requested document or action is reasonably necessary to effect the transactions described in this Agreement.

 

9.16 Governing Law. This Agreement shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of Nevada, without giving effect to any conflict of law rule or principle of such state.

 

9.17 Independent Contractor Relationship. Regarding all matters relating to this Agreement, this Agreement creates an independent contractor relationship among the parties. Nothing contained in this Agreement shall be construed to (a) give any party the power to direct and control the day-to-day activities of the other, (b) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking, or (c) constitute any party, its agents or employees as employees of any other party or grant any of them the power or authority to act for, bind or otherwise create or assume any obligation on behalf of any of the other parties for any purpose whatever.

 

9.18 Notices. All notices, requests, consents, approvals, waivers, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed delivered to the parties (a) on the date of personal delivery against a written receipt, or (b) on the date sent by confirmed telephonic facsimile transmission, or (c) on the first business day following the date of delivery to a nationally recognized overnight courier service, or (d) or the third business day following the date of deposit in the United States Mail, postage prepaid, by certified mail, in each case addressed as follows, or to such other address, person or entity as any party may designate by notice to the other in accordance herewith:

 

  If to the Company: G4 Products, LLC
    4938 Camden Ave., Suite 121
    San Jose, CA 95124

 

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  If to Distributor: Original Ventures, Inc.
    4938 Camden Ave., Suite 121
    San Jose, CA 95124

 

9.19 Severability of Provisions. If a court in any final, unappealable proceeding holds any provision of this Agreement or its application to any person or circumstance invalid, illegal or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it was held to be invalid, illegal or unenforceable, shall not be affected, and shall be valid, legal and enforceable to the fullest extent permitted by law, but only if and to the extent such enforcement would not materially and adversely frustrate the parties’ essential objectives as expressed in this Agreement. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties intend that the court add to this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be valid and enforceable, so as to effect the original intent of the parties to the greatest extent possible.

 

9.20 Time of Essence. Time is of the essence to the performance of the obligations set forth in this Agreement.

 

In Witness Whereof, the parties hereto have hereunto set their hands and seals the day and year first above written.

     
  G4 Products, LLC.
     
  By:         /s/ Wade Atteberry
    Wade Atteberry, its Manager
     
    Original Ventures, Inc.
     
  By:         /s/ Wade Atteberry
    Wade Atteberry, its President

 

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EXHIBIT D

 

MASTER DISTRIBUTORSHIP AGREEMENT

 

This Master Distributorship Agreement is entered into and effective as of November ____, 2017, by and between G4 Products, LLC, a Nevada limited liability company (the “Company”) and EM Energy, Inc., a Nevada corporation (“Distributor”).

 

Recitals:

 

A.            The Company owns the patent pending DeBudder Bucket Lid and holds the right to manufacture and sell the Products (defined below);

 

B.            Distributor desires to be the exclusive master distributor for the Products outside the United States; and

 

C.           The Company and Distributor agree that such master distributorship agreement for the Products will be on the following terms and conditions.

 

Agreement:

 

Now, Therefore, the parties hereby agree as follows:

 

1. General Terms.

 

1.1 Appointment and Acceptance. The Company hereby appoints Distributor as its master distributor for the sale of Products outside of the United States as set forth in this Agreement.

 

Distributor accepts such appointment and agrees to act in such a capacity as described in this Agreement and to be bound by all terms herein. Distributor further agrees to work and develop to the satisfaction of the Company sales of Products.

 

1.2 Distributor Not Made Agent or Legal Representative of the Company. It is agreed that this Agreement does not establish Distributor as the agent or legal representative of the Company for any purpose whatsoever. Distributor is not granted any right or authority to assume or to create any obligation or responsibility, express or implied, on behalf of or in the name of the Company or to bind the Company in any manner or thing whatsoever.

 

1.3 Right to Name and Good Will. Distributor is entitled to the use of the words “DeBudder Bucket Lid”, “DeBudder Lid”, and “The Original 420 Brand” including associated logos, in conjunction with the marketing, sales and distribution of the Products.

 

Upon termination or expiration of this Agreement, Distributor will discontinue the use of such words, and thereafter will not use, either directly or indirectly, in connection with its business, such words, or any other name, title or expression so nearly resembling the same as would be likely to lead to confusion or uncertainty or to deceive the public.

 

 

1.4 Sub-Distribution. Distributor shall have the right to enter into sub-distribution agreements within the Territory during the Term. The Company’s approval is required for any sub-distribution agreement with terms that may conflict with any terms in this Agreement.

 

2. Products and Services.

 

2.1 Products. The “Products” shall refer to the following goods sold by the Company pursuant to this Agreement to Distributor and to which Distributor takes title:

 

(a) DeBudder Bucket Lid, patent pending No. 62502422; and

 

(b) ancillary or accessory products to the foregoing,

 

(c) the repair and replacement parts for the foregoing.

 

2.2 Change of Models or Design. the Company reserves the right to change the design of any Products and to add or delete models at any time without notice to Distributor. If any such change is made, there will be no obligation on the Company to make such changes upon any Products previously shipped or to be shipped upon the orders of Distributor given to the Company prior to the date of the change, or to install or furnish any other or different parts than were thereon, when shipment was made.

 

2.3 Warranty. THE COMPANY WARRANTS THAT PRODUCTS SOLD BY IT TO DISTRIBUTOR SHALL BE DESCRIBED IN THE SALES CONTRACTS BETWEEN THE PARTIES THERETO AND THAT ALL PRODUCTS SOLD BY IT TO DISTRIBUTOR SHALL BE FREE FROM DEFECTS IN WORKMANSHIP OR MATERIALS, BUT THERE ARE NO WARRANTIES WHICH EXTEND BEYOND SUCH DESCRIPTION. THE COMPANY HEREBY EXCLUDES ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE AND ANY WARRANTY WHICH MIGHT OTHERWISE ARISE FROM THE COURSE OF DEALING BETWEEN THE PARTIES HERETO OR FROM ANY USAGE OF TRADE.

 

2.4 Evidence of the Quality, Condition and Quantity of Products. Upon delivery of Products to Distributor (or upon shipment if drop shipped), the clean bill of lading, express receipt, or similar delivery document shall serve as conclusive evidence of the quality, condition and quantity of Products.

 

3. Price and Payment.

 

3.1 Purchase Price. All Lids shall be sold to Distributor by the Company at a set price of $10.00 per Lid, FOB San Jose, California (the “Price”). The price of any additional shipping or any drop shipping requested by Distributor shall be in addition to the Price.

 

3.2 Change of Price. the Company reserves the right to change the prices of its Products in the event the cost for such Products increase by more than sixty percent (60%) from the Company’s costs as of the date of this Agreement. However, the Company shall serve upon Distributor written notice of a price increase at least sixty (60) days before such increased prices take effect, and Distributor agrees to purchase Products at such increased price.

 

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3.3 Expenses. Distributor shall be liable for and agrees to pay the following expenses to the extent they are associated with Products:

 

(a) Property taxes;

 

(b) Storage and warehousing expenses;

 

(c) Customs clearance, import duties and other fees related to the importation of the Products into the Territory.

 

(d) Advertising and similar types of marketing expenses initiated by Distributor;

 

(e) Excise and sales taxes on transactions between the Company and Distributor; and

 

(f) All costs necessary to comply with the terms of an export license (or other applicable export controls) for each Product, if any.

 

3.4 Payment by Distributor. Distributor agrees to pay the Company for Products purchased pursuant to this Agreement within thirty (30) days after Products are delivered to Distributor, or its agent. Payment for any Product sent directly to Distributor’s customers via drop shipping shall be made in full to the Company prior to shipment of such Product, including the cost of such drop shipping.

 

4. Territory.

 

4.1 Territory. Distributor shall have the exclusive right to sell the Products worldwide, excluding the United States and its territories, hereinafter the “Territory.”

 

4.2 Minimum Amounts. Distributor shall use its best efforts, endeavors and facilities to introduce and promote the sale of Products internationally, outside of the United States. To this end, Distributor must maintain a sales level of 5,000 units per year, commencing on January 1, 2020. Failure to maintain such a sales level shall give the Company the right to cancel this Agreement.

 

5. Orders.

 

5.1 Accepting and Filling Orders. All orders received by the Company from Distributor for Products are subject to acceptance by the Company.

 

Distributor expressly releases the Company from liability for any loss or damage arising from the failure of the Company to fill any order of Distributor. If the Company shall fail for reasons beyond its control to make shipments of any orders, such orders shall not be subject to immediate cancellation but shall be satisfied by shipment upon 30 days from the date called for. Any portions of such orders remaining unshipped after such 30 days may be cancelled upon written notice to the Company if received by the Company before shipment.

 

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5.2 Advance Shipment. the Company shall have the right to make shipments in advance of Distributor’s requirements, but for such shipments Distributor shall have the right to make payments in the month called for in its orders.

 

5.3 Drop Shipping. Distributor may request that the Company fulfill its customer’s orders via drop shipping and the Company will fulfill such requests within 30 days, subject to Distributor’s prepayment for such Product pursuant to Section 3.3.

 

6. Maintaining and Inspecting Records.

 

6.1 Maintaining, Inspecting and Furnishing Records. In order that the Company may have a complete record of the quantity and type of Products sold or in inventory, Distributor agrees to furnish monthly, or at such intervals as agreed upon by the Company and Distributor, a report of all Distributor’s sales of Products.

 

Distributor also agrees to keep accurate records of all contracts and accounts covered by this Agreement, and to permit examination of such contracts and accounts by the Company or its agents at any time during Distributor’s business hours. The right of the Company to examine such accounts and contracts shall cease one year after termination of this Agreement.

 

6.2 Secrecy. Distributor agrees that it shall keep secret and shall not divulge to any person, firm or corporation other than the Company any information acquired by it directly or indirectly in the course of business which is or may be in any way prejudicial to the interests of the Company. This article shall survive the duration of this Agreement, and shall not be affected by the termination of this Agreement.

 

7. Returns, Claims and Disputes.

 

7.1 Return of Products for Repair or Credit. Distributor agrees that it will follow and be governed by any rules and regulations of the Company then in force when returning any Products for repair or credit, and that settlement made thereunder shall be final.

 

7.2 Notice of Claims. If Distributor shall have reason to believe it has any claim against the Company in respect to any transaction growing out of this Agreement, it shall in writing notify the Company within 30 days after Distributor knows or has reason to know the basis of any such claim. If Distributor fails to comply with the stipulations of this article, such claims shall be deemed to be waived and absolutely barred. The provisions of this article shall survive the termination of other portions of this Agreement.

 

7.3 Distributor’s Damages. In the event of a breach of this Agreement by the Company, Distributor’s exclusive remedy and the Company’s limit of liability shall be for Distributor’s actual damages which shall in no event exceed the price specified herein of the Products with respect to which damages occurred. the Company shall in no event be liable to Distributor (i) on account of any such breach unless Distributor shall have demanded arbitration of such breach within one year after the cause of action accrued or (i) for Distributor’s manufacturing costs, injury to good will, or other incidental or consequential damages.

 

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8. Duration and Termination.

 

8.1 Duration of Agreement. This Agreement shall begin on the date hereof and continue in force and govern all transactions and relations between the parties hereto until December 31, 2037. By mutual consent of the Company and Distributor, this Agreement may be renewed in the manner and to the extent agreed upon by the parties.

 

8.2 Termination. The Distributor may cancel or terminate this Agreement at any time with or without cause, provided the Distributor gives provides the Company with written notice at least ninety (90) days prior to the effective date of such termination. The Company may not cancel or terminate the agreement without cause. For the purposes of this Agreement, “cause” shall include a (i) material breach of this agreement, including a failure under Section 4.2; (ii) failure to comply with any state or federal law or regulation and such violation is not corrected within Sixty (60) calendar days after notice of such violation by the applicable state or federal regulator, or the other party; (iii) the voluntary petition under any bankruptcy, reorganization, or insolvency law of any jurisdiction; and (iv) the failure of Distributor to pay for Product within 90 days after written demand from the Company.

 

8.3 Company’s Right to Repurchase When Agreement Terminates or Expires. In case of the termination or expiration of this Agreement, the Company may at its option repurchase from Distributor within a reasonable time after such termination or expiration, any or all of the Products on hand in Distributor’s place of business or in the possession of Distributor, at the net price paid by or due from Distributor to the Company. Upon demand and tender by the Company of the repurchase price, Distributor shall be obligated to and hereby agrees to deliver such Products to the Company at Distributor’s expense. the Company, however, reserves the right to reject any products not in first class condition.

 

Any Products sold by Distributor previous to the termination or expiration of this Agreement, but not yet delivered or installed, may be delivered or installed by the Company, and all expenses thereof may be charged to Distributor’s account and deducted at the time of final settlement.

 

8.4 Subrogation of the Company to Distributor’s Rights Against Third Parties. In case of the termination or expiration of this Agreement, the Company shall thereupon at its option immediately be surrogated to any or all the agreements, rights and relations of Distributor with or against dealers, salespersons, representatives, purchasers and other third persons with regard to the sale of Products, and all agreements between Distributor and such third persons shall contain a clause to make this provision effective in favor of the Company.

 

9. Miscellaneous Terms.

 

9.1 Sales Form. For each sale by the Company to Distributor of Products, Distributor agrees to accept and be bound by the terms of the sale contract form which is then used by the Company. In case of conflict between this Agreement and said form, Distributor and the Company agree that the terms of this Agreement shall prevail.

 

9.2 Agreement Non-Assignable; Binding Effect. No party shall assign any of its rights or obligations under this Agreement, whether by operation of law or otherwise, without obtaining the prior consent of the other parties to this Agreement. Subject to the foregoing, all of the provisions of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the parties to this Agreement and their respective heirs, legal representatives, successors and assigns.

 

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9.3 Amendment; Waiver. This Agreement may be amended, modified or superseded only by a written instrument signed by all of the parties to this Agreement. No party shall be deemed to have waived compliance by another party of any provision of this Agreement unless such waiver is contained in a written instrument signed by the waiving party and no waiver that may be given by a party will be applicable except in the specific instance for which it is given. The failure of any party to enforce at any time any of the provisions of this Agreement or to exercise any right or option contained in this Agreement or to require at any time performance of any of the provisions of this Agreement by any of the other parties shall not be construed to be a waiver of such provisions and shall not affect the validity of this Agreement or any of its provisions or the right of such party thereafter to enforce each provision of this Agreement. No course of dealing shall operate as a waiver or modification of any provision of this Agreement or otherwise prejudice such party’s rights, powers and remedies.

 

9.4 Arbitration. If any dispute shall arise between the parties hereto as to their rights or liabilities under this Agreement, the dispute shall be exclusively determined, and the dispute shall be settled, by arbitration in accordance with the American Arbitration Association (“AAA”) Commercial Arbitration Rules then in effect. The arbitration shall be conducted by one arbitrator, who shall be appointed by AAA from a panel of at least 10 qualified arbitrators. Each party shall have the right to strike three names from the panel proposed by the AAA. The arbitrators are not empowered to award any damages, including punitive damages, in excess of compensatory damages and each party hereto hereby irrevocably waives the right to receive any damages in excess of compensatory damages. The parties to the arbitration shall furnish each other with the originals or true copies of all books, records and other documents in their possession which may be requested by the other party. No additional discovery shall be permitted. Any decision or award of the arbitrator shall be final and binding upon the parties. Judgment on the award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award or any order of enforcement, as the case may be. The arbitrator may grant injunctive relief, including temporary, preliminary, permanent and mandatory injunctive relief. The arbitrator is empowered to apportion the costs and expenses of arbitration, including costs of investigation and reasonable attorneys’ fees, among the parties in such manner as the arbitrator shall deem reasonable. In the conduct of the arbitration:

 

(a) Summaries of any expert testimony, along with copies of all documents to be submitted as exhibits, shall be exchanged at least 10 days before the arbitration under procedures set up by the arbitrator.

 

(b) Each party’s presentation at the arbitration hearing shall be limited to a maximum of five hours, and the hearing shall be completed within a maximum of five days.

 

(c) The arbitration decision shall be rendered no later than 30 days after the final day of the hearing.

 

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(d) The arbitration shall be held in Las Vegas, Nevada and governed by the laws of the State of Nevada and the United States Arbitration Act, 9 U.S.C. §§ 1–16.

 

9.5 Confidentiality of Agreement. Unless otherwise required by law, no party shall disclose the terms of this Agreement to any person other than a party’s counsel and its other representatives or such other third parties with whom it must communicate to consummate the transactions described in this Agreement.

 

9.6 Confidentiality of Certain Information.

 

(a) The parties and their respective agents and employees shall hold and keep confidential all information which is proprietary in nature and non-public or confidential, in whole or in part (“Confidential Information”) which any of them may receive from any other party concerning such other party. Failure to mark any of the Confidential Information as non-public, proprietary or confidential shall not affect its status as Confidential Information under the terms of this Agreement. Confidential Information shall not include any information in the possession of the receiving party (a) that is developed by such party without reference to and independent of any Confidential Information, (b) is learned from a third party not under any duty of confidence to the disclosing party, or (c) becomes part of the public domain through no fault of the receiving party.

 

(b) None of the parties nor their respective agents or employees shall, without the prior consent of the disclosing party, disclose or use any such Confidential Information, in whole or in part, except in connection with the performance of the transactions described in this Agreement. Unless otherwise required by law, none of the parties shall disclose any Confidential Information acquired as a result of this Agreement to any person or entity, other than its respective counsel and other representatives, and such other third parties (such as bankers and lessors) with whom it must communicate to consummate the transactions described by this Agreement, all of whom must agree to keep the Confidential Information confidential.

 

9.7 Consent to Jurisdiction. Each of the parties consents and voluntarily submits to personal jurisdiction in the State of Arizona and in the courts in such state located in Clark County and the United States District Court for the District of Nevada in any proceeding arising out of or relating to this Agreement, and agrees that all claims raised in such proceeding may be heard and determined in such court. Each of the parties further consents and agrees that such party may be served with process in the same manner as a notice may be given under this Agreement.

 

9.8 Construction and Interpretation of Agreement.

 

(a) Headings. Section titles or captions in this Agreement are included for purposes of convenience only and shall not be considered a part of this Agreement in construing or interpreting any of its provisions. All references in this Agreement to Sections shall refer to Sections of this Agreement unless the context clearly otherwise requires.

 

(b) Use of “Including.” When used in this Agreement, the word “including” shall have its normal common meaning and any list of items that may follow such word shall not be deemed to represent a complete list.

 

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(c) Joint Drafting of Agreement. The parties have participated jointly in the negotiation and drafting of this Agreement. If any ambiguity or question of intent or interpretation arises, no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

(d) Number and Gender. Unless the context otherwise requires, when used in this Agreement, the singular shall include the plural, the plural shall include the singular, and all nouns, pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, as the identity of the person or persons may require.

 

(e) No Third Party Beneficiaries. The parties do not intend that this Agreement shall confer on any third party any right, remedy or benefit or that any third party shall have any right to enforce any provision of this Agreement.

 

9.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

9.10 Cumulative Remedies; Specific Performance. No right or remedy conferred upon or reserved to any of the parties under the terms of this Agreement is intended to be, nor shall it be deemed, exclusive of any other right or remedy provided in this Agreement or by law or equity, but each shall be cumulative of every other right or remedy. The parties understand and acknowledge that a party would be damaged irreparably by reason of a failure of another party to perform any obligation under this Agreement. Accordingly, if any party attempts to enforce the provisions of this Agreement by specific performance (including preliminary or permanent injunctive relief), the party against whom such action or proceeding is brought waives the claim or defense that the other party has an adequate remedy at law.

 

9.11 Consequential Damages Excluded. Notwithstanding anything to the contrary elsewhere in this Agreement or at law, no party shall, in any event, be liable to the other party for any indirect or consequential damages, including without limitation, loss of revenue, cost of capital, loss of business reputation or opportunity and costs arising under or in connection with this Agreement.

 

9.12 Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties related to its subject matter and supersedes all prior proposals, understandings, agreements, correspondence, arrangements and contemporaneous oral agreements relating to the subject matter of this Agreement. No representation, promise, inducement or statement of intention has been made by any party which has not been embodied in this Agreement. This Agreement may be modified only by a written instrument signed by the parties hereto.

 

9.13 Expenses. Except as otherwise expressly provided for in this Agreement, each party shall bear its own expenses incurred in connection with the preparation, execution and performance of its obligations under this Agreement, including all fees and expenses of agents, representatives, counsel and accountants.

 

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9.14 Force Majeure. No party shall be responsible for any loss or damage to any of the other parties if that party is unable to fulfill any part of its obligations (other than the payment of money) under this Agreement, or is prevented or delayed from fulfilling such obligation, due to flood, earthquake or other act of God, war or hostilities, invasion, rebellion, insurrection, riot, strike, lockout, or any other cause beyond the control of the party (“Force Majeure”). If a Force Majeure occurs, the party affected shall notify the other parties immediately. The rights and obligations of a party shall be suspended only for the duration and extent of the Force Majeure and once the Force Majeure ceases to exist, the rights and obligations of the parties shall continue in full force and effect.

 

9.15 Further Assurances. Each party shall execute and deliver such additional documents or take such additional actions as may be requested by another party to this Agreement if such requested document or action is reasonably necessary to effect the transactions described in this Agreement.

 

9.16 Governing Law. This Agreement shall be governed by, and shall be construed and enforced in accordance with, the laws of the State of Nevada, without giving effect to any conflict of law rule or principle of such state.

 

9.17 Independent Contractor Relationship. Regarding all matters relating to this Agreement, this Agreement creates an independent contractor relationship among the parties. Nothing contained in this Agreement shall be construed to (a) give any party the power to direct and control the day-to-day activities of the other, (b) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking, or (c) constitute any party, its agents or employees as employees of any other party or grant any of them the power or authority to act for, bind or otherwise create or assume any obligation on behalf of any of the other parties for any purpose whatever.

 

9.18 Notices. All notices, requests, consents, approvals, waivers, demands and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed delivered to the parties (a) on the date of personal delivery against a written receipt, or (b) on the date sent by confirmed telephonic facsimile transmission, or (c) on the first business day following the date of delivery to a nationally recognized overnight courier service, or (d) or the third business day following the date of deposit in the United States Mail, postage prepaid, by certified mail, in each case addressed as follows, or to such other address, person or entity as any party may designate by notice to the other in accordance herewith:

 

     
  If to the Company: G4 Products, LLC
    4938 Camden Ave., Suite 121
    San Jose, CA 95124

 

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  If to Distributor: Original Ventures, Inc.
    4938 Camden Ave., Suite 121
    San Jose, CA 95124

 

9.19 Severability of Provisions. If a court in any final, unappealable proceeding holds any provision of this Agreement or its application to any person or circumstance invalid, illegal or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it was held to be invalid, illegal or unenforceable, shall not be affected, and shall be valid, legal and enforceable to the fullest extent permitted by law, but only if and to the extent such enforcement would not materially and adversely frustrate the parties’ essential objectives as expressed in this Agreement. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties intend that the court add to this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be valid and enforceable, so as to effect the original intent of the parties to the greatest extent possible.

 

9.20 Time of Essence. Time is of the essence to the performance of the obligations set forth in this Agreement.

 

In Witness Whereof, the parties hereto have hereunto set their hands and seals the day and year first above written.

 

  G4 Products, LLC.
     
  By:  /s/ Wade Atteberry
    Wade Atteberry, its Manager
     
    Original Ventures, Inc.
     
  By:  /s/ Wade Atteberry
    Wade Atteberry, its President

 

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Exhibit 10.4

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into this 7th day of December, 2018, by and between Original Ventures, Inc., a California corporation (“Seller”) and MJ Harvest, Inc., a Nevada corporation (hereinafter referred to as “MJH” or the “Buyer”), as follows:

 

Premises

 

A.          Seller and Buyer were parties to that certain Securities Purchase Agreement dated November 7. 2017 (the “First Purchase Agreement”) for Buyer’s acquisition of a 51% equity interest in G4 Products, LLC, a Nevada limited liability company (the “Company”).

 

B.           The Company owns the DeBudder Bucket Lid (the “DeBudder Lid”) and all associated intellectual property, including Provisional Patent Application No. 62502422, associated trade secrets, trademarks, and modifications thereto (the “Intellectual Property”).

 

C.           Seller is willing to sell its remaining interest in the Company and terminate its exclusive license to sell the DeBudder Products (as defined below) in the United States; and

 

D.           Buyer desires to acquire, and Seller desires to sell, Seller’s remaining 49% equity interest in the Company upon the terms and conditions set forth herein.

 

Agreement

 

BASED upon the foregoing premises, which are incorporated herein by this reference, and for and in consideration of the mutual promises and covenants hereinafter set forth, and other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, it is agreed as follows:

 

ARTICLE I
PURCHASE AND SALE

 

1.1          Purchase and Sale of Membership Units. Buyer agrees to purchase from Seller and Seller agrees to sell to Buyer four thousand nine hundred (4,900) membership units of the Company (“Units”), equivalent to Seller’s remaining 49% membership interest in the Company, for a purchase price of one hundred seventy thousand dollars ($170,000) (the “Purchase Price”), payable as follows:

 

(1) $50,000 in cash, of which a portion will be used to pay Seller’s obligations to the Company for purchases of DeBudder Products (as defined below) shipped prior to the Closing, priced at $10 per unit. The approximate balance due from Seller to Buyer as of August 31, 2018 was $18,386. The actual balance due from Seller to Buyer will be determined at the Closing and will account for all sales of DeBudder Products by Buyer to Seller through the date of the Closing. As an accommodation to Seller, Buyer has agreed to advance $5,000 to Seller on December 7, 2018 prior to final determination of amounts due Buyer from Seller. Such amount shall be offset against the net amount payable to Seller under this paragraph when the final determination of the amount due Buyer from Seller is made. Buyer and Seller agree that the balance of the funds Due Seller will be paid on or before December 17, 2018.

 

(2) $120,000, payable as 80,000 shares of MJH common stock, par value $0.0001 (“MJH Stock”), valued at $1.50 per share (collectively, MJH Stock valued at $1.50 and issued hereunder are referred to hereafter as the “Shares”). Buyer will instruct the transfer agent to issue the shares as soon as practicable following the closing date.

 

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Except as otherwise set forth herein, all of the Shares shall be subject to the Lock-up/Leak-out Agreement attached hereto as Exhibit 1, which is fully incorporated and integrated herein.

 

1.2          Earn-out. Seller will be entitled to earn-out compensation based upon the financial results of the Company for calendar years 2019 and 2020 as described in this section. For avoidance of doubt, the earn-out provisions of this section supersede the earn-out provisions in Section 1.2 of the First Purchase Agreement.

 

(a)          Earn-Out for 2018. No earn-out was or shall be due hereunder or under Section 1.2 of the First Purchase Agreement for the period ended December 31, 2018.

 

(b)          Earn-Out for 2019. Seller’s earn-out for the 2019 calendar year shall be the Company’s domestic (United States) DeBudder Product sales revenue from May 1, 2018 through December 31, 2019, less $345,000 (the combined purchase prices paid in the First Purchase Agreement and this Agreement); provided, however, that no earn-out for 2019 shall be payable unless domestic unit sales of Debudder Products in calendar year 2019 exceed 20,000 units. For example, if total domestic sales of Debudder Products from May 1, 2018 through December 31, 2018 equal $100,000 (10,000 units) and calendar year 2019 domestic sales total $260,000 (26,000 units), then the 2019 earn-out payment would equal $15,000 ($360,000 in total domestic sales over the calculation period less $345,000 total Purchase Price).

 

(i)          “DeBudder Products” in this Agreement means the DeBudder Lid, the Debudder Edge, and any other products sold by Seller in the United States that rely on the DeBudder technology, as described in the patents covering the Intellectual Property.

 

(ii)         The 2019 earn-out payment shall be paid in shares of MJH Stock on or before March 15, 2020 based upon the average closing price of MJH Stock during the ten (10) trading days prior to authorization of such issuance by MJH.

 

(c)          Earn-Out for 2020. Seller’s earn-out for the 2020 calendar year shall be the Company’s domestic (United States) DeBudder Product sales revenue from May 1, 2018 through December 31, 2020, less $345,000 and less any earn-out previously paid for calendar year 2019; provided, however, that no earn-out for 2020 shall be payable unless domestic unit sales in calendar year 2020 exceed 20,000. For example, if total domestic sales of Debudder Products from May 1, 2018 through December 31, 2019 totaled 36,000 units and calendar year 2020 sales totaled $500,000 (50,000 total units sold at $10.00 per unit), then the 2020 earn-out payment would equal $500,000 ($860,000 total domestic sales over the calculation period, less $345,000 and less the $15,000 earn-out paid in 2019). The 2020 Earn-Out Payment shall be paid in shares of MJH Stock on or before March 15, 2021 based upon the average closing price of MJH Stock during the ten (10) trading days prior to authorization of such issuance by MJH.

 

(d)          No Earn-Out after 2020. No earn-outs based on Debudder Product sales will be payable for sales after December 31, 2020.

 

(e)          Earn-Out for Patent Approval. Seller shall be entitled to an additional earn-out payment of One Hundred Thousand ($100,000) Dollars in MJH Stock, upon the United States Patent and Trademark Office’s issuance of a non-provisional patent for the DeBudder Lid based upon Provisional Patent Application No. 62502422 (the “Patent”) within 42 months after Closing (the “Patent Earn-Out Payment”). The Patent Earn-Out Payment shall be made within 120 days after issuance of the Patent and shall be payable in MJH Stock based upon the average closing price of MJH Stock during the ten (10) trading days prior to authorization of such share issuance by MJH.

 

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1.3          Lock-up/Leak-out Agreement. All MJH Stock issued to the Seller pursuant to this Agreement will be restricted stock and subject to a lock-up/leak-out agreement substantially in the form attached hereto as Exhibit 1 (the “Lock-up/Leak-out Agreement”). Specifically, the Lock-up/Leak-out Agreement shall include the following terms, among others:

 

(1) No sales of the Shares issuable pursuant to this Agreement within the first twelve (12) months of the Closing;

(2) After twelve (12) months from the Closing, a maximum of ten percent (10%) of the Shares issuable pursuant to this Agreement may be sold each month;

(3) On any single trading day, Seller limited to sell no more than the greater of (i) 2,500 shares of MJH Stock, or (ii) five percent (5%) of the daily volume of MJH Stock on such trading day; and

(4) All sales to be made at no less than the best “asked” prices, and no sales to be made at the “bid” prices, unless the price per share of such sale exceeds the previous trading day’s closing price.

 

1.4          Assignment of Intellectual Property. On or before Closing, the Seller will confirm that the Intellectual Property has been assigned to the Company.

 

1.5          Buyer’s Due Diligence. Buyer shall have ten (10) days from the Effective Date, (such period being the “Due Diligence Period”) to inspect the books and records of the Company, review economic data, inspect and analyze the Company’s intellectual property, and otherwise conduct such due diligence review of the Company as Buyer deems appropriate.

 

1.6          Closing. The purchase and sale of the shares contemplated herein shall take place at a closing (the “Closing”), to be held on or before November 31, 2018 in San Jose, California upon the completion of Buyer’s due diligence, or at such earlier date and location as shall be determined by the Buyer and the Seller.

 

1.7          Closing Conditions. The following are the deliverables at Closing:

 

(1) The Seller shall deliver to the Buyer a written assignment of the remaining forty-nine percent (49%) membership interest in the Company and the Company shall transfer to Buyer the Seller’s four thousand nine hundred (4,900) membership units in the Company;

 

(2) The Buyer shall deliver to Seller certificates for 80,000 shares of MJH restricted common stock:

 

(3) Seller and each of its shareholders receiving MJH stock hereunder shall deliver to Buyer signed Lock-up/Leak-out Agreements substantially in the form attached hereto as Exhibit 1;

 

(4) Seller shall confirm in writing that the Intellectual Property has been assigned to the Company, to the satisfaction of the Buyer.

 

(5) Buyer and Seller shall execute the two other contemplated agreements negotiated between the parties, to Buyer’s reasonable satisfaction, comprising of an Inter-Company Services Agreement for certain services to be provided to G4 Products, LLC, a subsidiary of Seller, and an Independent Contractor Agreement under which Wade Atteberry shall provide certain consulting services to G4 Products, LLC.

 

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1.8          Closing Representations. All representations, covenants and warranties of the Buyer and Seller contained in this Agreement shall be true and correct on and as of the Closing date with the same effect as though the same had been made on and as of such date.

 

1.9          Post-Closing Obligations. At and at any time after the Closing, the parties shall duly execute, acknowledge and deliver all such further assignments, conveyances, instruments and documents, and shall take such other action consistent with the terms of this Agreement to carry out the transactions contemplated by this Agreement.

 

ARTICLE II
ADDITIONAL TERMS & CONDITIONS

 

2.1          Distribution Agreements. Except as expressly set forth herein, the parties ratify and confirm the sales distribution agreements they executed which are set forth in Schedule 2.1, attached hereto and incorporated herein. For avoidance of doubt. Seller may sell DeBudder Products solely through normal and customary retail sales channels, in accordance with its arrangements with Buyer.

 

2.2          Branding License. Seller ratifies and confirms its grant in me First Purchase Agreement, to the Company, of a 20 year, non-exclusive, royalty-free, fully-paid up, non-sublicensable, right and license to use the Seller’s “Original 420 Brand” and associated trademarks and logos, in conjunction with me manufacturing and sale, in accordance with the sales distribution rights granted in this Agreement, of the DeBudder Lids.

 

2.3          No Contingent Royalty. For avoidance of doubt, Buyer shall not owe contingency royalty payments for use of “Original 420 Brand” or associated trademarks or logos, after the Closing.

 

2.4          Patent Funding. Seller shall promptly and reasonably cooperate in tendering information, signing documents, and serving as a witness in connection with any ongoing patent-related applications or proceedings funded by the Company or Buyer anywhere in the world related to the Intellectual Property, at the sole cost and expense of the Company or Buyer.

 

ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE BUYER

 

As an inducement to, and to obtain the reliance of the Seller in connection with the issuance of MJH Stock, Buyer represents and warrants as follows:

 

3.1          Private Offering. Buyer represents that the offer, offer for sale, and sale of the shares of MJH Stock have not been and will not be registered with the SEC. The Shares are offered for sale and sold pursuant to the exemptions from the registration requirements of Section 5 of the Securities Act, as amended. Consequently, the Shares are deemed “restricted securities” and the ability to offer them for sale or to resell them shall be limited as further detailed in relevant restricted stock agreements.

 

3.2          Approval of Agreement. Buyer has full corporate power, authority, and legal right and has taken, or will take, all action required by law, its articles of incorporation, bylaws, and otherwise to execute and deliver this Agreement and to consummate the transactions herein contemplated including the issuance of the shares of the MJH Stock. The board of directors of the Buyer has authorized and approved the execution, delivery, and performance of this Agreement and the transactions contemplated hereby including the issuance of the MJH Stock.

 

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3.3          Legal Right. The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a material breach or violation of any of the terms and provisions of, or constitute a default under, any statute (except federal and state securities laws, compliance with which is elsewhere provided for in particular detail), indenture, mortgage or other agreement or instrument to which the Buyer is a party or by which it is bound by any order, rule or regulation directed to such party or its affiliates by any court or governmental agency or body having jurisdiction over them; and no other consent, approval, authorization or action is required for the consummation of the transactions herein contemplated other than such as have been obtained.

 

3.4          Validly Issued. The MJH Stock, when issued, will be duly authorized, validly issued, and non-assessable.

 

3.5          Organization. The Buyer has been duly organized and is now, and always during the period of the offer and sale will be, a validly existing corporation under the laws of the state of Nevada lawfully qualified to conduct the business for which it was organized and which it proposes to conduct.

 

3.6          Capitalization. The Buyer currently has an authorized capitalization of 50,000,000 shares of common stock, $0.0001 par value and no shares of preferred stock. The Buyer currently has 17,867,399 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.

 

3.7          Title and Related Matters. Except as disclosed, or disclosed in the most recent balance sheet of the Buyer and the notes thereto, the Buyer has good and marketable title to all of its properties, inventory, interests in properties, and assets, which are reflected in the most recent balance sheet of the Buyer or acquired after that date (except properties, interests in properties, and assets sold or otherwise disposed of since such date in the ordinary course of business), free and clear of all mortgages, liens, pledges, charges, or encumbrances, except (i) statutory liens or claims not yet delinquent; and (ii) such imperfections of title and easements as do not, and will not, materially detract from, or interfere with, the present or proposed use of the properties subject thereto or affected thereby or otherwise materially impair present business operations on such properties.

 

3.09        Litigation and Proceedings. Other than as disclosed to Seller or as otherwise set forth in our public reports, there are no actions, suits, or proceedings pending, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. The Buyer does not have any knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF THE SELLER

 

As an inducement to and to obtain the reliance of the Buyer in connection with its purchase of Units, Seller represents and warrants as follows:

 

4.1          Private Offering. The offer, offer for sale, and sale of Units have not been and will not be registered with the SEC. The Units shall be offered for sale and sold pursuant to the exemptions from the registration requirements of Section 5 of the Securities Act, as amended, and as such, will be deemed “restricted securities” limiting the Units ability to be resold.

 

4.2          Approval of Agreement. Seller, and if required, the Company, have full corporate power, authority, and legal right and have taken, or will take, all action required by law, its articles of organization, articles of incorporation, operating agreement, bylaws, and otherwise to execute and deliver this Agreement and to consummate the transactions herein contemplated including the sale and transfer of the Units. The execution, delivery, and performance of this Agreement and the transactions contemplated hereby, have been duly authorized by Seller, and if required, by the Company.

 

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4.3          Legal Right. The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a material breach or violation of any of the terms and provisions of, or constitute a default under, any statute (except federal and state securities laws, compliance with which is elsewhere provided for in particular detail), indenture, mortgage or other agreement or instrument to which the Company is a party or by which it is bound by any order, rule or regulation directed to such party or its affiliates by any court or governmental agency or body having jurisdiction over them; and no other consent, approval, authorization or action is required for the consummation of the transactions herein contemplated other than such as have been obtained.

 

4.4          Organization. The Company has been duly organized and is now, and always during the period of the offer and sale will be, a validly existing company under the laws of the State of Nevada, lawfully qualified to conduct the business for which it was organized and which it proposes to conduct.

 

4.5          Intellectual Property. The Seller and/or the Company owns, exclusively, all right, title and interest in and to the intellectual property of the Company (collectively, the “Company Intellectual Property”), free and clear of encumbrances. To the best knowledge of Seller, the Company is in full compliance with all legal requirements applicable to the Company Intellectual Property and the Company’s ownership and use thereof. To the best knowledge of Seller, the Company Intellectual Property, licensed or used by the Company or proposed to be used, and the Company’s conduct of its business as currently and formerly conducted and proposed to be conducted have not, do not and will not infringe, violate or misappropriate the Intellectual Property of any person. The Company has not received any communication, and no action has been instituted, settled or, to the Company’s knowledge, threatened that alleges any such infringement, violation or misappropriation, and none of the Company Intellectual Property are subject to any outstanding governmental order.

 

4.6          Disclosure of Information. Seller has received all the information Seller considers necessary or appropriate for deciding whether or not to purchase the shares of MJH Stock. Seller further represents that it has had an opportunity to ask questions and receive answers from the Buyer regarding the terms and conditions of the offering of the shares of MJH Stock. The foregoing, however, does not limit or modify the representations and warranties of the Buyer in Article III of this Agreement or the right of Seller to rely thereon.

 

4.7          Investment Experience. Seller is composed of investors in the securities of companies in the development stage and acknowledge that they are able to fend for themselves, can bear the economic risk of their investment, and have such knowledge and experience in financial or business matters that they are capable of evaluating the merits and risks of the investment in the shares of MJH Stock.

 

4.8          Acknowledgment. Seller acknowledges that an investment in the shares of MJH Stock involves substantial risk.

 

4.9          Knowledge of Buyer. Seller is aware, through its own extensive due diligence of all material information respecting the past, present and proposed business operations of the Buyer, including, but not limited to, its technology, its management, its financial position, or otherwise; and that the purchase price being paid for the MJH Stock bears no relationship to assets, book value or other established criteria of value. Seller has conducted its own investigation of the risks and merits of an investment in the Buyer, and to the extent desired, including, but not limited to, a review of the Buyer’s books and records, financial statements and other relevant business information, Seller has had the opportunity to discuss this documentation with the directors and executive officers of the Buyer: to ask questions of these directors and executive officers; and that to the extent requested, all such questions have been answered to Seller’s satisfaction.

 

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4.10        Informed Decision. The Seller has had an opportunity to consult with its independent legal, tax and financial advisors, and together with such advisors, has evaluated the transactions contemplated in this Agreement and has independently determined to agree to the terms and conditions of this Agreement. No representation is being or has been made by the Seller, the Buyer or either of their respective advisors to the Seller regarding the tax, financial, legal or other effects to the Seller or its stockholders of the transactions contemplated in this Agreement. The Seller is familiar with and understands the business and financial condition, operations and prospects of the Buyer and Seller is sufficiently informed and sophisticated enough to make a decision regarding the transactions contemplated by this Agreement.

 

4.11        Purchasing Entirely for Own Account. The shares to be acquired by the Seller will be acquired for investment for the Seller’ own respective accounts, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Seller has no present intention of selling, granting any participation in, or otherwise distributing the same. The Seller has not entered into any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the shares of MJH Stock to be acquired by the Seller hereunder.

 

4.12        Litigation and Proceedings. Other than as disclosed in writing to Buyer, the Company and any related entity have no actions, suits, or proceedings pending, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. The Seller has no knowledge of any default on its part or the part of the Company with respect to any judgment, order, writ, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.

 

ARTICLE V
SPECIAL COVENANTS

 

5.1          Assignment of Inventions. Prior to Closing, Wade Atteberry and Seller shall have assigned to the Company the Intellectual Property and all inventions, trade secrets, and patents which relate to the business of the Company and which were not already assigned under the First Purchase Agreement.

 

5.2          Maximum Outstanding Shares/No Convertible Securities. Prior to Closing, the Company will have no more than 10,000 Units issued and outstanding. Immediately after Closing, there shall be no more than 10,000 Units issued and outstanding. Furthermore, the Company warrants that the Company has not issued nor agreed to issue any securities which may convert to Units, other than as contemplated by this Agreement. Furthermore, the Seller and me Company agree that no Units shall be issued by the Company without shareholder approval during the first three years after Closing.

 

5.3          Business Activities of the Company.

 

(a)     From and after the date of this Agreement until the Closing date and except as set forth herein or as permitted or contemplated by this Agreement, Seller warrant that the Company will:

 

(i)          Carry on its business in substantially the same manner as it has heretofore:

 

(ii)         Maintain in full force and effect insurance comparable in amount and in scope of coverage to that now maintained by it;

 

(iii)        Perform in all material respects all of its obligations under material contracts, leases, and instruments relating to or affecting its assets, properties, and business;

 

(iv)        Use its best efforts to maintain and preserve it business organization intact, to retain its key employees, and to maintain its relationships with its material suppliers and customers;

 

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(v)         Except to the extent that noncompliance is not material or adverse to the respective party, duly and timely file for all taxable periods ending on or prior to the Closing date all federal, state, county, and local tax returns required to be filed by or on behalf of such entity or for which such entity may be held responsible and shall pay, or cause to pay, all taxes required to be shown as due and payable on such returns, as well as all installments of tax due and payable during the period commencing on the date of this Agreement and ending on the Closing date; and

 

(vi)        Fully comply with and perform in all material respects all obligations and duties imposed on it by all federal and state laws and all rules, regulations, and orders imposed by federal or state governmental authorities.

 

(b)    From and after the date of this Agreement and except as provided herein until the Closing date. Seller warrants that the Company will not:

 

(i)          Make any change in its articles of incorporation or bylaws, other than as expressly provided for herein;

 

(ii)         Enter into or amend any material contract, agreement, or other instrument, except in the ordinary course of business; and

 

(iii)        Enter into any agreement for the sale of the Company’s securities without the prior approval of the other party.

 

5.5          Access to Books and Records of the Company. Until the Closing date, the Seller will afford to Buyer and its authorized representatives prompt and full access to the properties, books, and records of the Company in order that Buyer may have full opportunity to make such reasonable investigation as it shall desire to make of the affairs of the Company and will furnish the Buyer with such additional financial and other information as to the business and properties of the Company as Buyer shall from time to time reasonably request.

 

5.6          Access to Books and Records of Buyer. Until the Closing date, the Buyer will afford to Seller and its authorized representatives prompt and full access to the properties, books, and records of the Buyer in order mat Seller may have full opportunity to make such reasonable investigation as it shall desire to make of the affairs of Buyer and will furnish the Seller with such additional financial and other information as to the business and properties of the Buyer as Seller shall from time to time reasonably request.

 

5.7          Purchase and Sale of Stock. The Buyer and Seller agree and understand that the consummation of this Agreement, including the purchase, sale and exchange of the Units and shares of MJH Stock as contemplated hereby, constitute the offer and sale of securities under the Securities Act and applicable state statutes. The Buyer and Seller agree such transactions shall be consummated in reliance on exemptions from the registration and prospectus delivery requirements of such statutes which depend, among other items, on the circumstances under which such securities are acquired.

 

(a)         In connection therewith, the parties represent and warrant that:

 

(i)          neither the SEC nor the securities commission of any state or other federal agency has made any determination as to the merits of acquiring the Units or MJH Stock, and that this transaction involves certain risks.

 

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(ii)         they have received and read the Agreement and understand the risks related to the consummation of the transactions herein contemplated.

 

(iii)        they have such knowledge and experience in business and financial matters that it is capable of evaluating each business.

 

(iv)        they have been provided with copies of all materials and information requested by them or their representatives, including any information requested to verify any information furnished (to the extent such information is available or can be obtained without unreasonable effort or expense), and the parties have been provided the opportunity for direct communication regarding the transactions contemplated hereby.

 

(v)         all information which Seller has provided to the Buyer or their representatives concerning Seller’s suitability- and intent to hold shares in MJH Stock following the transactions contemplated hereby is complete, accurate, and correct.

 

(vi)        the shares of MJH Stock to be acquired by the Seller under the terms of this Agreement will be acquired for the Seller’s own account, for investment, and not with the present intention of resale or distribution of all or any part of the securities. Seller agrees that it will refrain from transferring or otherwise disposing of any of the shares, or any interest therein, in such manner as to violate the Securities Act or any applicable state securities law regulating the disposition thereof.

 

(vii)       the Units to be acquired by the Buyer under the terms of this Agreement will be acquired for the Buyer’s own account, for investment, and not with the present intention of resale or distribution of all or any part of the securities. Buyer agrees that it will refrain from transferring or otherwise disposing of any of the shares, or any interest therein, in such manner as to violate the Securities Act or any applicable state securities law regulating the disposition thereof.

 

(viii)      neither party has offered or sold any securities of the other party, or any interest in this Agreement, and neither party has a present intention of dividing the shares to be received or the rights under this Agreement with others or of reselling or otherwise disposing of any portion of such stock or rights, either currently or after the passage of a fixed or determinable period of time or on the occurrence or nonoccurrence of any predetermined event or circumstance.

 

(ix)         the Units and MJH Stock have not been registered, but are being acquired by reason of a specific exemption under the Securities Act as well as under certain state statutes for transactions not involving any public offering and that any disposition of the subject shares may, under certain circumstances, be inconsistent with this exemption and may make a seller an ‘underwriter,’“ within the meaning of the Securities Act. It is understood that the definition of “underwriter” focuses upon the concept of “distribution” and that any subsequent disposition of the subject shares can only be effected in transactions which are not considered distributions. Generally, the term “distribution” is considered synonymous with ‘“public offering” or any other offer or sale involving general solicitation or general advertising. Under present law, in determining whether a distribution occurs when securities are sold into the public market, under certain circumstances one must consider the availability of public information regarding the issuer, a holding period for the securities sufficient to assure that the persons desiring to sell the securities without registration first bear the economic risk of their investment, and a limitation on the number of securities which the stockholder is permitted to sell and on the manner of sale, thereby reducing the potential impact of the sale on the trading markets. These criteria are set forth specifically in rule 144 promulgated under the Securities Act (“Rule 144”).

 

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(viii)      the shares of MJH Stock and Units must be held and may not be sold, transferred, or otherwise disposed of for value unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Buyer is not under any obligation to register the shares of MJH Stock under the Securities Act, except as set forth in this Agreement. The Buyer is not under any obligation to make Rule 144 available, except as may be expressly agreed to by it in writing in this Agreement, and in the event Rule 144 is not available, some other disclosure exemption may be required before Seller can sell, transfer, or otherwise dispose of such shares of MJH Stock without registration under the Securities Act. The registrar and transfer agent for Buyer and Seller will maintain a stop transfer order against the registration or transfer of the shares of MJH Stock and Units respectively, and the certificates representing the shares of such stock will bear a legend in substantially the following form so restricting the sale of such securities:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND ARE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.

 

(ix)         The Buyer may refuse to register further transfers or resales of the shares of MJH Stock in the absence of compliance with Rule 144 unless Seller furnishes the Buyer with a “no-action” or interpretive letter from the SEC or an opinion of counsel reasonably acceptable to the Buyer stating that the transfer is proper. Further, unless such letter or opinion states that the shares of MJH Stock are free of any restrictions under the Securities Act, the Buyer may refuse to transfer the securities to any transferee who does not furnish in writing to the Buyer the same representations and agree to the same conditions with respect to such shares of MJH Stock as set forth herein. The Buyer may also refuse to transfer the shares of MJH Stock if any circumstances are present reasonably indicating that the transferee’s representations are not accurate.

 

(b)         In connection with the transaction contemplated by this Agreement, the Buyer and Seller shall each file, with the assistance of the other and their respective legal counsel, such notices, applications, reports, or other instruments as may be deemed by them to be necessary or appropriate in an effort to document reliance on such exemptions, and the appropriate regulatory authority in the states where Buyer resides unless an exemption requiring no filing is available in such jurisdictions, all to the extent and in the manner as may be deemed by such parties to be appropriate.

 

(c)         In order to more fully document reliance on the exemptions as provided herein, the Buyer and Seller shall execute and deliver to the other, at or prior to the Closing, such further letters of representation, acknowledgment, suitability, or the like as me Buyer or Seller (or their respective counsel) may reasonably request in connection with reliance on exemptions from registration under such securities laws including but not limited to an investment letter.

 

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(d)         The Buyer and Seller acknowledge that the basis for relying on exemptions from registration or qualifications are factual, depending on the conduct of the various parties, and that no legal opinion or other assurance will be required or given to the effect that the transactions contemplated hereby are in fact exempt from registration or qualification.

 

5.8          No Representation Regarding Tax Treatment. No representation or warranty is being made by any party to any other regarding the treatment of this transaction for federal or state income taxation. Each party has relied exclusively on its own legal, accounting, and other tax adviser regarding the treatment of this transaction for federal and state income taxes and not on any representation, warranty, or assurance from any other parry or such other party’s legal, accounting, or other adviser.

 

5.9          Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement.

 

ARTICLE VI
INDEMNIFICATION

 

6.1         Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the second anniversary of the Closing Date. All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching parry prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

 

6.2          Indemnification by Company. Subject to the other terms and conditions of this Article VI, the Company shall indemnify, defend and hold MJH and its officers, directors, agents, employees, successors and assigns (referred to collectively as “Representatives”) harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, MJH or any of its Representatives, based upon, arising out of, with respect to or by reason of: any inaccuracy in or breach of any of the representations or warranties of the Company contained in this Agreement or in any certificate or instrument delivered by or on behalf of the Company pursuant to this Agreement; or any breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Company pursuant to this Agreement. For avoidance of doubt, the term “Losses” in the immediately preceding sentence means any losses, damages, liabilities, deficiencies, claims, diminution of value, interest, awards, judgments, penalties, costs or expenses, including attorneys’ fees, costs and other out-of-pocket expenses incurred in investigating, preparing or defending the foregoing.

 

ARTICLE VII
RESTRICTIVE COVENANTS

 

7.1          Non-Competition; Non-Solicitation For a period of five years following the Closing (the “Restricted Period”). or for such shorter period as expressly set forth below, the Seller and its majority shareholder, Wade Atteberry, agree not to, and shall cause their affiliates or subsidiaries and employees not to, directly or indirectly through any person or contractual arrangement:

 

(a)         engage in any business activity with, have any economic or ownership interest in or loan any money to, or perform any services or provide any advice for, any person, firm, corporation, business or entity (whether as a shareholder, member, partner, investor, proprietor, principal, agent, security holder, trustee, beneficiary, creditor lending credit or money for the purpose of establishing or operating any such business or otherwise, alone or in association with any other person or entity) which is the same as, substantially similar to, or substantially competitive with, the DeBudder Products within the United States, Europe and Australia; provided, however, that nothing herein shall prevent (A) Seller or its affiliates or Wade Atteberry from owning and operating businesses in the cannabis industry as operated by them at Closing.

 

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(b)         The Seller and Wade Atteberry covenant and agree that it is unlikely that they could undertake any of the activities described in this Section 7.1 without necessarily benefiting from and making use of the Confidential Information. The Seller and Wade Atteberry therefore covenant and agree that during the period beginning on the date hereof and ending on the second anniversary of the date hereof, neither it nor any of its affiliates or subsidiaries, nor Wade Atteberry, shall, for itself, themselves, himself or any third party”, directly or indirectly, (i) divert from the Buyer or any of its affiliates or subsidiaries any business of any kind in which either the Seller was engaged with respect of the sale of DeBudder Products or the Buyer was engaged in at the Closing, including, without limitation, the solicitation or inducement of or interference with, any past, existing or prospective client, customer or source of financing of the Seller, the Buyer or any affiliate or subsidiary’ of the Buyer, (ii) employ or solicit for employment any person employed by the Buyer, or any affiliate or subsidiary of the Buyer, or induce any employee of the Buyers or any affiliate or subsidiary of the Buyer to leave the employ of the Buyer or any affiliate or subsidiary of the Buyer for any reason whatsoever, unless such person will have ceased to be employed or engaged by the Buyer for a period of at least six months prior thereto or (iii) attempt to do any of the foregoing; provided, however, that nothing herein shall prevent the Seller or any of its affiliates or subsidiaries from engaging in general media advertising or solicitation that may be targeted to a particular geographic or technical area but that is not targeted toward Buyer’s employees; or

 

(c)         disparage the Buyer or any of its affiliates or subsidiaries in any way that could adversely affect the goodwill, reputation or business relationships of the DeBudder Products, the Buyer or any of its affiliates or subsidiaries with the public generally, or with any of their customers, suppliers or employees.

 

7.2          The Buyer covenants and agrees mat during the period beginning on the date hereof and ending on the second anniversary of the date hereof neither it nor any of its affiliates or subsidiaries shall, for itself, themselves or any third party, directly or indirectly, (i) employ or solicit for employment any person employed by the Seller or any affiliate or subsidiary of the Seller or induce any employee of the Seller or any affiliate or subsidiary of the Seller to leave the employ of the Seller or any affiliate or subsidiary of the Seller for any reason whatsoever, unless such person will have ceased to be employed or engaged by the Seller for a period of at least six months prior thereto or (ii) attempt to do any of me foregoing; provided, however, mat nothing herein shall prevent the Buyer or any of its affiliates or subsidiaries from engaging in general media advertising or solicitation mat may be targeted to a particular geographic or technical area but that is not targeted toward Seller’s employees and for me avoidance of doubt, the performance of that certain Inter-Company Services Agreement between Buyer and Seller, and the Wade Atteberry Independent Contractor Agreement with G4 Products, shall not be deemed a violation of this Article VII.

 

7.3          The Seller and Wade Atteberry acknowledge and agree that compliance with the covenants contained in this Article VII are necessary to protect the value of the ongoing business and assets (including the goodwill) and other proprietary interests being acquired pursuant to tins Agreement. The Seller and Wade Atteberry further acknowledge and agree that a breach of the covenants in this Article VII will result in irreparable and continuing damage to me Buyer for which there will be no adequate remedy at law, and agrees that in me event of any breach or threatened breach of such covenants, the Buyer shall be entitled to interim relief in the form of a temporary restraining order, preliminary injunction or injunction and to have such covenants specifically enforced by any court having equity jurisdiction in addition to such other and further relief as may be proper.

 

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7.4          Subject to Section 7.1(a), it is the intention of the parties hereto that the scope and effect of the covenants contained in this Article VII shall be as broad in time and geography, and in all other respects, as is permitted pursuant to applicable Law. The provisions of this Article VII are severable and independent and shall be interpreted and applied consistently with requirements of reasonableness and equity. If any provision of this Article VII shall be held to restrict competition to a greater degree than is permitted by applicable law or to be invalid or otherwise unenforceable, in whole or in part, such term or provision shall be adjusted rather than voided, and the remainder of the provisions, or enforceable parts thereof, shall not be affected thereby, and shall remain in full force and effect to the maximum extent possible.

 

7.5          The Seller and Wade Atteberry acknowledge that’s Seller’s subsidiary, G4 Products, LLC and Wade Atteberry intend to enter into an Independent Contractor Agreement (“ICA”) in which Wade Atteberry provides services to G4 Products, LLC, following Closing. The ICA is fully incorporated and integrated into this Purchase Agreement, and the provisions of this Article VII are fully integrated with the ICA.

 

ARTICLE VIII
MISCELLANEOUS

 

8.1          Public Statements. Subject to their respective legal obligations (including requirements of stock exchanges and other similar regulatory bodies), the Seller and Buyer shall consult with one another, and use reasonable best efforts to agree upon the text of any press release, before issuing any such press release or otherwise making public statements with respect to the transactions and in making any filing with any federal or state governmental or regulatory agency or with any securities exchange with respect thereto.

 

8.2          Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing occurs.

 

8.3          Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile (with confirmation of transmission); (d) on the date of confirmation of receipt by the intended addressee of an email, or (e) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7.3):

 

If to MJ Harvest, Inc.: Patrick Bilton
  P.O. Box 6295
  West Palm Beach, FL 33405
   
with a copy to: Brad E. Herr, CFO
P.O. Box 30417
Spokane, WA 99223
   
If to Seller: Original Ventures, Inc.
  14938 Camden Ave., Suite 121
  San Jose, CA 95124

 

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If to Company: G4 Products, LLC
  14938 Camden Ave., Suite 121
  San Jose, CA 95124
   
If to Wade Atteberry: 245 Saint Francis Drive
  Boulder Creek, CA 95006

 

8.4          Entire Agreement. This Agreement represents the entire agreement between the parties relating to the subject matter hereof. All previous agreements between the parties, whether written or oral, have been merged into this Agreement. This Agreement alone fully and completely expresses the agreement of the parties relating to the subject matter hereof. There are no other courses of dealing, understandings, agreements, representations, or warranties, written or oral, except as set forth herein.

 

8.5          Attorney’s Fees. In the event that any party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the breaching party or parties shall reimburse the non-breaching party or parties for all costs, including reasonable attorneys’ fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.

 

8.6          Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

8.7          Amendment or Waiver. Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and such remedies may be enforced concurrently, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. At any time prior to the Closing, this Agreement may be amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance thereof may be extended by a writing signed by the party or parties for whose benefit the provision is intended.

 

8.8          Binding Effect. This Agreement shall inure to the benefit of and be binding upon the Buyer and Seller and their successors. Nothing expressed in this Agreement is intended to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under this Agreement.

 

8.9          Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder hereof.

 

8.10        Captions. The captions or headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope. extent, or intent of this Agreement or any provisions hereof.

 

8.11        Applicable Law. The Buyer and Seller hereby agree this Agreement shall be governed by and construed and enforced under and in accordance with the laws of the State of Nevada and all subject matter and in persona jurisdiction shall be the state courts of Nevada and as such the Buyer and Seller irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Nevada and of the United States of America located in Las Vegas, Nevada for any actions, suits or proceedings arising out of or relating to this Agreement.

 

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IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to be executed by their respective officers, hereunto duly authorized, as of the date first above written.

 

FOR BUXER MJ HARVEST, INC:

 

FOR SELLER ORIGINAL VENTURES, INC.:

 

 

 

By:

  IMAGE

 

By:

  IMAGE

 

Patrick Bilton, CEO

 

 

Wade Atteberry, President

 

FOR WADE ATTEBARRY, INDIVIDUALLY, 

 

WITH RESPECT TO COVENANTS IN

 

ARTICLE V AND ARTICLE VII :

 

 

 

  IMAGE

 

Wade Atteberry

 

 

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EXHIBIT 1 

LOCK-UP/LEAK-OUT AGREEMENT

 

THIS LOCK-UP/LEAK-OUT AGREEMENT (the “Agreement”) is between MJ Harvest, Inc., a Nevada corporation (the “Corporation”), and [Shareholder Name] (the “Shareholder”). For all purposes of this Agreement, “Shareholder” includes any “affiliate, controlling person of Shareholder, agent, representative or other person with whom Shareholder is acting in concert.

 

Premise

 

WHEREAS, it is intended that the shares of common stock of the Corporation covered by this Agreement shall include any shares of common stock of the Corporation distributable to the Shareholder pursuant to that Securities Purchase Agreement dated December 7, 2018 between the Corporation and the Shareholder (the “Purchase Agreement”) regarding the Corporation’s acquisition of a 49% interest in G4 Products, LLC, a Nevada limited liability company, including all stock certificates (or any successor stock certificate issued on the transfer of such stock certificates) issued to the Shareholder in connection with the Purchase Agreement (the “Common Stock”); and

 

WHEREAS, the execution and delivery of this Agreement was a condition of the Purchase Agreement and the issuance of the Common Stock covered hereby.

 

Agreement

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                Initial Lock-Up/Leak-Out. Except as otherwise expressly provided herein, and except as the Shareholder may be otherwise restricted from selling shares of Common Stock under applicable federal or state securities laws, rules and regulations and Securities and Exchange Commission (the “SEC”) interpretations thereof, the Shareholder may only sell the Common Stock represented by the Shareholder’s Purchase Shares (as defined in the Purchase Agreement) subject to the following conditions, commencing on the date of this Agreement and terminating thirty-six months from the date of this Agreement (the “Initial Lock-Up Period”). During the first twelve months of the Initial Lock-Up Period no sales of Common Stock shall be made by the Shareholder. After the first twelve months of the Initial Lock-Up Period, the Shareholder may sell the shares of Common Stock derived from the Shares only under the following conditions:

 

1.1 the Shareholder shall sell no more than ten percent (10%) of the Shareholder’s Shares per month.

 

2.                              Earn-Out Lock-up/Leak-Out. Except as otherwise expressly provided herein, and except as the Shareholder may be otherwise restricted from selling shares of Common Stock under applicable federal or state securities laws, rules and regulations and SEC interpretations thereof, the Shareholder may only sell shares of Common Stock received by Shareholder as a result of the earn-out provisions of Section 1.04 of the Purchase Agreement (“Earn-Out Shares”) subject to the following conditions, commencing on the date of the issuance of any such shares and terminating 30 months from the date of such issuance (the “Earn-Out Lock-Up Period”). During the first six months of the Earn-out Lock-Up Period no sales of Earn-Out Shares shall be made by the Shareholder. After the first six months of the Earn-Out Lock-Up Period, if then allowed under Rule 144, the Shareholder may sell the shares of Earn-Out Shares only under the following conditions:

 

2.1 During the 6th through the 30* month of the Earn-Out Lockup Period, the Shareholder shall sell no more than five percent (5%) of the Shareholder’s Earn-Out Shares per month.

 

16

 

 

 

3.      Additional Limitations applicable to both Purchase Shares and Earn-Out Shares.

 

3.1

On any single trading day, the Shareholder is limited to sell no more than the greater of (i) five percent (5%) of the daily volume of the Corporation’s common stock on such trading day; or (ii) 2,500 shares.

 

3.2

Shareholder agrees that all sales of Common Stock will be made at no less than the best “asked” prices, and no sales will be made at the “bid” prices, unless the price per share of such sale exceeds the closing price of the Corporation’s common stock on the previous trading day;

 

3.3

Except as otherwise provided herein, all Common Stock shall be sold by the Shareholder in “broker’s transactions” and in compliance with the “manner of sale” requirements as those terms are defined in Rule 144 of the SEC during the all Lock-Up periods.

 

3.4

An appropriate legend describing this Agreement shall be imprinted on each stock certificate representing Common Stock covered hereby, and the transfer records of the Corporation’s transfer agent shall reflect such restrictions.

 

4.     The delivery of a duly executed copy of a broker/dealer agreement by the Shareholder’s broker and a duly executed seller’s resale agreement by the Shareholder in the forms to be approved by legal counsel for the Corporation shall be satisfactory evidence for all purposes of this Agreement that the Shareholder and the broker will comply with me “brokers’ transactions” and “manner of sale” requirements of this Agreement, and no further evidence thereof will be required of the Shareholder; provided, however, the Corporation may confirm such compliance with any Shareholder and the Shareholder’s broker, to the extent that it deems reasonably required or necessary to assure compliance with this Agreement; and provided, however, that the Shareholder can otherwise provide satisfactory evidence to the Corporation of such compliance, subject to the Corporation’s acceptance of any such alternative compliance evidence.

 

5.     The Shareholder agrees to provide brokerage account statements identifying all trades of the Common Stock within 15 days after written request by the Corporation. If any such brokerage statements are not available at the time of the request, such brokerage account statements shall be delivered to the Corporation within 15 days after they become available.

 

4.     Notwithstanding anything to the contrary set forth herein, the Corporation may, in its sole discretion and in good faith, at any time and from time to time, waive any of the conditions or restrictions contained herein to increase the liquidity of the Common Stock or if such waiver would otherwise be in the best interests of the development of the trading market for the Common Stock.

 

5.      The Shareholder shall not, directly or through an affiliate engage in any open market Short Sales (as defined below) of any shares of Corporation’s common stock. As used herein, “Short Sale” has the meaning provided in Rule 3b-3 under the Securities Exchange Act of 1934, as amended.

 

6.     Except as otherwise provided in this Agreement or any other agreements between the parties, the Shareholder shall be entitled to their respective beneficial rights of ownership of the Common Stock, including the right to vote the Common Stock for any and all purposes.

 

7.      The number of shares of Common Stock included in any allotment that can be sold by the Shareholder hereunder shall be appropriately adjusted should the Corporation make a dividend or distribution, undergo a forward split or a reverse split or otherwise reclassify its shares of Common Stock.

 

17

 

8.             This Agreement may be executed in any number of counterparts with the same force and effect as if all parties had executed the same document.

 

9.            All notices, instructions or other communications required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by certified mail, return receipt requested, overnight deliver)’ or hand-delivered to all parties to this Agreement, to the Corporation, at its principal corporate office, and to the Shareholder, at the address on the books and records of the Corporation. All notices shall be deemed to be given on the same day if delivered by hand or on the following business day if sent by overnight delivery or the second business day following the date of mailing.

 

10.            The resale restrictions on the Common Stock set forth in this Agreement shall be in addition to all other restrictions on transfer imposed by applicable United States and state securities laws, rules and regulations.

 

11.            The Corporation or me Shareholder who fails to fully adhere to the terms and conditions of this Agreement shall be liable to every other party for any damages suffered by any party by reason of any such breach of the terms and conditions hereof. The Shareholder agrees that in the event of a breach of any of the terms and conditions of this Agreement by the Shareholder, that in addition to all other remedies that may be available in law or in equity to the non-defaulting parties, a preliminary and permanent injunction, without bond or surety, and an order of a court requiring such Shareholder to cease and desist from violating the terms and conditions of this Agreement and specifically requiring the Shareholder to perform his/her/its obligations hereunder is fair and reasonable by reason of the inability of the parties to tins Agreement to presently determine me type, extent or amount of damages that the Corporation or any non-defaulting Shareholder may suffer as a result of any breach or continuation thereof.

 

12.           This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof and may not be amended except by a written instrument executed by the parties hereto and approved by a majority of the members of the Board of Directors of the Corporation.

 

13.          This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada applicable to contracts entered into and to be performed wholly within said State; and the Corporation and the Shareholder agree that any action based upon this Agreement may be brought in the United States federal and state courts situated in Nevada only, and that shall each submit to the jurisdiction of such courts for all purposes hereunder.

 

14.          In the event of default hereunder, the non-defaulting parties shall be entitled to recover reasonable attorney’s fees incurred in the enforcement of this Agreement.

 

15.        This Agreement shall be binding upon any successors or assigns of the Common Stock, without qualification, and in the event of any exchange of the Common Stock under a merger or reorganization or other transaction of the Corporation by which the Common Stock is subject to exchange for other securities in an\ manner, this Agreement shall remain if full force and effect and shall apply to any securities received or receivable in exchange for such Common Stock, without qualification.

 

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the day and year first above written.

 

18

 

 

 

FOR MJ HARVEST, INC.:

 

  IMAGE

12/20/18

 

Patrick Bilton, CEO

Date

 

 

 

FOR ORIGINAL VENTURES, INC;

 

  IMAGE

12-6-18

 

Wade Atteberry, President

Date

 

 

 

 

 

19

 

SCHEDULE 2.1

 

LIST OF AGREEMENTS

 

20

 

 

 

Original Ventures, Inc.

 

Meeting Minutes

 

Dec. 9, 2018

 

 

 

Present:

Wade Atteberry, Cheryl Hall, Lenny Pevna, Aileen Gumabay

Next meeting:

TBD

 

1.     Discussion

 

Three contracts were discussed and reviewed:


Intercompany Services Agreement


Independent Contractor Agreement


Securities Purchase Agreement

 

2.     Roundtable

 

All parties agreed to the final version of these documents.

 

Wade Atteberry 

  IMAGE

Leonard Pevna

  IMAGE

Cheryl Hall

  IMAGE

AILEEN M GUMABAY

  IMAGE

 

Exhibit 21.1

SUBISIDIARIES OF REGISTRANT

 

 

MJ Harvest, Inc. owns 100% of the following subsidiaries:

 

G4 Products, LLC, a Nevada Limited Liability Company
AgroExports LLC, a Nevada Limited Liability Company
AgroExports.CA ULC, an Unlimited Liability Company organized in British Columbia, Canada

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Registration Statement on Form S-1 of our report, Dated August 30, 2019, relating to the financial statements of MJ Harvest, Inc. We also consent to the reference to our Firm under the caption “Experts” in the Prospectus. We understand the S-1 Registration Statement is being filed on October 2, 2019.

 

 

 

/s/ DeCoria, Maichel & Teague P.S.

 

DeCoria, Maichel & Teague P.S.

October 02, 2019

Spokane, Washington