Item 1.01 Entry into a Material Definitive Agreement.
On January 23, 2014. mCig, Inc. (mCig) and Vapolution, Inc. (Vapolution) entered into a Stock Purchase Agreement (the Agreement) whereby mCig, Inc. would issue 5,000,000 shares representing one percent (1%) of mCig's fully diluted capital structure to shareholders of Vapolution, Inc.
On January 23, 2014, Paul Rosenberg, CEO of mCig, Inc. cancelled an equal amount (2,500,000 shares) of common shares owned by him resulting in a net non-dilutive transaction to existing mCig, Inc. shareholders. The remaining 2,500,000 of common shares owned by Paul Rosenberg will be cancelled on the one year anniversary of the agreement on January 23, 2015, to offset the 2,500,000 new shares to be issued from the treasury for the completion of the acquisition of Vapolution.
On May 23, 2014, the parties to the agreement agreed to amend the original Stock Purchase Agreement.
The foregoing description of the Amended Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended Stock Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
We plan on releasing the two-year audited comparative financial statements for Vapolution, Inc. as part of our audited Form 10-K, which will be filed by July 29, 2014.
Following consultation with our legal and auditing advisors in preparation for the filing of our audited Form 10-K, the company and Vapolution, Inc. decided to amend their original Stock Purchase Agreement. Per the amended Stock Purchase Agreement executed as of May 23, 2014, a clarification was made to the agreement that more appropriately expresses the spirit of the transaction as agreed upon by management of mCig and the previous owners of Vapolution, Inc.
The following is a summary of the changes to the agreement:
1.
In the amended agreement, former Vapolution, Inc. shareholders have autonomous control over the day-to-day operations of the Company while the Board of Directors of mCig, Inc. will have ultimate control over the business decisions within Vapolution, Inc. This differs from the original agreement whereby Vapolution, Inc. former shareholders had the ability to veto any decision made by mCig, Inc.
2.
The Amended Agreement states that as part of the acquisition, all tangible and intangible assets of Vapolution, Inc. are included as part of the acquisition. This differs from the original agreement whereby the assets of Vapolution, Inc. were not acquired by mCig, Inc.
3.
In the amended agreement, former Vapolution, Inc. shareholders have just one (1) year to rescind the agreement and return to full ownership of the Company as opposed to five (5) in the original agreement.
Risk Factors
While the amended Vapolution, Inc. acquisition agreement provides mCig, Inc. with more control of the company and its assets, several risk factors must still be considered:
·
mCig, Inc. runs the risk that previous management in charge of the day-to-day operations at Vapolution, make decisions that are not aligned with the vision of mCigs Board of Directors.
·
There is no guarantee that previous owners of Vapolution, Inc. will make decisions that are in the best interest of Vapolution, Inc. as an mCig, Inc. subsidiary.