UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March
31, 2015.
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
__________ to __________
Commission File Number: 001-15673
|
AGRITEK HOLDINGS, INC. |
(Exact name of registrant as specified in its charter) |
|
|
|
Delaware |
|
20-8484256 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
319 Clematis Street, Suite 1008 |
|
|
West Palm Beach, FL |
|
33401 |
(Address of principal executive offices) |
|
(Zip Code) |
|
561-249-6511 |
(Registrant’s telephone number, including area code) |
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one)
Large accelerated filer
☐ |
Accelerated
filer ☐ |
|
|
Non-accelerated filer ☐ (Do not check
if a smaller reporting company) |
Smaller reporting
company ☑ |
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The number of shares outstanding of registrant’s
$0.0001 par value Common Stock, as of May 15, 2015, was 134,160,211 shares.
TABLE OF CONTENTS
|
Page |
Part I. Financial Information |
| | |
|
| | |
Item 1. Financial Statements |
| | |
|
| | |
Condensed Consolidated Balance Sheets at March 31, 2015 (Unaudited) and December 31, 2014 |
| 1 | |
|
| | |
Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (Unaudited) |
| 2 | |
|
| | |
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (Unaudited) |
| 3 | |
|
| | |
Notes to Condensed Consolidated Financial Statements (Unaudited) |
| 4 | |
|
| | |
Item 2. Management’s Discussion and Analysis |
| 15 | |
|
| | |
Item 3. Quantitative and Qualitative Disclosures about Market Risks |
| 21 | |
|
| | |
Item 4. Controls and Procedures |
| 21 | |
|
| | |
Part II. Other Information |
| | |
|
| | |
Item 1. Legal Proceedings |
| 22 | |
|
| | |
Item 1A. Risk Factors |
| 22 | |
|
| | |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
| 22 | |
|
| | |
Item 3. Defaults Upon Senior Securities |
| 22 | |
|
| | |
Item 4. Mine Safety Disclosures |
| 22 | |
|
| | |
Item 5. Other Information |
| 22 | |
|
| | |
Item 6. Exhibits |
| 23 | |
|
| | |
Signatures |
| 24 | |
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains
forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”
and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to
represent an all-inclusive means of identifying forward-looking statements as denoted in this quarterly report on Form 10-Q. Additionally,
statements concerning future matters are forward-looking statements.
Although forward-looking statements
in this quarterly report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts
and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and
actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking
statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those
specifically addressed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in our annual report on Form 10-K for the fiscal year ended December 31, 2014, in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in this quarterly report on Form 10-Q and in other
reports that we file with the Securities and Exchange Commission (the “SEC”). You are urged not to place undue reliance
on these forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q.
We file reports with the SEC. The SEC
maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC, including us. You can also read and copy any materials we file with, or furnish to, the
SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
We undertake no obligation to revise or update any forward-looking
statements in order to reflect any event or circumstance that may arise after the date of this quarterly report on Form 10-Q, except
as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of
this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial
condition, results of operations and prospects.
AGRITEK HOLDINGS, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
| |
| | | |
| | |
| |
March 31, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
| | |
ASSETS | |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 140,853 | | |
$ | 118,429 | |
Accounts receivable, net | |
| 662 | | |
| 173 | |
Inventory, net | |
| 5,110 | | |
| 42,061 | |
Notes receivable | |
| 317,609 | | |
| 400,000 | |
Interest receivable | |
| 18,991 | | |
| 28,954 | |
Deferred financing costs | |
| 9,708 | | |
| 1,518 | |
Due from related party | |
| 267,369 | | |
| 236,759 | |
Prepaid assets and other | |
| 18,333 | | |
| 44,586 | |
Total current assets | |
| 778,635 | | |
| 872,480 | |
| |
| | | |
| | |
Other | |
| 15,525 | | |
| 15,525 | |
Goodwill | |
| — | | |
| 192,849 | |
Property and equipment, net of accumulated depreciation of $2,423 (2015) and $1,976 (2014) | |
| 365,675 | | |
| 366,122 | |
Investments in non-marketable securities | |
| 50,000 | | |
| 50,000 | |
| |
| | | |
| | |
Total assets | |
$ | 1,209,835 | | |
$ | 1,496,976 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 384,393 | | |
$ | 242,857 | |
Deferred compensation | |
| 101,949 | | |
| 81,661 | |
Note payable, current portion | |
| 25,300 | | |
| 34,300 | |
Tenant deposits | |
| — | | |
| 90,000 | |
Convertible debt, net of discounts of $129,355 (2015) | |
| 55,395 | | |
| — | |
Convertible note payable, net of discounts of $6,011 (2015) and $166,222 (2014) | |
| 948,608 | | |
| 1,233,903 | |
Derivative liabilities | |
| 136,357 | | |
| — | |
Total current liabilities | |
| 1,652,002 | | |
| 1,682,721 | |
| |
| | | |
| | |
Note payable, long term | |
| 51,450 | | |
| 51,450 | |
| |
| | | |
| | |
Total liabilities | |
| 1,703,452 | | |
| 1,734,171 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' Deficit: | |
| | | |
| | |
Series B convertible preferred stock, $0.0001 par value; 1,000,000 shares
authorized, and 1,000,000 shares issued and outstanding | |
| — | | |
| — | |
Common stock, $.0001 par value; 250,000,000 shares authorized; 123,152,050
(2015) shares and 93,500,420 (2014) shares issued and outstanding | |
| 12,316 | | |
| 9,351 | |
Additional paid-in capital | |
| 11,868,822 | | |
| 11,084,504 | |
Deferred stock compensation | |
| (283,516 | ) | |
| — | |
Accumulated deficit | |
| (12,091,239 | ) | |
| (11,331,050 | ) |
Total stockholders' deficit | |
| (493,617 | ) | |
| (237,195 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' deficit | |
$ | 1,209,835 | | |
$ | 1,496,976 | |
| |
| | | |
| | |
See notes to unaudited condensed consolidated financial statements. |
AGRITEK HOLDINGS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited) |
| |
| | | |
| | |
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | |
Product revenue | |
$ | 7,221 | | |
$ | 19,520 | |
Cost of revenue | |
| 3,281 | | |
| 21,159 | |
Gross profit (loss) | |
| 3,940 | | |
| (1,639 | ) |
| |
| | | |
| | |
Operating Expenses: | |
| | | |
| | |
Administrative and management fees (including $16,484 (2015) stock based compensation) | |
| 97,693 | | |
| 71,431 | |
Professional and consulting fees (including $25,000 (2014) stock based compensation) | |
| 20,588 | | |
| 47,950 | |
Impairment of Goodwill | |
| 192,849 | | |
| — | |
Reserve for Inventory Loss | |
| 32,529 | | |
| — | |
Commissions and license fees | |
| — | | |
| 8,072 | |
Rent and other occupancy costs | |
| 15,129 | | |
| 1,929 | |
Leased property expense | |
| 54,911 | | |
| — | |
Advertising and promotion | |
| 7,543 | | |
| 1,000 | |
Travel and entertainment | |
| 15,046 | | |
| — | |
Other general and administrative expenses | |
| 19,984 | | |
| 33,212 | |
| |
| | | |
| | |
Total operating expenses | |
| 456,271 | | |
| 163,594 | |
| |
| | | |
| | |
Operating loss | |
| (452,331 | ) | |
| (165,233 | ) |
| |
| | | |
| | |
Other Income (Expense): | |
| | | |
| | |
Interest income | |
| 7,646 | | |
| 10,740 | |
Interest expense | |
| (314,893 | ) | |
| (111,455 | ) |
Derivative liability (expense) income | |
| (611 | ) | |
| 30,347 | |
| |
| | | |
| | |
Total other expense, net | |
| (307,858 | ) | |
| (70,368 | ) |
| |
| | | |
| | |
Net loss | |
$ | (760,189 | ) | |
$ | (235,601 | ) |
| |
| | | |
| | |
Basic and diluted loss per share | |
$ | (0.01 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | |
Weighted average number of common shares outstanding | |
| | | |
| | |
Basic and diluted | |
| 100,791,499 | | |
| 56,814,256 | |
| |
| | | |
| | |
See notes to unaudited condensed consolidated financial statements. |
AGRITEK HOLDINGS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
| |
| | | |
| | |
| |
Three Months Ended March 31, | |
| |
2015 | | |
2014 | |
Cash flow from operating activities: | |
| | | |
| | |
Net loss | |
$ | (760,189 | ) | |
$ | (235,601 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Stock issued for consulting services | |
| — | | |
| 25,000 | |
Amortization of deferred stock compensation | |
| 16,484 | | |
| — | |
Amortization of deferred financing costs | |
| 1,560 | | |
| 14,340 | |
Impairment of Goodwill | |
| 192,849 | | |
| — | |
Reserve for Inventory Loss | |
| 32,529 | | |
| — | |
Depreciation | |
| 447 | | |
| 203 | |
Non cash interest expense for excess value of common stock issued for convertible notes payable | |
| 149,782 | | |
| — | |
Amortization of discounts on convertible notes | |
| 23,135 | | |
| 77,833 | |
Change in fair values of derivative liabilities | |
| 611 | | |
| (30,347 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Decrease (increase) in : | |
| | | |
| | |
Accounts receivable | |
| (489 | ) | |
| (2,536 | ) |
Inventory | |
| 4,422 | | |
| 13,810 | |
Prepaid assets and other | |
| 36,216 | | |
| (11,200 | ) |
Increase (decrease) in : | |
| | | |
| | |
Accounts payable and accrued expenses | |
| 176,999 | | |
| (50,706 | ) |
Tenant deposits | |
| (90,000 | ) | |
| — | |
Deferred compensation | |
| 20,288 | | |
| 76,800 | |
Net cash used in operating activities | |
| (195,356 | ) | |
| (122,405 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Land acquisition costs | |
| — | | |
| (40,571 | ) |
Advances to related party | |
| (30,610 | ) | |
| (15,708 | ) |
Net cash used in investing activities | |
| (30,610 | ) | |
| (56,279 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Payments received on notes receivable issued for convertible debt | |
| 82,390 | | |
| 200,000 | |
Proceeds from issuance of convertible debt | |
| 175,000 | | |
| 300,000 | |
Payments made on note payable | |
| (9,000 | ) | |
| — | |
Payment of deferred financing costs | |
| — | | |
| (8,000 | ) |
Net cash provided by financing activities | |
| 248,390 | | |
| 492,000 | |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| 22,424 | | |
| 313,316 | |
| |
| | | |
| | |
Cash and cash equivalents, Beginning | |
| 118,429 | | |
| 108,766 | |
| |
| | | |
| | |
Cash and cash equivalents, Ending | |
$ | 140,853 | | |
$ | 422,082 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | — | | |
$ | — | |
Cash paid for income taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
Schedule of non-cash financing activities: | |
| | | |
| | |
Conversion of notes payable and interest into common stock | |
$ | 337,500 | | |
$ | 711,491 | |
Conversion of deferred compensation into common stock | |
$ | — | | |
$ | 60,000 | |
Issuance of note payable for land acquisition | |
$ | — | | |
$ | 85,750 | |
| |
| | | |
| | |
See notes to unaudited condensed consolidated financial statements. |
AGRITEK HOLDINGS, INC.
Notes to Condensed Consolidated Financial
Statements
March 31, 2015
(Unaudited)
Note 1 - Organization
Business
Agritek Holdings, Inc. (the “Company”
or “Agritek”), formerly known as Mediswipe, Inc., and its wholly owned subsidiary, Agritek Venture Holdings, Inc. (“AVHI”),
acquires and leases real estate to licensed marijuana operators, including providing complete turnkey growing space and related
facilities to licensed marijuana growers and dispensary owners. Additionally, the Company offers a variety of services and
product lines to the medicinal marijuana sector including the distribution of hemp based nutritional products, a line of innovative
solutions for electronically processing merchant transactions and recently, the Company began importing and distributing vaporizers
and e-cigarettes under the Company's Mont Blunt brand.
The Company does not grow, harvest,
distribute or sell marijuana or any substances that violate the laws of the United States of America.
On March 18, 2014,
the Company completed the purchase of 80 acres zoned for agricultural use in Pueblo County, Colorado. The Company plans to
lease individual parcels of the 80 acre parcel to fully-licensed and compliant growers and dispensaries within the regulated medicinal
and recreational market of Colorado. The Company plans include receiving rents and management fees for providing infrastructure,
water, electricity, equipment leasing and security services. As of March 31, 2015, the Company
has not realized any revenue from the property.
On April 28, 2014,
the Company executed and closed a lease agreement for 20 acres of an agricultural farming facility located in South Florida following
the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing low grade marijuana specifically
for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement, through November 1, 2014, the Company
had an option to purchase the land for $1,100,000, which it did not exercise, and maintains a first right of refusal to purchase
the property for three years. As of March 31, 2015, the Company has not realized any revenue
from the property.
On July 11, 2014,
the Company signed a ten year lease agreement for 40 acres in Pueblo, Colorado, now bringing
total land holdings in the country's first recreational cannabis state to over 120 acres zoned for its planned agricultural and
cultivation facilities located in Pueblo County, Colorado. The lease requires monthly rent payments of $10,000 during the
first year and is subject to a 2% annual increase over the life of the lease. The lease also provides rights to 50 acres of certain
tenant water rights for $50,000 annually plus cost of approximately $2,400 annually. The water rights ensure the Company’s
non-interruption of operations on behalf of new tenants qualified as fully registered and licensed grow and manufacturing operations.
As of March 31, 2015, the Company has not realized any revenue from the property. The Company is currently in default of the lease
agreement, as it has not paid March, April and May rent as of May 15, 2015.
On
July 26, 2014, the Company executed a Real Property Purchase Agreement to acquire approximately 3.2 acres for $224,000, in the
Apex Industrial Park Complex, otherwise known as Nevada “Green Zone”. The Company had also entered into a 99 year lease
agreement with My Life Organics, Inc. (“My Life”). My Life has been issued a provisional license for cultivation of
marijuana to be grown on the Company’s property. The closing of the property occurred in November 2014 and the Company also
advanced $50,000 to MYLO Construction, LLC (“MYLO”), a newly formed Company to manage the construction of the proposed
building. The Company expensed the $50,000 advanced to MYLO during the year ended December 31, 2014. On January 7, 2015, My Life
notified the Company that it was terminating the lease with the Company, claiming the Company has defaulted on certain provisions
of the lease.
On February
10, 2015, the Company executed a Revenue Participation Agreement with Genie Gateway, for the resale and use of a customized virtual
wallet and ecommerce platform to provide cashless merchant and payment services to the healthcare, wellness and unbanked merchants
nationally. The Company has not realized any revenues from the Agreement.
On March 23,
2015, the Company signed an operational and licensing agreement with Green Leaf Farms Holdings Inc. (“Green Leaf”)
an 80% owned subsidiary of Player's Network (PNTV) a fully reporting diversified company with holdings in two primary
areas, Media and Medical Marijuana. The five (5) year agreement provides for the Company to be the exclusive consultant regarding
the build out on behalf of Green Leaf of a 22,000 sq. ft. facility. Green Leaf presently holds two provisional or "MME"
licenses in North Las Vegas for both medicinal cannabis cultivation and production. Pursuant to the representations and terms
of the agreement the Company will provide consulting services and specialists related to grow and production, operational build
out, equipment lease financing, and an infrastructure funding commitment of up to one million dollars ($1,000,000). Under
the agreement, both Companies expect to complete an approximate 12,000 sq. foot cultivation operation as well as a commercial
extraction facility on behalf of Green Leaf. The Company will provide direct to manufacturer relationships with lighting, extraction
equipment, chillers and hydroponic equipment, edibles production as well as cultivation specialists. In addition to monthly consulting
fees once the facility is operational, the Company will receive licensing fees as the provider of vaporizers, cartridges and infused
edibles.
Note 2 – Summary of Significant
Account Policies
Basis of Presentation and Principles
of Consolidation
The accompanying condensed consolidated
financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to
present the financial position, results of operations and cash flows for the stated periods have been made. Except as described
below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included
in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be
read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto. Interim results
of operations for the three months ended March 31, 2015 are not necessarily indicative of future results for the full year. Certain
amounts from the 2014 period have been reclassified to conform to the presentation used in the current period.
The condensed consolidated unaudited
financial statements of the Company include the consolidated accounts of Agritek and its’
wholly owned subsidiaries AVHI and PPI. PPI, a Florida corporation, was originally formed on July 1, 2013 as The American Hemp
Trading Company, Inc. (“AHTC”) and on August 27, 2014, AHTC changed its’ name to PPI. All intercompany accounts
and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with an original term of three months or less to be cash equivalents.
Accounts Receivable
The Company records accounts receivable
from amounts due from its customers upon the shipment of products. The allowance for losses is established through a provision
for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability
is unlikely. The allowance is an amount that management believes will be adequate to absorb estimated losses on existing receivables,
based on evaluation of the collectability of the accounts and prior loss experience. While management uses the best information
available to make its evaluations, this estimate is susceptible to significant change in the near term. As of March 31, 2015, based
on the above criteria, the Company has an allowance for doubtful accounts of $43,408.
Inventory
Inventory consists of finished goods and is
valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially
obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts.
Deferred Financing Costs
The costs related to the issuance of debt are
capitalized and amortized to interest expense using the effective interest method through the maturities of the related debt.
Investment of Non-Marketable Securities
The Company’s investment in non-marketable
securities consist of cash investments in a less than 10% interest in privately held companies that provide merchant processing
services.
Property and Equipment
Property and equipment are
stated at cost, and except for land, depreciation is provided by use of a straight-line method over the estimated useful lives
of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances
indicate that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment are as
follows:
Furniture and equipment |
5 years |
The Company's property and equipment consisted of the following
at March 31, 2015 and December 31, 2014:
| |
2015 | |
2014 |
Land | |
$ | 354,269 | | |
$ | 354,269 | |
Furniture and equipment | |
| 13,829 | | |
| 13,829 | |
Accumulated depreciation | |
| (2,423 | ) | |
| (1,976 | ) |
Balance | |
$ | 365,675 | | |
$ | 366,122 | |
Depreciation expense of $447 and $203
was recorded for the three months ended March 31, 2015 and 2014, respectively.
Long-Lived Assets
Long-lived assets are reviewed
for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Revenue Recognition
The Company recognizes revenue in accordance
with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met: (1) persuasive evidence of an arrangement
exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably
assured. The Company recognizes revenue during the month in which products are shipped or commissions are earned. No revenue has
been recognized from leasing arrangements to date.
Fair Value of Financial Instruments
Fair value measurements are determined
under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair
value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of
the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant
assumptions developed based on the best information available in the circumstances (“unobservable inputs”).
Fair value is the price that would be
received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction
between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant
information generated by market transactions involving identical or comparable assets (“market approach”). The Company
also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with
normal activity to identify transactions that are not orderly.
The highest priority is given to unadjusted
quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level
3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement.
The three hierarchy levels are
defined as follows:
Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Credit risk adjustments are applied
to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent
with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed
in the credit default swap market.
The Company's financial instruments
consist primarily of cash, accounts receivable, notes receivable, accounts payable and accrued expenses, note payable and convertible
debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term
maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative
of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.
Income Taxes
The Company accounts for income taxes
in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future
tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
ASC 740-10 prescribes a recognition
threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on
recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.
Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed,
nor paid, any interest or penalties.
Uncertain tax positions are measured
and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may
be recognized or continue to be recognized. The Company’s tax years subsequent to 2005 remain subject to examination by federal
and state tax jurisdictions.
Earnings (Loss) Per Share
Earnings (loss) per share are computed
in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income
(loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common
stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number
of shares of common stock, common stock equivalents and other potentially dilutive securities, if any, outstanding during the period.
As of March 31, 2015 there were warrants to purchase 300,000 shares of common stock and the Company’s outstanding convertible
debt is convertible into approximately 103,000,000 shares of common stock These amounts are not included in the computation of
dilutive loss per share because their impact is antidilutive.
Accounting for Stock-based Compensation
The Company accounts for stock awards
issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier
of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the
date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective
measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in
which services are provided.
For the three months ended March 31,
2015 and March 31, 2014, the Company recorded stock and warrant based compensation of $16,484 and $25,000, respectively. (See Notes
7 and 8).
Use of Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amount of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Advertising
The Company records advertising costs
as incurred. For the three months ended March 31, 2015 and 2014, advertising expense was $7,543 and $1,000, respectively.
Note 3 – Recent Accounting Pronouncements
Accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption.
Note 4 – Impairment of Goodwill
On September
12, 2014, the Company completed the asset acquisition of the entire line of products, technology and customers of Dry Vapes
Holdings, Inc. (“Dry Vapes”). Dry Vapes is an importer, marketer and distributor of innovative vaporizers and accessories
with over 11,000 social network followers. Dry Vapes has historically sold its’ product under the logo DV on eBay and other
websites. The Company plans to develop a full line of products under the "Mont Blunt" brand name and market it to Brick
and Mortar smoke shops nationally in the upcoming months. The company will operate the business under PPI.
The Company recorded the acquisition
using the acquisition method, which requires the Company to record the acquired assets and assumed liabilities (if any) at their
acquisition date fair values and record any excess of the consideration given, including liabilities assumed (if any) over the
fair value of the assets acquired as goodwill. The acquired assets consisted solely of inventory. The Company determined the fair
value of the inventory acquired on a cost basis. The transaction resulted in the Company recording goodwill of $192,849. Based
on events and circumstances occurring during the three months ended March 31, 2015, the Company reviewed the carrying amount of
the goodwill, and determined that the carrying amount may not be recoverable and accordingly recognized an impairment loss of $192,849
for the three months ended March 31, 2015. The Company also recorded a reserve for inventory loss of $32,529 for the three months
ended March 31, 2015.
Note 5 – Sales Concentration
and Concentration of Credit Risk
Cash
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash. The Company maintains cash balances at one financial institution,
which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insured institution insures
up to $250,000 on account balances. The company maintains its’ cash balance at a large financial institution and has not
experienced any losses in such accounts.
Sales and Accounts Receivable
Following is a summary of customers
who accounted for more than ten percent (10%) of the Company’s revenues for the three months ended March 31, 2015 and 2014
and the accounts receivable balance as of March 31, 2015:
|
Customer | |
Sales % Three
Months Ended
March 31, 2014 | |
Sales % Three
Months Ended
March 31, 2015 | |
Accounts Receivable
Balance as of
March 31, 2015 |
| A | | |
| 42 | % | |
| — | | |
$ | — | |
| B | | |
| 20 | % | |
| — | | |
$ | — | |
| C | | |
| 18 | % | |
| — | | |
$ | — | |
| D | | |
| — | | |
| 70 | % | |
$ | — | |
| E | | |
| — | | |
| 22 | % | |
$ | 180 | |
Purchases
For the three months ended March 31,
2014, 100% of the Company’s purchases were from one vendor related to the purchase of our tobacco product line.
Note 6 – Convertible Debt
and Note Payable
2014 Convertible Note
In January 2014, the Company entered into a
Secured Promissory Note for $1,660,000 (the “2014 Company Note”) to Tonaquint, Inc. (“Tonaquint”) which includes a purchase price of $1,500,000 and transaction costs of $160,000. On January 31, 2014,
the Company received $300,000 of the purchase price. Tonaquint also issued to the Company 6 secured promissory notes, each in the
amount of $200,000 (the 2014 “Investor Notes”). All or any portion of the outstanding balance of the 2014 Investor
Notes may be prepaid, without penalty, along with accrued but unpaid interest at any time prior to maturity. The Company has no
obligation to pay Tonaquint any amounts on the unfunded portion of the 2014 Company Note. The 2014 Company Note bears interest
at 8% per annum (increases to 22% per annum upon an event of default) and is convertible into shares of the Company’s common
stock at Tonaquint’s option at a price of $0.55 per share, exercisable in seven tranches, consisting of a first tranche of
$340,000 of principal and any interest, fees costs or charges, and nine additional tranches of $220,000 each, plus any interest,
costs, fees or charges.
Beginning on the date that is nine (9) months
after the later of (i) the Issuance Date, and (ii) the date the Initial Cash Purchase Price is paid to the Company (the “Initial
Installment Date”), and on each applicable Installment Date thereafter, the Company is to pay the Holder, the applicable
Installment Amount due on such date. Ten Installment Amounts of $166,000 plus the sum of any accrued and unpaid interest, fees,
costs or charges may be made (a) in cash (a “Company Redemption”), (b) by converting such Installment Amount into shares
of Common Stock (a “Company Conversion”), or (c) by any combination of a Company Conversion and a Company Redemption
so long as the entire amount of such Installment Amount due shall be converted and/or redeemed by the Company on the applicable
Installment Date. The 2014 Company Note matures fifteen months after the Issuance Date.
During the year ended December 31, 2014,
the Company received an additional $800,000 of the purchase price and an additional $100,000 (including $17,609 of interest) during
the three months ended March 31, 2015. As of March 31, 2015, the balance of the purchase price of $317,609 is included in Notes
receivable on the unaudited condensed consolidated financial statements included herein, as well as $18,991 of interest receivable.
During the three months ended March 31, 2015, the Company recorded interest expense of $139,888 and increased accrued interest
expense by $139,888 for amounts due Tonaquint, pursuant to the 2014 Company Note. As of March 31, 2015, $960,630 of principal and
accrued interest of $226,491 is outstanding on the 2014 Company Note, and the principal amount is carried at $954,619, net of a
remaining note discount of $6,011.
During the three months ended March
31, 2015, the Company issued the following shares of common stock upon the conversions of portions of the 2014 Company Note:
Date | |
Principal
Conversion | |
Interest
Conversion | |
Total
Conversion | |
Conversion
Price | |
Shares
Issued |
| 1 /3/15 | |
$ | 65,460 | | |
$ | 9,540 | | |
$ | 75,000 | | |
$ | .045 | | |
| 1,665,445 | |
| 1 /28/15 | |
$ | 54,123 | | |
$ | 8,377 | | |
$ | 62,500 | | |
$ | .0334 | | |
| 1,869,190 | |
| 2 /20/15 | |
$ | 55,901 | | |
$ | 9,099 | | |
$ | 65,000 | | |
$ | .0244 | | |
| 2,668,309 | |
| 3 /13/15 | |
$ | 60,000 | | |
$ | — | | |
$ | 60,000 | | |
$ | .0244 | | |
| 2,463,054 | |
| 3 /31/15 | |
$ | 66,555 | | |
$ | 8,445 | | |
$ | 75,000 | | |
$ | .0125 | | |
| 5,985,634 | |
| | | |
$ | 302,039 | | |
$ | 35,461 | | |
$ | 337,500 | | |
| | | |
| 14,651,632 | |
2015 Convertible Notes
On March 2, 2015, the Company issued
a Convertible Promissory Note for $79,000 to Vis Vires Group (“Vis Vires”). The Company received net proceeds of $75,000
after debt issuance costs of $4,000 paid for lender legal fees. The Note matures November 25, 2015 and converts at a 39% discount
to the market price as defined in the Note.
On March 27, 2015, the Company issued
a Convertible Promissory Note for $27,000 to GW Holding Group, LLC. On March 31, 2015, the Company received net proceeds of $25,000
after debt issuance costs of $2,000 paid for lender legal fees. The Note matures March 27, 2016 and converts at a 42% discount
to the market price as defined in the Note.
March 27, 2015, the Company issued a
Convertible Promissory Note for $78,750 to LG Capital Funding, LLC. On March 30, 2015, the Company received net proceeds of $75,000
after debt issuance costs of $3,750 paid for lender legal fees. The Note matures March 27, 2016 and converts at a 42% discount
to the market price as defined in the Note.
The
debt issuance costs of $9,750 in the aggregate included in the 2015 Convertible Notes, will be amortized over the earlier of the
terms of the Note or any redemptions and accordingly $444 has been expensed
as debt issuance costs (included in interest expense) for the three months ended March 31, 2015. As
of March 31, 2015, $184,750 of principal and accrued interest of $527 is outstanding on the 2015 Convertible Notes, and the principal
amount is carried at $55,395, net of a remaining note discount of $129,355.
Among other terms the 2015 Notes are
due nine to twelve months from their issuance date, bearing interest at 8% per annum, payable in cash or shares at a conversion
price (the “Conversion Price”) for each share of common stock equal to 39% - 42% of the average of the lowest three
trading prices (as defined in the note agreements) per share of the Company’s common stock for the ten to eighteen trading
days immediately preceding the date of conversion. Upon the occurrence of an event of default, as defined in the 2015 Convertible
Notes, the Company was required to pay interest at 22% per annum and the holders could at their option declare a Note, together
with accrued and unpaid interest, to be immediately due and payable. In addition, the 2015 Convertible Notes provide for adjustments
for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock
for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where
there is a change in control of the Company.
The Company determined that the conversion
feature of the 2015 Convertible Notes represent an embedded derivative since the Notes are convertible into a variable number of
shares upon conversion. Accordingly, the 2015 Convertible Notes were not considered to be conventional debt under EITF 00-19 and
the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the
fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding
amount recorded as a discount to each Note. Such discount is being amortized from the date of issuance to the maturity dates of
the Notes. The change in the fair value of the liability for derivative contracts are recorded in other income or expenses in the
consolidated statements of operations at the end of each quarter, with the offset to the derivative liability on the balance sheet.
The embedded feature included in the 2015 Convertible Notes resulted in an initial debt discount and an initial derivative liability
of $135,746.
As
of March 31, 2015 the Company revalued the embedded conversion feature of the 2015 Convertible Notes. From the dates of issuance
of the 2015 Convertible Notes, the Company increased the derivative liability by $611 resulting in a derivative liability of $136,357.
The fair value of the 2015 Convertible Notes was calculated at March 31, 2015 based on the average historical effective discounts
to market over periods consistent with the terms of the related debt.
A summary of the derivative liability balance as of March
31, 2015 is as follows:
| |
2015 |
Beginning Balance | |
$ | — | |
Initial Derivative Liability | |
| 135,746 | |
Fair Value Change | |
| 611 | |
Ending Balance | |
$ | 136,357 | |
Note Payable
On March 18, 2014, in conjunction with
the land purchase of 80 acres in Pueblo County, Colorado, the Company paid $36,000 cash and entered into a promissory note in the
amount of $85,750. The promissory note is being amortized on the basis of five (5) years, with principal payments of $17,150 plus
interest at 3.5% due annually on December 1 of each year. Payments begin December 1, 2014, and shall be due on the first day of
each succeeding December, with any balance of principal and accrued interest due December 1, 2020. On March 4, 2015, and May 4,
2015, the Company paid $9,000 and $2,437, respectively, of the December 1, 2014 amount. The Company owes a balance of $8,150 of
the December 2014 amount due.
Note 7 – Related Party Transactions
Management Fees and Stock Compensation
Expense
Effective January 1, 2013, the Company
agreed to an annual compensation of $150,000 for its CEO, Mr. Michael Friedman (resigned March 20, 2015), and $96,000 for the CFO,
Mr. Barry Hollander. For 2014, the Company and the CFO agreed that up to $5,000 per month can be paid in cash and the balance in
restricted shares of common stock.
For the three months ended March 31,
2015 and 2014, the Company recorded expenses to its’ officers the following amounts included in Administrative and Management
Fees in the condensed consolidated statements of operations, included herein:
| |
March 31, | |
March 31 |
| |
2015 | |
2014 |
CEO | |
$ | 3,846 | | |
$ | — | |
Former CEO | |
| 37,500 | | |
| 37,500 | |
CFO | |
| 24,000 | | |
| 24,000 | |
Total | |
$ | 65,346 | | |
$ | 61,500 | |
As of March 31, 2015 and December 31,
2014, the Company owed to its’ officer the following amounts, included in deferred compensation on the Company’s condensed
consolidated balance sheet:
| |
March 31, | |
December 31, |
| |
2015 | |
2014 |
Former CEO | |
$ | 91,219 | | |
$ | 80,082 | |
CFO | |
| 10,730 | | |
| 1,579 | |
Total | |
$ | 101,949 | | |
$ | 81,661 | |
Effective March 20, 2015, Mr. Justin
Braune was named CEO and President. Mr. Braune also was appointed to the Board of Directors. B. Michael Friedman resigned his role
as CEO and also from the Board of Directors, and was named to the Advisory Board to the Company’s Board of Directors. The
Company agreed to an annual compensation of $100,000 for Mr. Braune in his role of CEO and Director of the company and to issue
Braune 15,000,000 shares of restricted common stock. For the three months ended March 31, 2015, the Company has included $3,846
for Mr. Braune’s salary in Administrative and Management Fees in the condensed consolidated statements of operations.
The shares of common stock will vest
as follows: 5,000,000, shares on the six month anniversary of the Agreement and 10,000,000 shares on the one year anniversary of
the Agreement. The Company valued the 15,000,000 shares of common stock at $300,000 ($0.02 per share, the market price of the common
stock) and recorded the $300,000 as deferred stock compensation in the equity section of the balance sheet, and will amortize the
deferred stock compensation as the shares of common stock vest. Accordingly, the Company has included $16.484 stock compensation
expense. The remaining $283,516 of deferred stock compensation will be expensed over the vesting period.
Amounts Due from 800 Commerce, Inc.
800 Commerce, Inc., a commonly controlled entity,
owed Agritek $267,369 and $236,759 as of March 31, 2015 and December 31, 2014, respectively, as a result of advances received from
or payments made by Agritek on behalf of 800 Commerce. These advances are non-interest bearing and are due on demand and are included
in Due from Related Party on the balance sheet herein.
Note 8 – Common and Preferred
Stock
Common Stock
During the three months ended March
31, 2015, the Company issued 14,651,632 shares of common stock in satisfaction of $337,500 of principal and accrued and unpaid
interest against the 2014 Company Note (see Note 6).
Warrants
On April 26, 2013 and in connection
with the appointment of Mr. James Canton to the Company’s advisory board, the Company issued a warrant to Mr. Canton to purchase
300,000 shares of common stock. The warrant has an exercise price of $0.50 per share, remains outstanding and expires April 26,
2016.
Note 9 – Income Taxes
Deferred income taxes reflect the net
tax effects of operating loss and tax credit carry forwards and temporary differences between carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
which temporary differences representing net future deductible amounts become deductible. Due to the uncertainty of the Company’s
ability to realize the benefit of the deferred tax assets, the deferred tax assets are fully offset by a valuation allowance at
March 31, 2015 and 2014.
As of March 31, 2015, the Company had
a tax net operating loss carry forward of approximately $2,681,000. Any unused portion of this carry forward expires in 2030. Utilization
of this loss may be limited in the event of an ownership change pursuant to IRS Section 382.
Note 10 – Commitments and Contingencies
Office Space
Effective April 1, 2014, the Company
has entered into a rent sharing agreement for the use of 1,300 square feet with a company controlled by the Company’s CFO.
The Company has agreed to pay $1,350 per month for the space.
In April 2014, the Company entered into
a ten year sublease agreement for the use of up to 7,500 square feet with a Colorado based
oncology clinical trial and drug testing company and facility presently doing cancer research and testing for established pharmaceutical
companies seeking FDA approval for new drugs. Pursuant to the lease as amended, the Company has agreed to pay $3,500 per
month for the space, and it will be utilized to market, sell and distribute products to Colorado dispensaries.
For the three months ended March 31,
2015 and 2014, the Company recorded rent expense of $15,129 and $1,929, respectively.
Leased Properties
On April 28, 2014,
the Company executed and closed a 10 year lease agreement for 20 acres of an agricultural farming facility located in South Florida
following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing low grade marijuana
specifically for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement the Company maintains
a first right of refusal to purchase the property for three years. The Company prepaid the first year lease amount of $24,000 and
has recorded $9,561 of expense (included in leased property expenses) for the three months ended March 31, 2015.
On July 11,
2014, the Company signed a ten year lease agreement for an additional 40 acres in
Pueblo, Colorado. The lease requires monthly rent payments of $10,000 during the first year and is subject to a 2% annual
increase over the life of the lease. The lease also provides rights to 50 acres of certain tenant water rights for $50,000
annually plus cost of approximately $2,400 annually. The Company paid the $50,000 in July 2014. The water rights ensure the
Company’s non-interruption of operations on behalf of new tenants qualified as fully registered and licensed grow and
manufacturing operations. The Company has recorded $45,350 of expense for the three months ended March 31, 2015 (included in
leased property expenses) related to the land and water rights. The Company is currently in default of the lease
agreement, as rents for March, April and May 2015 have not been paid.
Other
On March 2, 2015, the Company and the
Company’s CEO, at the time, and the Company’s CFO were named in a civil complaint filed by Erick Rodriguez, a former
officer of the Company, in the District Court in Clark County, Nevada. The complaint alleges that Mr. Rodriguez never received
250,000 shares of Series B preferred stock that were initially approved by the Board of Directors in 2012. Mr. Rodriguez resigned
in June 2013, and the Company cancelled the issuance of the shares to Mr. Rodriguez on the Company’s books and records.
On March 20, 2015, Montblanc-Simplo
GmbH (“Montblanc”) filed a Combined Notice of Opposition and Petition for Cancellation with the United States Patent
and Trademark Office. Montblanc believes that it will be damaged by the registration of the mark MONT BLUNT filed on April 26,
2014 in Application Serial No. 86/263,737 (the “Application”) and by the previously issued U.S. Registration NO. 4,608,789
(the “Registration”). The Company believes that the logos and product of Mont Blunt pursuant to the Registration and
Application significantly differ from Montblanc and accordingly does not believe it subjects Montblanc to any damages.
Note 11 – Going Concern
The accompanying condensed consolidated
financial statements have been prepared assuming the Company will continue as a going concern. As of March 31, 2015 the Company
had an accumulated deficit of $12,091,239 and working capital deficit of $873,367. These conditions
raise substantial doubt about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 12 – Subsequent Events
On
March 30, 2015, the Company issued a Convertible Promissory Note for $27,000 to Service Trading Company, LLC. On April 6,
2015, the Company received net proceeds of $25,000 after debt issuance costs of $2,000 paid for lender legal fees. The Note matures
March 30, 2016 and converts at a 42% discount to the market price as defined in the Note. As the proceeds were not received until
April 6, 2015, the Company has not included the resulting transaction on the Company’s balance sheet as of March 31, 2015,
presented herein.
On April 14, 2015, the Company appointed
Dr. Stephen Holt to the Advisory Board of the Board of Directors of the Company. The Company issued 5,000,000 shares of restricted
common stock to Dr. Holt for his appointment.
On May 5, 2015, the Company issued 6,008,171
shares of common stock to Tonaquint in satisfaction of $75,000 of principal and accrued and unpaid interest against the 2014 Company
Note.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
The following is management’s
discussion and analysis of certain significant factors that have affected our financial position and operating results during the
periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current
management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,”
“may,” “will,” “should,” “expect,” “intend,” “estimate,”
“continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other
reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which
speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto
for the years ended March 31, 2015 and 2014.
The independent auditor’s report
on our financial statements for the years ended December 31, 2014 and 2013 includes a “going concern” explanatory paragraph
that describes substantial doubt about our ability to continue as a going concern. Management’s plans in regard to the factors
prompting the explanatory paragraph are discussed below and also in Note 10 to the unaudited condensed financial statements.
While our financial statements are presented
on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business over a reasonable length of time, our auditor has raised substantial doubt about our ability to continue
as a going concern.
Results of Operations
For the three months ended March
31, 2015 compared to the three months ended March 31, 2014
Revenues
Revenues for the three months ended
March 31, 2015 and 2014 were $7,221 and $19,520, respectively, and were comprised of the following:
| |
Three months ended March 31, |
| |
2015 | |
2014 |
Wellness products | |
$ | 7,221 | | |
$ | 7,178 | |
Chillo products | |
| — | | |
| 12,342 | |
Total | |
$ | 7,221 | | |
$ | 19,520 | |
Operating Expenses
Operating expenses were $456,271 for
the three months ended March 31, 2015 compared to $163,594 for the three months ended March 31, 2014. The expenses were comprised
of:
| |
Three Months Ended March 31, |
Description | |
2015 | |
2014 |
Administration and management fees | |
$ | 81,209 | | |
$ | 71,431 | |
Stock compensation expense, management | |
| 16,484 | | |
| — | |
Stock compensation expense, other | |
| — | | |
| 25,000 | |
Professional and consulting fees | |
| 20,588 | | |
| 22,950 | |
Impairment of Goodwill | |
| 192,849 | | |
| — | |
Reserve for Inventory Loss | |
| 32,529 | | |
| — | |
Commissions and license fees | |
| — | | |
| 8,072 | |
Advertising and promotional expenses | |
| 7,543 | | |
| 1,000 | |
Rent and occupancy costs | |
| 15,129 | | |
| 1,929 | |
Leased property for sub-lease | |
| 54,911 | | |
| — | |
Travel and entertainment | |
| 15,046 | | |
| 17,727 | |
General and other administrative | |
| 19,983 | | |
| 15,485 | |
Total | |
$ | 456,271 | | |
$ | 163,594 | |
Stock compensation expense, management
was $16,484 for the three months ended March 31, 2015 compared to $0 for the three months ended March 31, 2014. The 2015 amount
is comprised of the amortization of restricted common stock issued to our new CEO.
Stock compensation expense, other (included
in professional and consulting fees) was $0 for the three months ended March 31, 2015 compared to $25,000 for the three months
ended March 31, 2014. The 2014 period is comprised of $25,000 to advisories to the board of directors for the issuance of 56,948
shares of common stock for services provided to the Company.
Professional and consulting fees (excluding
stock compensation expense, other) decreased to $20,588 for the three months ended March 31, 2015 compared to $22,950 for the three
months ended March 31, 2014 and is comprised of the following:
| |
Three Months Ended March 31, |
| |
2015 | |
2015 |
Legal fees | |
$ | 5,930 | | |
$ | 12,000 | |
Property management fees | |
| 10,000 | | |
| 2,500 | |
Accounting fees | |
| 2,958 | | |
| 6,200 | |
Investor relation costs | |
| 1,700 | | |
| 2,250 | |
| |
$ | 20,588 | | |
$ | 22,950 | |
Commission and licensing fees of $0
were incurred for three months ended March 31, 2015 compared to commissions of $8,072 for the three months ended March 31, 2014.
Advertising and promotional expenses
increased to $7,543 for the three months ended March 31, 2015 compared to $1,000 for the three months ended March 31, 2014. The
increase of $6,543 was primarily due the marketing of the Company’s Mont Blunt brand.
Rent and occupancy costs were $15,129
for the three months ended March 31, 2015 compared to $1,929 for the three months ended March 31, 2014. The increase was due primarily
to the Company entering into sublease agreement for the use of up to 7,500 square feet of office space that will be utilized to
market, sell and distribute products to Colorado dispensaries.
Leased property available for sub-lease
and property maintenance costs were $54,911 for the three months ended March 31, 2015 compared to $0 for the three months ended
March 31, 2014. These costs were comprised of $42,411 for leased real estate and $12,500 for water rights that the Company plans
to lease or sub-lease to licensed marijuana operators.
General and other administrative costs
for the three months ended March 31, 2015, were $19,983 compared to $15,485 for the three months ended March 31, 2014. Expenses
for the three months ended March 31, 2015, include property and other taxes of $7,684, filing and transfer agent fees of $2,080,
telephone, internet and web based service costs of $3,714, payroll taxes and fees of $1,773, office supply purchases of $1,052
and $3,680 of other general and administrative costs. Expenses for the 2014 period include public company filing and transfer agent
fees of $3,503, internet and web based service costs of $2,301, payroll taxes and fees of $2,071, office supply purchased of $2,604
and $5,006 of other general and administrative costs.
Other Income (Expense), Net
Other expense for the three months ended
March 31, 2015 was $307,858 compared to $70,368 for the three months ended March 31, 2014. Included in other expenses for the 2015
period was an expense from the increase on the fair value of derivatives of $611 and interest income of $7,646, offset by interest
expense of $314,893. Other expense for the 2014 period was income from the decrease on the fair value of derivatives of $30,347
and interest income of $10,740, offset by interest expense of $111,455.
A summary of interest expense for each
of the periods is as follows:
| |
Three months ended March 31, |
| |
2015 | |
2014 |
Excess value of common stock issued | |
$ | 149,782 | | |
$ | — | |
Interest on face value | |
| 22,490 | | |
| 15,566 | |
Additional true-up interest | |
| 117,926 | | |
| — | |
Amortization of note discount | |
| 23,135 | | |
| 54,055 | |
Amortization of OID | |
| — | | |
| 23,778 | |
Beneficial conversion feature | |
| — | | |
| 3,716 | |
Amortization of deferred financing fees | |
| 1,560 | | |
| 14,340 | |
Total | |
$ | 314,893 | | |
$ | 111,455 | |
Capital
Resources and Liquidity
Liquidity is the ability of an enterprise
to generate adequate amounts of cash to meet its needs for cash requirements. As of March 31, 2015, we had cash and cash equivalents
of $140,853, an increase of $22,424, from $118,429 as of December 31, 2014. At March 31, 2015, we had current liabilities of $1,626,702
compared to current assets of $778,635 which resulted in working capital deficit of $848,067. The current liabilities are comprised
of accounts payable, accrued expenses, convertible debt and notes payable.
Operating Activities
For the three months ended March 31,
2015, net cash used in operating activities was $195,356 compared to $122,405 for the three months ended March 31, 2014. The net
loss for the three months ended March 31, 2015 of $760,189 was impacted by the impairment of goodwill of $192,849, noncash interest
expense of $267,708 for excess value of common stock issued for convertible notes payable, the amortization of discounts on convertible
notes of $23,135 amortization of deferred stock compensation of $16,484. and the amortization of deferred financing fees of $1,560
related to the convertible promissory notes. Additional non-cash expenses for the three months ended March 31, 2015 was a reserve
for inventory loss of $32,529, the change in fair value of the derivative liability of $611 and depreciation expense of $447. Changes
in operating assets and liabilities utilizing cash included an increase in accounts receivable of $489 and the return of $90,000
on tenant deposits. Changes in operating assets and liabilities that reduced cash used in operating activities included an increase
in accounts payable and accrued expenses of $59,073, an increase in deferred compensation of $20,228 a decrease in prepaid assets
and other of $36,216 and a decrease in inventory of $4,422.
The net loss for the three months ended
March 31, 2014 was impacted by $25,000 for the 56,948 shares of common stock for services provided to the Company. Additional non-cash
expenses for the three months ended March 31, 2014 were the amortization of the initial discounts of $77,833 on the convertible
notes and amortization of deferred financing fees of $14,340 also related to the convertible promissory notes. These amounts were
offset by the change in the fair value of the derivatives of $30,347.
Investing Activities
During the three months ended March
31, 2015, net cash used in investing activities was $30,610 compared to $56,279 for the three months ended March 31, 2014. The
2015 period was the result of advances to a related party of $30,610. Net cash used in investing activity for the three months
ended March 31, 2014 was the result of land acquisition cost of $40,571 and advances to a related party of $15,708.
Financing Activities
Net cash provided by financing activities
was $248,390 and $492,000 for the three months ended March 31, 2015 and 2014, respectively. The
2015 activity was comprised of proceeds received related to the Tonaquint notes receivable of $82,390, the issuance of convertible
promissory notes of $175,000 and the payments made on notes payable of $9,000. The 2014 amount was comprised of proceeds received
from the issuance of convertible promissory notes of $300,000 and proceeds of $200,000 related to the Typenex note receivable and
the payment of deferred financing fees of $8,000.
We do not have cash and cash equivalents
on hand to meet our obligations. We presently maintain our daily operations and capital needs through the sale of our products
and financings available to us from our lender.
Off Balance Sheet Arrangements
We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations,
realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the accompanying unaudited
condensed consolidated financial statements, the Company had an accumulated deficit at March 31, 2015, a net loss and net cash
used in operating activities for the reporting period then ended. These conditions raise substantial doubt about its ability to
continue as a going concern.
The Company is attempting to produce
sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. While the
Company believes in the viability of its strategy to produce sufficient revenue and in its ability to raise additional funds, there
can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to
further implement its business plan and generate sufficient revenues and in its ability to raise additional funds.
The unaudited consolidated financial
statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Critical Accounting Policies
We have identified the following policies below as critical
to our business and results of operations. Our reported results are impacted by the application of the following accounting policies,
certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the
effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all
of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely
require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.
Basis of Presentation and Principles
of Consolidation
The accompanying condensed consolidated
financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to
present the financial position, results of operations and cash flows for the stated periods have been made. Except as described
below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included
in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. These condensed consolidated unaudited financial statements should be
read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto. Interim results
of operations for the three months ended March 31, 2015 are not necessarily indicative of future results for the full year. Certain
amounts from the 2014 period have been reclassified to conform to the presentation used in the current period.
The condensed consolidated unaudited financial statements
of the Company include the consolidated accounts of Agritek and its’ wholly owned subsidiaries
AVHI and PPI. PPI, a Florida corporation, was originally formed on July 1, 2013 as The American Hemp Trading Company, Inc. (“AHTC”)
and on August 27, 2014, AHTC changed its’ name to PPI. All intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with an original term of three months or less to be cash equivalents.
Accounts Receivable
The Company records accounts receivable
from amounts due from its customers upon the shipment of products. The allowance for losses is established through a provision
for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability
is unlikely. The allowance is an amount that management believes will be adequate to absorb estimated losses on existing receivables,
based on evaluation of the collectability of the accounts and prior loss experience. While management uses the best information
available to make its evaluations, this estimate is susceptible to significant change in the near term. As of March 31, 2015, based
on the above criteria, the Company has an allowance for doubtful accounts of $43,408.
Property and Equipment
Property and equipment are
stated at cost, and except for land, depreciation is provided by use of straight-line methods over the estimated useful lives of
the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate
that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment are as follows:
Furniture and equipment |
5 years |
The Company's property and equipment consisted of the following
at March 31, 2015 and December 31, 2014:
| |
2015 | |
2014 |
Land | |
$ | 354,269 | | |
$ | 354,269 | |
Furniture and equipment | |
| 13,829 | | |
| 13,829 | |
Accumulated depreciation | |
| (2,423 | ) | |
| (1,976 | ) |
Balance | |
$ | 365,675 | | |
$ | 366,122 | |
Depreciation expense of $447 and $203
was recorded for the three months ended March 31, 2015 and 2014, respectively.
Revenue Recognition
The Company recognizes revenue in accordance
with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met: (1) persuasive evidence of an arrangement
exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably
assured. The Company recognizes revenue during the month in which products are shipped or commissions are earned. No revenue has
been recognized from leasing arrangements to date.
Fair Value of Financial Instruments
Fair value measurements are determined
under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair
value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of
the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant
assumptions developed based on the best information available in the circumstances (“unobservable inputs”).
Fair value is the price that would be
received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction
between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant
information generated by market transactions involving identical or comparable assets (“market approach”). The Company
also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with
normal activity to identify transactions that are not orderly.
The highest priority is given to unadjusted
quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level
3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement.
The three hierarchy levels are
defined as follows:
Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Credit risk adjustments are applied
to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent
with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed
in the credit default swap market.
The Company's financial instruments
consist primarily of cash, accounts receivable, notes receivable, accounts payable and accrued expenses, note payable and convertible
debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term
maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative
of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.
Earnings (Loss) Per Share
Earnings (loss) per share are computed
in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income
(loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common
stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number
of shares of common stock, common stock equivalents and other potentially dilutive securities, if any, outstanding during the period.
As of March 31, 2015 there were warrants to purchase 300,000 shares of common stock and the Company’s outstanding convertible
debt is convertible into approximately 103,000,000 shares of common stock These amounts are not included in the computation of
dilutive loss per share because their impact is antidilutive.
Accounting for Stock-based Compensation
The Company accounts for stock awards
issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier
of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the
date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective
measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in
which services are provided.
For the three months ended March 31,
2015 and March 31, 2014, the Company recorded stock and warrant based compensation of $16,484 and $25,000, respectively. (See Notes
7 and 8).
Item 3. Quantitative
and Qualitative Disclosures about Market Risk
Not applicable to smaller reporting
companies.
Item 4. Evaluation of Disclosure
Controls and Procedures
We maintain disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required
to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified
in the rules and forms of the SEC. This information is accumulated to allow our management to make timely decisions regarding required
disclosure. Our President, who serves as our principal executive officer and principal financial officer, evaluated the effectiveness
of our disclosure controls and procedures as of the end of the period covered by this report and he determined that our disclosure
controls and procedures were not effective due to a control deficiency. During the period we did not have additional personnel
to allow segregation of duties to ensure the completeness or accuracy of our information. Due to the size and operations of the
Company, we are unable to remediate this deficiency until we acquire or merge with another company.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s
internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15
or 15d-15 of the Exchange Act that occurred during the quarter ended March 31, 2015 that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Item 1. Legal
Proceedings
We are not a party to any material litigation, nor, to the
knowledge of management, is any litigation threatened against us that may materially affect us.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2
of the Securities Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
On January 3, 2015, the Company issued
1,665,445 shares of common stock upon the conversion of $75,000 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.045 per share.
On January 28, 2015, the Company issued
1,869,190 shares of common stock upon the conversion of $62,500 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.0334 per share.
On February 10, 2015, the Company issued
2,668,309 shares of common stock upon the conversion of $65,000 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.0244 per share.
On March 13, 2015, the Company issued
2,463,054 shares of common stock upon the conversion of $60,000 of principal on the 2014 Company Note. The shares were issued at
approximately $0.0334 per share.
On March 20, 2015, the Company issued
15,000,000 shares of common stock to Justin Braune in connection with an employment and board of directors agreement naming Mr.
Braune as Chief Executive Officer, President and a member of our Board of Directors. The shares of common stock will vest as follows:
5,000,000, shares on the six month anniversary of the Agreement and 10,000,000 shares on the one year anniversary of the Agreement.
On March 31, 2015, the Company issued
5,985,634 shares of common stock upon the conversion of $75,000 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.0125 per share.
Item 3. Defaults upon Senior Securities
None.
Item
4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Convertible Debenture Proceeds
On March 2, 2015, the Company received
net proceeds of $75,000 in exchange for 8% interest bearing unsecured convertible promissory note dated February 23, 2015, with
a face value of $79,000 to Vis Vires Group (“Vis Vires”), which matures on November 25, 2015. Principal and interest
due on the note is convertible into shares of common stock at a 39% discount to the average of the lowest 3 closing bid prices
for the 10 days preceding conversion. The note includes prepayment cash redemption penalties between 15% and 35% of outstanding
principal and interest, and the debt holder is limited to owning 9.99% of the Company’s issued and outstanding shares. The
Company must at all times reserve at least eight times the number of shares required for full conversion of the note and interest.
On March 30, 2015, the Company
received proceeds of $75,000 in exchange for an 8% interest bearing unsecured convertible promissory note dated March 27, 2015,
with a face value of $78,750 to LG Capital Funding, LLC. The Note matures March 27, 2016. Principal and interest due on the note
is convertible into shares of common stock at a 42% discount to the lowest closing bid price for the 18 prior trading days including
the conversion date. The note includes prepayment cash redemption penalties between 18% and 48% of outstanding principal and interest,
and the debt holder is limited to owning 9.9% of the Company’s issued and outstanding shares. The Company must at all times
reserve 27,851,000 shares of common stock for potential conversions.
On March 31, 2015, the Company
received net proceeds of $25,000 in exchange for an 8% interest bearing unsecured convertible promissory note dated March 30, 2015,
with a face value of $27,000 to GW Holding Group, LLC. The Note matures March 30, 2016. Principal and interest due on the note
is convertible into shares of common stock at a 42% discount to the lowest closing bid price for the 18 prior trading days including
the conversion date. The note includes prepayment cash redemption penalties between 18% and 48% of outstanding principal and interest,
and the debt holder is limited to owning 9.9% of the Company’s issued and outstanding shares. The Company must at all times
reserve 9,310,000 shares of common stock for potential conversions.
Common Stock Issuances for Debt Conversions
On January 3, 2015, the Company issued
1,665,445 shares of common stock upon the conversion of $75,000 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.045 per share.
On January 28, 2015, the Company issued
1,869,190 shares of common stock upon the conversion of $62,500 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.0334 per share.
On February 10, 2015, the Company issued
2,668,309 shares of common stock upon the conversion of $65,000 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.0244 per share.
On March 13, 2015, the Company issued
2,463,054 shares of common stock upon the conversion of $60,000 of principal on the 2014 Company Note. The shares were issued at
approximately $0.0334 per share.
On March 31, 2015, the Company issued
5,985,634 shares of common stock upon the conversion of $75,000 of principal and accrued and unpaid interest on the 2014 Company
Note. The shares were issued at approximately $0.0125 per share.
Item 6. Exhibits
Exhibit
No. |
|
Description
of Exhibit |
10.1* |
|
Form of Convertible Promissory Note by and between Agritek Holdings, Inc. and Vis Vires Group, Inc. dated February 23, 2015. |
10.2* |
|
Form of 8% Convertible Redeemable Note by and between Agritek Holdings, Inc. and LG Capital Funding, LLC dated March 27, 2015. |
10.3* |
|
Form of 8% Convertible Redeemable Note by and between Agritek Holdings, Inc. and GW Holding Group, LLC dated March 30, 2015. |
10.4+ |
|
Employment and Board of Directors Agreement effective March 20, 2015 by and between Agritek Holdings, Inc. and Justin Braune (Incorporated herein by reference to Exhibit 10.1 as filed on Form 8-K with the SEC on March 20, 2015). |
31.1* |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
31.2* |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer |
32.1* |
|
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |
101.INS* |
|
XBRL Instance |
101.SCH* |
|
XBRL Taxonomy Extension Schema |
101.CAL* |
|
XBRL Taxonomy Extension Calculation Linkbase |
101.DEF* |
|
XBRL Taxonomy Extension Definition Linkbase |
101.LAB* |
|
XBRL Taxonomy Extension Labels Linkbase |
101.PRE* |
|
XBRL Taxonomy Extension Presentation Linkbase |
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 18, 2015
AGRITEK HOLDINGS, INC.
By: /s/ Justin
Braune
Justin Braune
Chief Executive Officer (principal executive
officer)
By: /s/ Barry Hollander
Barry Hollander
Chief Financial Officer (principal financial
and accounting officer)
24
EXHIBIT
10.1
NEITHER
THE ISSUANCE
AND SALE
OF THE
SECURITIES
REPRESENTED
BY THIS CERTIFICATE
NOR THE
SECURITIES
INTO WHICH THESE
SECURITIES
ARE CONVERTIBLE
HAVE BEEN
REGISTERED
UNDER THE
SECURITIES
ACT OF 1933, AS AMENDED,
OR APPLICABLE
STATE
SECURITIES
LAWS.
THE SECURITIES
MAY NOT BE
OFFERED
FOR SALE,
SOLD,
TRANSFERRED
OR ASSIGNED
(I) IN
THE ABSENCE
OF (A) AN
EFFECTIVE
REGISTRATION
STATEMENT
FOR THE
SECURITIES
UNDER THE
SECURITIES
ACT OF 1933, AS
AMENDED,
OR (B)
AN OPINION OF
COUNSEL
(WHICH COUNSEL
SHALL BE
SELECTED
BY THE
HOLDER),
IN A GENERALLY
ACCEPTABLE
FORM,
THAT REGISTRATION
IS NOT REQUIRED
UNDER SAID ACT
OR (II) UNLESS
SOLD PURSUANT
TO RULE 144 OR RULE
144A UNDER SAID ACT.
NOTWITHSTANDING
THE FOREGOING,
THE SECURITIES
MAY BE
PLEDGED
IN CONNECTION WITH
A BONA FIDE
MARGIN
ACCOUNT OR OTHER
LOAN OR FINANCING
ARRANGEMENT
SECURED BY
THE SECURITIES.
Principal Amount: $79,000.00 |
Issue
Date: February 23, 2015 |
Purchase Price: $79,000.00 |
|
CONVERTIBLE
PROMISSORY
NOTE
FOR
VALUE RECEIVED, AGRITEK
HOLDINGS,
INC., a Delaware
corporation
(hereinafter
called
the “Borrower”),
hereby
promises
to pay to
the order
VIS VIRES
GROUP,
INC., a New
York corporation,
or registered
assigns
(the “Holder”)
the sum of
$79,000.00 together
with any
interest
as set
forth
herein, on
November
25, 2015 (the
“Maturity
Date”),
and to pay
interest
on the unpaid
principal
balance
hereof at
the rate of eight
percent (8%)
(the “Interest
Rate”)
per annum
from the date
hereof
(the “Issue
Date”)
until the same becomes
due and payable,
whether
at maturity
or upon
acceleration
or by
prepayment
or otherwise.
This Note may not be prepaid
in whole or in part except
as otherwise explicitly
set forth
herein.
Any amount
of principal
or interest
on this Note which
is not paid
when due shall
bear interest
at the rate
of twenty
two percent
(22%)
per annum
from
the due date
thereof until
the same
is paid (“Default
Interest”).
Interest
shall commence
accruing
on the date
that the
Note is fully
paid and
shall be computed
on the
basis of
a 365-day
year and
the actual
number of
days elapsed.
All payments
due hereunder
(to the extent
not converted
into common
stock, $0.0001
par value
per share
(the “Common
Stock”)
in accordance
with the terms hereof)
shall be made in lawful
money of the United
States
of America.
All payments
shall be made at
such address
as the Holder
shall hereafter
give to the
Borrower
by written
notice made
in accordance
with the provisions
of this Note.
Whenever
any amount
expressed
to be due
by the terms
of this Note
is due on any
day
which is
not a business
day, the
same shall
instead be
due on
the next
succeeding
day which
is a business
day and,
in the case
of any
interest payment
date
which
is not the
date on
which this Note is paid
in full, the
extension
of the
due date
thereof shall
not be taken
into account for
purposes
of determining
the amount
of interest
due on such
date. As
used in
this Note, the
term “business
day” shall
mean any
day
other
than a Saturday,
Sunday
or a day
on which commercial
banks in the city
of New York,
New York
are authorized
or required
by law
or executive
order to remain
closed. Each
capitalized
term used herein,
and not otherwise defined,
shall have
the meaning
ascribed
thereto
in that
certain
Securities
Purchase
Agreement
dated
the date
hereof,
pursuant to
which this
Note was
originally
issued
(the “Purchase
Agreement”).
This
Note is free
from all
taxes,
liens, claims
and encumbrances
with respect
to the issue
thereof and
shall not
be subject
to preemptive
rights
or other similar rights
of shareholders
of the Borrower
and will not impose personal
liability
upon the holder
thereof.
The
following terms
shall apply
to this Note:
ARTICLE
I. CONVERSION
RIGHTS
1.1
Conversion
Right.
The Holder
shall have
the right
from time
to time,
and
at any
time during
the period
beginning
on the date
which is
one hundred
eighty
(180) days
following the date
of this Note
and ending
on the later
of: (i)
the Maturity
Date and
(ii) the
date of payment
of the Default
Amount (as
defined
in Article
III) pursuant
to Section
1.6(a) or
Article III,
each
in respect
of the
remaining
outstanding
principal
amount of
this Note to
convert
all or any
part
of the outstanding
and unpaid
principal
amount of
this Note into
fully paid
and non-
assessable
shares
of Common
Stock,
as such
Common Stock
exists on the
Issue Date,
or any
shares of
capital
stock or
other securities
of the Borrower
into which
such Common
Stock
shall hereafter
be changed
or reclassified
at the conversion
price
(the “Conversion
Price”)
determined
as provided
herein
(a “Conversion”);
provided,
however,
that in
no event
shall the Holder
be entitled
to convert
any
portion
of this Note
in excess
of that
portion of
this Note upon
conversion
of which the sum of (1)
the number of
shares of Common
Stock beneficially
owned by the
Holder and
its affiliates
(other
than shares
of Common
Stock
which may
be deemed
beneficially
owned through
the ownership
of the unconverted
portion of the Notes
or the unexercised
or unconverted
portion of any
other security
of the Borrower
subject to a
limitation on conversion
or exercise
analogous
to the
limitations contained
herein) and
(2) the
number of
shares of Common
Stock issuable
upon the conversion
of the portion of this Note with respect
to which the
determination
of this
proviso is
being made,
would result
in beneficial
ownership by
the Holder and
its affiliates
of more
than 9.99%
of the
outstanding shares
of Common
Stock. For
purposes
of the proviso
to the immediately
preceding
sentence,
beneficial
ownership shall
be determined
in accordance
with Section
13(d) of the Securities
Exchange
Act
of 1934, as amended
(the “Exchange
Act”),
and
Regulations
13D-G
thereunder,
except
as
otherwise provided
in clause
(1)
of such
proviso, provided,
further,
however,
that the limitations
on conversion
may be waived
by the
Holder upon,
at the
election
of the Holder,
not less
than 61 days’
prior notice to
the Borrower,
and the provisions
of the conversion
limitation
shall continue
to apply until
such 61st
day (or
such later
date,
as determined
by the Holder,
as may
be specified
in such
notice of waiver).
The number of
shares
of Common
Stock
to be issued upon
each
conversion
of this Note
shall be
determined
by dividing the Conversion
Amount (as
defined below)
by the applicable
Conversion
Price
then in
effect on
the date
specified
in the notice
of conversion, in the
form attached
hereto as
Exhibit A (the
“Notice
of Conversion”),
delivered
to the Borrower
by the
Holder
in accordance
with Section
1.4 below;
provided
that the Notice
of Conversion
is submitted
by facsimile
or e-mail (or
by other means
resulting
in, or reasonably
expected
to result
in, notice)
to the Borrower
before
6:00 p.m., New
York, New
York time on such
conversion
date (the
“Conversion
Date”).
The term “Conversion
Amount” means, with respect
to any
conversion
of this Note,
the sum of
(1) the
principal
amount
of this Note
to be converted
in such
conversion
plus (2) at
the Holder’s
option, accrued
and unpaid
interest, if any,
on such
principal
amount
at the interest
rates
provided
in this Note to
the Conversion
Date,
plus (3) at
the Holder’s
option, Default
Interest,
if any,
on the amounts
referred
to in the immediately
preceding
clauses
(1) and/or
(2) plus
(4) at
the Holder’s
option, any
amounts
owed to
the Holder pursuant
to Sections 1.3 and
1.4(g)
hereof.
1.2
Conversion Price.
(a)
Calculation
of Conversion
Price.
The conversion
price
(the “Conversion
Price”)
shall equal
the Variable Conversion
Price
(as defined
herein) (subject
to equitable adjustments
for stock
splits, stock
dividends
or rights
offerings
by
the Borrower
relating
to the Borrower’s
securities
or the securities
of any
subsidiary of
the Borrower,
combinations,
recapitalization,
reclassifications,
extraordinary
distributions and
similar events).
The "Variable
Conversion
Price"
shall
mean 61%
multiplied by
the Market
Price
(as
defined herein)
(representing
a discount
rate of
39%). “Market
Price”
means the
average
of the lowest
three (3)
Trading
Prices
(as defined
below)
for the
Common Stock
during
the ten
(10) Trading
Day period
ending
on the
latest
complete
Trading
Day prior
to the Conversion
Date.
“Trading
Price”
means,
for any
security
as of
any date,
the closing
bid price
on the Over-the-Counter
Bulletin
Board,
Pink
Sheets
electronic
quotation
system
or applicable
trading
market
(the “OTC”)
as reported
by a reliable
reporting
service
(“Reporting
Service”)
designated
by the Holder
(i.e.
Bloomberg)
or, if
the OTC is
not the principal
trading market
for such
security,
the closing
bid price
of such
security
on the principal
securities
exchange
or trading
market
where such
security
is listed or traded
or, if no closing bid price
of such security
is available
in any
of the foregoing
manners,
the average
of the closing
bid prices
of any
market
makers
for such
security
that are
listed in
the “pink
sheets”.
If the
Trading
Price
cannot be
calculated
for
such security
on such
date in
the manner
provided
above,
the Trading
Price
shall
be the fair
market
value as
mutually determined
by the Borrower
and the
holders of
a majority
in interest
of the Notes
being
converted
for which
the calculation
of the Trading
Price
is required
in order
to determine the
Conversion
Price
of such
Notes. “Trading
Day”
shall
mean any
day on
which the Common
Stock
is tradable
for any
period
on the OTC,
or on the
principal
securities
exchange
or other
securities
market
on which the
Common Stock
is then being
traded.
(b)
Conversion Price
During
Major
Announcements.
Notwithstanding anything
contained
in Section
1.2(a) to
the contrary,
in the event
the Borrower
(i) makes
a public announcement
that it
intends
to consolidate
or merge
with any
other corporation
(other than
a merger
in which
the Borrower
is the surviving
or continuing corporation
and its
capital
stock is unchanged)
or sell
or transfer
all or
substantially all
of the assets
of the Borrower
or (ii)
any person,
group
or entity
(including
the Borrower)
publicly
announces
a tender
offer
to purchase
50% or more
of the
Borrower’s
Common Stock
(or any
other takeover
scheme)
(the date
of the announcement
referred
to in clause
(i) or
(ii) is
hereinafter
referred
to as
the “Announcement
Date”),
then the Conversion
Price
shall, effective
upon the Announcement
Date and
continuing through
the Adjusted Conversion
Price
Termination
Date (as
defined
below),
be equal
to the lower of
(x) the Conversion
Price
which would
have been
applicable
for a
Conversion
occurring
on the Announcement
Date and
(y) the Conversion
Price
that would
otherwise be in
effect. From
and after
the Adjusted Conversion
Price
Termination
Date,
the Conversion
Price
shall be determined
as set
forth
in this Section
1.2(a). For purposes
hereof,
“Adjusted
Conversion
Price Termination
Date”
shall
mean, with
respect
to any proposed
transaction
or tender
offer
(or takeover
scheme)
for which
a public announcement
as contemplated
by this
Section
1.2(b) has
been made,
the date upon
which the Borrower
(in
the case of clause
(i) above)
or the person, group
or entity
(in the
case of
clause
(ii) above)
consummates
or publicly
announces
the termination
or abandonment
of the proposed
transaction
or tender
offer
(or takeover
scheme)
which caused
this Section
1.2(b) to become
operative.
1.3
Authorized
Shares.
The Borrower
covenants
that
during
the period
the conversion
right
exists,
the Borrower
will reserve
from its
authorized
and unissued
Common Stock
a sufficient
number of shares,
free
from preemptive
rights,
to provide for
the issuance of Common
Stock upon the
full conversion of
this Note issued
pursuant to the
Purchase
Agreement.
The Borrower
is required
at all
times
to have
authorized
and reserved
eight
times the number
of shares that
is actually
issuable upon
full conversion
of the Note (based
on the Conversion
Price
of the Notes in effect
from time to time)(the
“Reserved
Amount”). The Reserved
Amount shall be increased
from time to
time in accordance
with the Borrower’s
obligations
hereunder.
The Borrower
represents
that upon issuance,
such shares
will be duly and validly
issued, fully
paid and
non-assessable.
In addition,
if the Borrower
shall
issue any
securities
or make
any change
to its capital
structure
which would
change
the number
of shares
of Common Stock
into which the Notes
shall be
convertible
at the then
current
Conversion
Price,
the Borrower
shall at
the same time make
proper
provision
so that
thereafter
there shall
be a sufficient
number of
shares
of Common Stock
authorized
and reserved,
free
from
preemptive rights,
for conversion
of the outstanding Notes.
The Borrower
(i) acknowledges
that it
has irrevocably
instructed
its transfer
agent to issue certificates
for the Common Stock
issuable upon conversion
of this Note, and (ii)
agrees
that its issuance
of this Note shall constitute full
authority
to its officers and
agents
who are
charged
with the duty
of executing
stock certificates
to execute
and issue the necessary
certificates
for shares
of Common Stock
in accordance
with the terms and conditions
of this Note.
If,
at any
time the Borrower
does not
maintain
the Reserved
Amount it will
be considered
an Event of
Default under
Section 3.2 of
the Note.
1.4
Method of Conversion.
(a)
Mechanics
of Conversion.
Subject
to Section
1.1, this
Note may
be converted
by the
Holder in
whole or in
part at
any time
from time
to time after
the Issue
Date,
by (A)
submitting to the Borrower
a Notice of Conversion
(by
facsimile,
e-mail
or other reasonable
means of communication
dispatched
on the Conversion
Date prior to
6:00 p.m., New
York, New
York time)
and (B)
subject
to Section
1.4(b),
surrendering
this Note at the principal
office of the Borrower.
(b)
Surrender
of Note
Upon Conversion.
Notwithstanding anything
to the contrary
set forth
herein, upon
conversion
of this Note
in accordance
with the terms
hereof,
the Holder shall
not be required
to physically
surrender
this Note to
the Borrower
unless the
entire unpaid
principal
amount of
this Note is
so converted.
The Holder
and
the Borrower
shall maintain
records
showing the
principal
amount so converted
and the dates
of such
conversions
or shall use
such other
method,
reasonably
satisfactory
to the Holder
and the
Borrower,
so as not
to require
physical
surrender
of this Note
upon each
such conversion.
In the
event of
any
dispute or discrepancy,
such records
of the Borrower
shall, prima
facie,
be controlling
and determinative
in the absence
of manifest
error. Notwithstanding
the foregoing,
if any
portion of
this Note is converted
as aforesaid,
the Holder
may not transfer
this Note unless
the Holder
first
physically
surrenders
this Note to the
Borrower,
whereupon
the Borrower
will forthwith
issue and
deliver upon
the order
of the Holder
a new Note of
like tenor,
registered
as the Holder
(upon payment
by the Holder
of any
applicable
transfer
taxes)
may request,
representing
in the aggregate
the remaining
unpaid principal
amount of
this Note. The
Holder and
any assignee,
by acceptance
of this Note,
acknowledge
and agree
that, by reason
of the provisions
of this paragraph,
following conversion
of a portion
of this Note,
the unpaid
and unconverted
principal
amount of
this Note represented
by this Note
may be
less than the
amount stated
on the face
hereof.
(c)
Payment
of Taxes.
The Borrower
shall not
be required
to pay
any tax
which may
be payable
in respect
of any
transfer
involved in
the issue and
delivery
of shares
of Common
Stock
or other
securities
or property
on conversion of
this Note
in a name
other than
that of the
Holder (or
in street
name),
and the
Borrower
shall not
be required
to issue or
deliver any
such shares
or other
securities
or property
unless
and until
the person
or persons (other
than the Holder
or the custodian
in whose street
name such
shares are
to be held
for the Holder’s account)
requesting
the issuance
thereof shall
have paid to the Borrower
the amount of any
such tax
or shall have
established
to the satisfaction
of the Borrower
that such
tax has
been paid.
(d)
Delivery
of Common
Stock
Upon Conversion.
Upon receipt
by the Borrower
from the
Holder of
a facsimile
transmission
or e-mail
(or other
reasonable
means
of communication)
of a Notice
of Conversion
meeting
the requirements
for conversion
as provided
in this Section
1.4, the Borrower
shall issue and
deliver
or cause to
be issued
and delivered
to or upon the
order
of the Holder
certificates
for
the Common
Stock
issuable upon such
conversion within
three (3)
business
days
after
such receipt
(the “Deadline”)
(and, solely
in the case
of conversion
of the entire
unpaid principal
amount hereof,
surrender
of this Note)
in accordance
with the terms hereof
and the
Purchase
Agreement.
(e)
Obligation
of Borrower
to Deliver
Common Stock.
Upon receipt
by the Borrower
of a Notice
of Conversion,
the Holder shall
be deemed
to be the holder
of record
of the Common Stock
issuable upon
such conversion,
the outstanding
principal
amount and
the amount
of accrued
and unpaid
interest on
this Note shall
be reduced
to reflect
such conversion,
and, unless
the Borrower
defaults on
its obligations
under this Article
I, all
rights
with respect
to the portion
of this Note being
so converted
shall
forthwith
terminate except
the right
to receive
the Common
Stock or other
securities,
cash or
other assets,
as herein
provided,
on such conversion.
If the Holder shall
have given
a Notice of Conversion
as provided
herein, the Borrower’s
obligation to issue and deliver
the certificates
for Common
Stock shall
be absolute and
unconditional,
irrespective
of the absence
of any action
by the Holder
to enforce
the same,
any waiver
or consent with respect
to any provision
thereof, the recovery
of any judgment
against
any person
or any
action
to enforce
the same,
any
failure
or delay
in the enforcement
of any other
obligation
of the
Borrower
to the
holder of
record,
or any
setoff,
counterclaim,
recoupment,
limitation or
termination,
or any
breach
or alleged
breach
by the Holder
of any obligation
to the Borrower,
and irrespective
of any other
circumstance
which
might otherwise
limit such
obligation
of the Borrower
to the Holder
in connection
with such
conversion.
The Conversion
Date specified
in the Notice
of Conversion
shall be
the Conversion
Date so
long as the Notice of Conversion
is received by
the Borrower
before
6:00 p.m., New York, New
York time, on such
date.
(f)
Delivery
of Common
Stock
by
Electronic
Transfer.
In
lieu of delivering
physical
certificates
representing
the Common
Stock
issuable upon
conversion, provided
the Borrower
is participating
in the
Depository Trust
Company
(“DTC”)
Fast Automated
Securities
Transfer
(“FAST”)
program,
upon request
of the Holder
and its compliance
with the provisions
contained
in Section
1.1 and
in this Section
1.4, the Borrower
shall use its
best efforts
to cause its
transfer agent
to electronically
transmit
the Common
Stock issuable
upon conversion
to the Holder
by crediting
the account
of Holder’s
Prime
Broker
with DTC through
its Deposit Withdrawal
Agent Commission (“DWAC”)
system.
(g)
Failure to
Deliver Common
Stock
Prior to Deadline.
Without
in any
way limiting
the Holder’s
right to pursue
other remedies,
including
actual
damages
and/or equitable
relief,
the parties
agree
that if
delivery
of the Common Stock
issuable
upon conversion
of this Note
is not delivered
by the Deadline
(other
than a
failure
due to
the circumstances
described
in Section
1.3 above,
which
failure
shall
be governed
by such
Section)
the Borrower
shall pay
to the Holder
$2,000 per
day in
cash,
for each
day beyond
the Deadline
that the Borrower
fails
to deliver
such Common
Stock.
Such
cash amount
shall be paid
to Holder
by the fifth
day of
the month following
the month in
which it
has accrued
or, at
the option
of the Holder
(by
written
notice to
the Borrower
by the
first
day of
the month
following the
month in which
it has accrued),
shall
be added
to the principal
amount
of this Note,
in which
event
interest
shall accrue
thereon in
accordance
with the terms
of this Note and
such additional
principal
amount shall
be convertible
into Common
Stock
in accordance
with the
terms of
this Note.
The Borrower
agrees
that the right
to convert
is a valuable
right to the
Holder. The
damages
resulting from
a failure,
attempt
to frustrate,
interference
with such
conversion
right
are difficult
if not impossible to qualify.
Accordingly
the parties
acknowledge
that
the liquidated
damages
provision contained
in this Section 1.4(g)
are justified.
1.5
Concerning
the Shares.
The shares
of Common
Stock
issuable
upon conversion
of this Note
may not
be sold or
transferred
unless (i)
such shares
are
sold pursuant
to an effective
registration
statement
under the Act
or (ii) the Borrower
or its transfer
agent
shall have been
furnished
with an
opinion of counsel
(which
opinion shall
be in form,
substance
and scope
customary
for opinions
of counsel
in comparable
transactions)
to the effect
that the
shares to be
sold or transferred
may be sold
or transferred
pursuant
to an exemption
from such
registration
or (iii) such
shares are sold
or transferred
pursuant to
Rule 144
under the Act (or
a successor rule)
(“Rule 144”)
or (iv) such
shares
are transferred
to an
“affiliate”
(as defined
in Rule 144) of the Borrower
who agrees
to sell or otherwise
transfer
the shares
only in accordance
with this Section
1.5 and who
is an
Accredited
Investor
(as defined
in the Purchase
Agreement).
Except
as otherwise
provided
in the Purchase
Agreement
(and subject
to the removal
provisions set
forth
below),
until such
time as the
shares
of Common
Stock issuable
upon conversion
of this Note
have been
registered
under the Act
or otherwise
may be sold pursuant
to Rule
144 without any
restriction
as to
the number
of securities
as of
a particular
date that
can
then be
immediately
sold, each
certificate
for shares
of Common
Stock issuable
upon conversion
of this Note that
has not been so
included in
an effective
registration
statement
or that has not been
sold pursuant to an
effective
registration
statement
or an exemption
that permits
removal
of the legend,
shall bear
a legend
substantially
in the following form,
as appropriate:
“NEITHER
THE ISSUANCE
AND SALE
OF THE
SECURITIES
REPRESENTED
BY THIS
CERTIFICATE
NOR
THE SECURITIES
INTO WHICH
THESE
SECURITIES
ARE EXERCISABLE
HAVE BEEN
REGISTERED UNDER
THE SECURITIES
ACT OF
1933,
AS AMENDED,
OR APPLICABLE
STATE SECURITIES
LAWS. THE
SECURITIES
MAY NOT
BE OFFERED
FOR SALE,
SOLD,
TRANSFERRED
OR ASSIGNED
(I)
IN THE
ABSENCE
OF (A)
AN EFFECTIVE
REGISTRATION
STATEMENT
FOR THE
SECURITIES
UNDER THE
SECURITIES
ACT OF
1933, AS AMENDED,
OR (B)
AN OPINION
OF COUNSEL
(WHICH
COUNSEL
SHALL BE
SELECTED
BY THE HOLDER),
IN A GENERALLY
ACCEPTABLE
FORM,
THAT
REGISTRATION
IS NOT REQUIRED
UNDER SAID
ACT OR (II)
UNLESS SOLD
PURSUANT
TO RULE
144 OR RULE
144A UNDER
SAID ACT.
NOTWITHSTANDING
THE FOREGOING,
THE SECURITIES
MAY BE PLEDGED
IN CONNECTION
WITH
A BONA
FIDE
MARGIN ACCOUNT
OR OTHER
LOAN
OR
FINANCING
ARRANGEMENT
SECURED
BY THE
SECURITIES.”
The
legend
set forth
above shall
be removed
and the Borrower
shall
issue to the Holder
a new
certificate
therefore
free
of any
transfer
legend
if (i)
the Borrower
or its transfer
agent
shall have
received
an opinion
of counsel,
in form,
substance
and scope
customary
for opinions
of counsel
in comparable
transactions,
to the effect
that a
public sale or
transfer
of such Common
Stock may
be made
without registration
under the
Act, which
opinion shall be
accepted
by the Company
so that
the sale or
transfer
is effected
or (ii)
in the case
of the Common
Stock issuable
upon conversion
of this Note,
such
security
is registered
for sale
by the
Holder under
an effective
registration
statement
filed
under the
Act
or otherwise
may be
sold pursuant
to Rule 144 without
any restriction
as to
the number
of securities
as of
a particular
date that
can
then be immediately
sold. In the
event that
the Company
does not accept
the opinion of counsel
provided
by the Holder
with respect
to the transfer
of Securities
pursuant
to an
exemption
from registration,
such as
Rule 144
or Regulation
S, at
the Deadline,
it will be
considered
an Event
of Default pursuant
to Section 3.2 of
the Note.
1.6
Effect of
Certain
Events.
(a)
Effect of
Merger,
Consolidation,
Etc. At
the option of the Holder,
the sale,
conveyance
or disposition of
all or
substantially
all of
the assets
of the Borrower,
the effectuation
by the Borrower
of a transaction
or series
of related
transactions
in which
more than
50% of the voting
power of
the Borrower
is disposed
of, or
the consolidation,
merger
or other business
combination
of the Borrower
with or into
any
other Person
(as
defined
below)
or Persons when
the Borrower
is not the survivor shall
either: (i)
be deemed to be an
Event of Default
(as defined
in Article III)
pursuant
to which the Borrower
shall be required
to pay to the Holder upon
the consummation
of and as
a condition
to such
transaction
an amount
equal
to the Default
Amount (as
defined
in Article
III) or (ii)
be treated
pursuant
to Section
1.6(b) hereof.
“Person”
shall mean any
individual, corporation,
limited liability
company,
partnership,
association,
trust or other
entity or
organization.
(b)
Adjustment Due
to Merger,
Consolidation,
Etc. If,
at any
time when this
Note is issued
and outstanding
and prior
to conversion
of all
of the Notes,
there shall
be any
merger,
consolidation,
exchange
of shares, recapitalization,
reorganization,
or other similar
event, as
a result
of which
shares
of Common Stock
of the Borrower
shall be changed
into the same or
a different
number of shares
of another
class
or classes
of stock or securities
of the Borrower
or another
entity,
or in case
of any
sale or
conveyance
of all
or substantially
all of
the assets
of the Borrower
other than
in connection
with a plan
of complete
liquidation of the Borrower,
then the Holder
of this Note shall
thereafter
have the right
to receive
upon conversion
of this Note,
upon the basis
and upon
the terms
and conditions
specified
herein and
in lieu
of the shares
of Common
Stock
immediately
theretofore
issuable
upon conversion,
such
stock, securities
or assets
which the
Holder would
have
been entitled
to receive
in such
transaction
had this Note been
converted
in full
immediately
prior to
such transaction
(without regard
to any
limitations on
conversion
set forth
herein),
and in
any such
case
appropriate
provisions shall
be made with respect
to the rights
and interests
of the Holder of
this Note to
the end that
the provisions hereof
(including,
without limitation, provisions for
adjustment of the Conversion
Price
and of the
number of shares
issuable upon
conversion
of the Note) shall
thereafter
be applicable,
as nearly
as may
be practicable
in relation
to any
securities
or assets
thereafter
deliverable
upon the
conversion
hereof.
The
Borrower
shall
not affect
any transaction
described
in this Section 1.6(b)
unless (a)
it first gives,
to the extent
practicable,
thirty (30)
days prior written
notice (but in any
event
at least fifteen
(15) days
prior written
notice) of the record
date of
the special
meeting
of shareholders
to approve,
or if there
is no such
record
date,
the consummation
of, such
merger,
consolidation,
exchange
of shares,
recapitalization,
reorganization
or other
similar
event
or sale
of assets
(during which
time the Holder
shall be entitled
to convert
this Note)
and (b)
the resulting successor
or acquiring
entity (if
not the Borrower)
assumes by
written instrument
the obligations of this Section
1.6(b). The above
provisions shall
similarly apply
to successive
consolidations,
mergers,
sales,
transfers
or share
exchanges.
(c)
Adjustment Due to
Distribution.
If the Borrower
shall declare
or make any
distribution of
its assets
(or rights
to acquire
its assets)
to holders
of Common
Stock
as a dividend,
stock repurchase,
by way
of return
of capital
or otherwise
(including
any dividend
or distribution
to the Borrower’s
shareholders
in cash
or shares
(or
rights
to acquire
shares)
of capital stock
of a subsidiary
(i.e.,
a spin-off))
(a “Distribution”),
then the Holder
of this Note shall be
entitled,
upon any
conversion
of this Note
after
the date
of record
for
determining
shareholders entitled
to such Distribution, to receive
the amount of
such assets
which would have
been payable
to the Holder with
respect
to the shares
of Common Stock
issuable upon such
conversion
had such
Holder been
the holder of such
shares of Common
Stock
on the record
date for
the determination
of shareholders
entitled to such
Distribution.
(d)
Adjustment Due
to Dilutive Issuance.
If,
at any
time when
any
Notes are issued
and outstanding,
the Borrower
issues or
sells, or
in accordance
with this Section
1.6(d) hereof
is deemed
to have
issued or
sold, any
shares
of Common
Stock for
no consideration
or for
a consideration
per share
(before
deduction
of reasonable
expenses
or commissions or underwriting
discounts or
allowances
in connection
therewith) or
for
consideration per
share which
is less
than the
Conversion
Price
in effect
on the date
of such
issuance
(or deemed
issuance)
of such
shares
of Common
Stock
(a “Dilutive
Issuance”),
then immediately
upon the Dilutive Issuance,
the Conversion
Price will
be reduced
to the amount
of the consideration
per share
received
by the Borrower
in such Dilutive
Issuance.
The
Borrower
shall be deemed
to have issued
or sold
shares of Common
Stock
if the Borrower
in any
manner
issues or
grants
any
warrants,
rights
or options (not
including employee
stock
option plans),
whether
or not immediately
exercisable,
to subscribe
for or to
purchase
Common Stock
or other securities
convertible
into or
exchangeable
for Common
Stock (“Convertible
Securities”)
(such
warrants,
rights and
options to purchase Common
Stock or Convertible
Securities
are hereinafter
referred
to as
“Options”) and
the price per
share for
which Common
Stock
is issuable upon
the exercise
of such
Options is less
than the
Conversion Price
then in effect,
then the Conversion
Price
shall be equal
to such price
per share.
For purposes
of the preceding
sentence,
the “price
per
share
for
which Common
Stock
is issuable upon the exercise
of such
Options” is determined
by dividing (i) the total
amount, if any,
received
or receivable
by the Borrower
as consideration
for the
issuance
or granting of
all such
Options, plus the minimum
aggregate
amount of
additional
consideration,
if any,
payable
to the Borrower
upon the exercise
of all
such Options,
plus, in the case
of Convertible
Securities
issuable upon the exercise
of such Options,
the minimum aggregate
amount of additional
consideration
payable upon
the conversion
or exchange
thereof
at the time
such Convertible
Securities
first
become
convertible or
exchangeable,
by (ii)
the maximum
total
number of
shares of
Common Stock
issuable upon the
exercise
of all
such Options
(assuming full
conversion
of Convertible Securities,
if applicable).
No further
adjustment
to the Conversion
Price
will be made
upon the actual
issuance
of such
Common Stock
upon the exercise
of such Options or
upon the conversion or
exchange
of Convertible
Securities
issuable upon exercise
of such Options.
Additionally,
the Borrower
shall be
deemed
to have
issued or
sold shares
of Common
Stock
if the
Borrower
in any
manner
issues or
sells any
Convertible
Securities,
whether
or not immediately
convertible
(other
than
where
the same
are
issuable
upon the exercise
of Options),
and
the price per
share
for which
Common Stock
is issuable upon
such conversion
or exchange
is less
than the Conversion
Price
then in
effect,
then the Conversion
Price
shall be equal
to such price
per share.
For the purposes
of the preceding
sentence,
the “price
per
share for
which Common
Stock is
issuable upon
such conversion
or exchange”
is determined
by dividing
(i) the
total amount,
if any,
received
or receivable
by the Borrower
as consideration
for the issuance
or sale of all
such Convertible
Securities,
plus the minimum aggregate
amount of additional
consideration,
if any,
payable
to the Borrower
upon the conversion
or exchange
thereof
at the time such
Convertible Securities
first become
convertible
or exchangeable,
by (ii) the maximum
total number
of shares of Common
Stock issuable
upon the conversion
or exchange
of all
such Convertible
Securities.
No further
adjustment to the Conversion
Price
will be made upon
the actual
issuance
of such
Common Stock
upon conversion
or exchange
of such
Convertible
Securities.
(e)
Purchase
Rights.
If,
at any
time when any
Notes
are issued
and outstanding,
the Borrower
issues any
convertible
securities
or rights
to purchase
stock, warrants,
securities
or other
property
(the “Purchase
Rights”)
pro rata
to the record
holders of
any class
of Common Stock,
then
the Holder of this
Note will be entitled
to acquire,
upon the terms
applicable to
such Purchase
Rights,
the aggregate
Purchase
Rights
which such
Holder could
have acquired
if such Holder
had held
the number of shares
of Common Stock
acquirable upon complete
conversion
of this Note
(without regard
to any
limitations on
conversion
contained
herein) immediately
before
the date on which
a record
is taken
for
the grant, issuance
or sale
of such Purchase
Rights
or, if
no such
record
is taken,
the date
as of
which the
record
holders of Common Stock
are to be determined
for the
grant,
issue or sale
of such Purchase
Rights.
(f)
Notice of
Adjustments. Upon
the occurrence
of each
adjustment
or readjustment
of the Conversion
Price
as a
result of
the events
described
in this
Section
1.6, the Borrower,
at its
expense,
shall promptly
compute
such adjustment
or readjustment
and prepare
and furnish
to the Holder
a certificate
setting
forth
such adjustment
or readjustment
and showing
in detail
the facts
upon which
such adjustment
or readjustment
is based.
The Borrower
shall, upon the
written
request at
any time
of the
Holder,
furnish
to such
Holder a
like certificate
setting forth
(i) such
adjustment
or readjustment, (ii)
the Conversion Price
at the time in effect
and (iii)
the number
of shares
of Common Stock
and the
amount, if
any,
of other
securities
or property
which at
the time would be
received
upon conversion
of the Note.
1.7
Trading
Market
Limitations.
Unless permitted
by the
applicable
rules
and regulations
of the principal
securities
market
on which the
Common Stock
is then
listed or
traded, in no event
shall the Borrower
issue upon conversion
of or otherwise
pursuant to this Note and
the other Notes
issued pursuant
to the Purchase
Agreement
more than
the maximum number
of shares
of Common
Stock
that the
Borrower
can issue
pursuant
to any
rule of
the principal
United States
securities
market
on which
the Common Stock
is then
traded
(the “Maximum
Share
Amount”),
which shall
be 9.99%
of the total
shares outstanding
on the Closing Date
(as
defined
in the Purchase
Agreement),
subject
to equitable
adjustment
from time to
time for stock
splits, stock
dividends,
combinations,
capital
reorganizations
and similar
events
relating to
the Common Stock
occurring
after the
date hereof.
Once the Maximum
Share Amount
has been issued,
if the Borrower
fails to eliminate
any prohibitions
under applicable
law or the rules
or regulations
of any stock
exchange,
interdealer
quotation system
or other self-regulatory
organization
with jurisdiction
over the Borrower
or any
of its
securities
on the Borrower’s
ability to
issue shares of Common
Stock
in excess
of the Maximum
Share Amount,
in lieu
of any further
right
to convert this Note,
this will be considered
an Event of Default
under Section
3.3 of the Note.
1.8
Status
as Shareholder.
Upon submission
of a Notice
of Conversion
by a Holder,
(i) the
shares
covered
thereby
(other
than
the shares,
if any,
which
cannot be
issued because their
issuance would
exceed
such Holder’s
allocated
portion of the
Reserved
Amount or Maximum
Share
Amount) shall
be deemed
converted
into shares
of Common
Stock
and (ii)
the Holder’s rights
as a
Holder of
such converted
portion
of this Note shall
cease and
terminate,
excepting
only the right
to receive
certificates
for such
shares
of Common Stock
and to
any remedies
provided herein
or otherwise available
at law or in equity
to such Holder because
of a failure by
the Borrower
to comply
with the terms of this Note. Notwithstanding
the foregoing,
if a Holder has
not received
certificates
for all
shares
of Common Stock
prior to the tenth
(10th) business
day after
the expiration
of the Deadline
with respect
to a conversion
of any
portion of this Note for
any reason,
then (unless
the Holder otherwise
elects
to retain
its status as a holder
of Common
Stock
by so notifying
the Borrower)
the Holder
shall
regain
the rights
of a Holder
of this Note with respect to such
unconverted
portions of this Note and
the Borrower
shall, as soon as
practicable,
return
such unconverted
Note to
the Holder or,
if the Note has
not been
surrendered,
adjust its
records
to reflect
that
such portion
of this Note has
not been
converted.
In all cases,
the Holder shall retain
all of its rights
and remedies
(including,
without limitation, (i) the right
to receive
Conversion
Default
Payments
pursuant
to Section
1.3 to the extent
required thereby
for such
Conversion
Default and any
subsequent
Conversion Default
and (ii)
the right
to have the Conversion
Price
with respect
to subsequent
conversions
determined
in accordance
with Section 1.3)
for the Borrower’s
failure
to convert
this Note.
1.9
Prepayment.
Notwithstanding
anything
to the contrary
contained
in this Note,
at any
time during
the periods
set
forth
on the table
immediately
following
this paragraph
(the “Prepayment
Periods”),
the Borrower
shall have
the right,
exercisable
on not less
than three
(3) Trading
Days
prior written
notice to
the Holder
of the Note
to prepay
the outstanding
Note (principal
and accrued
interest),
in full,
in accordance
with this Section
1.9. Any notice
of prepayment
hereunder
(an
“Optional
Prepayment
Notice”) shall
be delivered
to the Holder of the Note
at its
registered
addresses
and shall
state:
(1) that
the Borrower
is exercising
its right
to prepay the
Note, and (2)
the date of
prepayment
which shall
be not more than
three (3) Trading
Days
from the date
of the Optional
Prepayment
Notice. On the date
fixed
for prepayment
(the “Optional
Prepayment
Date”),
the Borrower
shall
make payment
of the Optional
Prepayment
Amount (as
defined
below)
to Holder,
or upon the
order
of the Holder
as specified
by the
Holder in writing to the Borrower,
at least
one (1) business
day prior
to the Optional Prepayment
Date. If the Borrower
exercises
its right
to prepay
the Note,
the Borrower
shall make
payment
to the Holder of an
amount in
cash (the
“Optional
Prepayment
Amount”) equal
to the percentage
(“Prepayment
Percentage”)
as
set forth
in the
table immediately
following this
paragraph
opposite the applicable
Prepayment
Period,
multiplied by
the sum of:
(w)
the then
outstanding principal
amount of this
Note plus (x)
accrued and
unpaid interest
on the unpaid principal
amount of
this Note to the
Optional Prepayment
Date plus
(y) Default
Interest, if
any,
on the amounts
referred
to in clauses
(w) and
(x)
plus (z)
any amounts
owed to
the Holder
pursuant
to Sections 1.3 and
1.4(g)
hereof.
If the
Borrower
delivers an
Optional Prepayment
Notice and fails
to pay the Optional
Prepayment
Amount due to the
Holder of the
Note within two
(2) business
days
following the Optional
Prepayment
Date,
the Borrower
shall forever
forfeit
its right
to prepay
the Note
pursuant
to this Section 1.9.
Prepayment
Period
|
Prepayment
Percentage |
1.
The period
beginning
on the Issue
Date
and
ending
on the date
which is thirty
(30) days
following the
Issue
Date. |
110% |
2.
The
period
beginning
on the
date
which
is thirty-
one
(31)
days
following
the
Issue Date
and ending
on the date
which
is sixty
(60) days
following
the Issue
Date |
115% |
3.
The
period
beginning
on the
date which
is sixty-one
(61)
days following
the Issue
Date
and ending
on the date
which
is ninety
(90) days
following
the Issue
Date |
120% |
4.
The
period
beginning
on the
date
that
is ninety-one
(91)
day from
the Issue
Date
and ending
one hundred
twenty
(120)
days
following
the
Issue Date |
125% |
5.
The
period
beginning
on the
date that
is one
hundred
twenty-one
(121) day
from the
Issue Date
and ending
one hundred
fifty
(150)
days following
the Issue
Date |
130% |
6.
The
period
beginning
on the
date that
is one
hundred
fifty-one
(151) day
from the
Issue Date
and ending
one hundred
eighty
(180) days
following
the Issue
Date |
135% |
After
the expiration
of one
hundred
eighty
(180) days
following the
Issue
Date,
the Borrower
shall have
no right of
prepayment.
ARTICLE
II.
CERTAIN
COVENANTS
2.1
Distributions on
Capital
Stock.
So long
as the Borrower
shall
have any
obligation
under this
Note,
the Borrower
shall not
without the Holder’s
written
consent
(a) pay,
declare
or set
apart
for such
payment,
any
dividend
or other
distribution
(whether
in cash, property
or other
securities)
on shares of
capital
stock other
than dividends
on shares of
Common Stock
solely in
the form of
additional
shares
of Common Stock
or (b)
directly
or indirectly
or through
any subsidiary
make any
other payment
or distribution
in respect
of its capital
stock except
for distributions
pursuant to any
shareholders’
rights
plan which
is approved
by a
majority
of the Borrower’s
disinterested
directors.
2.2
Restriction
on Stock
Repurchases.
So
long as
the Borrower
shall have
any obligation
under this Note,
the Borrower
shall not
without the Holder’s
written
consent
redeem,
repurchase
or otherwise
acquire
(whether
for cash
or in exchange
for property
or other
securities
or otherwise)
in any
one transaction
or series
of related
transactions
any
shares of
capital stock
of the Borrower
or any
warrants,
rights or
options to purchase
or acquire
any
such shares.
2.3
Borrowings.
So
long as
the Borrower
shall have
any
obligation
under this Note,
the Borrower
shall
not, without the Holder’s
written
consent,
create,
incur,
assume guarantee,
endorse,
contingently
agree
to purchase
or otherwise
become
liable
upon the obligation
of any
person,
firm,
partnership,
joint venture
or corporation,
except
by the endorsement
of negotiable
instruments
for deposit
or collection,
or suffer
to exist
any liability
for borrowed
money, except
(a) borrowings
in existence
or committed
on the date hereof
and of which
the Borrower
has informed
Holder in
writing prior
to the date
hereof,
(b) indebtedness
to trade creditors
or financial
institutions incurred
in the ordinary
course
of business
or (c) borrowings,
the proceeds
of which shall
be used to
repay this Note.
2.4
Sale
of Assets.
So long
as the
Borrower
shall
have any
obligation
under this Note,
the Borrower
shall not,
without the
Holder’s
written
consent,
sell,
lease or
otherwise dispose of any
significant
portion of its assets
outside the ordinary
course
of business. Any consent
to the disposition of any
assets may be
conditioned on a specified
use of the proceeds
of disposition.
2.5
Advances
and Loans.
So
long as
the Borrower
shall have
any
obligation
under this
Note, the
Borrower
shall not,
without the Holder’s
written
consent,
lend money,
give credit
or make
advances
to any
person, firm,
joint venture
or corporation,
including,
without limitation, officers,
directors, employees,
subsidiaries and
affiliates
of the Borrower,
except
loans, credits
or advances
(a) in existence
or committed
on the date hereof
and which
the Borrower
has
informed
Holder in writing
prior
to the date hereof,
(b) made
in the ordinary
course
of business or
(c)
not in excess
of $100,000.
ARTICLE
III.
EVENTS OF DEFAULT
If
any
of the following
events of
default (each,
an “Event
of Default”)
shall occur:
3.1
Failure
to Pay
Principal
or Interest.
The
Borrower
fails
to pay
the principal
hereof or interest
thereon
when due on
this Note,
whether
at maturity,
upon acceleration
or otherwise.
3.2
Conversion
and the
Shares.
The
Borrower
fails to
issue shares
of Common Stock
to the Holder
(or announces
or threatens
in writing
that it
will not honor
its obligation
to do so) upon exercise by
the Holder of the conversion
rights of the Holder
in accordance
with the terms of this Note, fails
to transfer
or cause its transfer
agent
to transfer
(issue) (electronically
or in certificated
form)
any certificate
for shares
of Common Stock
issued to the
Holder upon conversion
of or otherwise
pursuant to this Note as
and when required
by this Note, the Borrower
directs
its transfer
agent
not to transfer
or delays,
impairs,
and/or hinders
its transfer
agent in transferring
(or issuing)
(electronically
or in certificated
form)
any certificate
for shares
of Common Stock
to be issued to the Holder upon
conversion of or otherwise
pursuant to this Note as
and when
required
by this Note,
or fails to
remove (or directs
its transfer
agent
not to remove or impairs,
delays,
and/or hinders
its transfer
agent
from removing)
any
restrictive
legend
(or
to withdraw
any
stop transfer
instructions
in respect
thereof)
on any
certificate
for any
shares of Common
Stock
issued to
the Holder upon conversion
of or otherwise pursuant
to this Note as
and when
required
by this
Note (or
makes
any
written
announcement,
statement
or threat that
it does not
intend to honor the obligations
described
in this paragraph)
and any
such failure
shall continue
uncured
(or any
written
announcement,
statement
or threat
not to honor
its obligations shall
not be rescinded
in writing) for
three (3) business
days after
the Holder shall have
delivered
a Notice of Conversion.
It is an obligation
of the Borrower
to remain current
in its obligations
to its transfer
agent.
It shall
be an event
of default
of this Note,
if a conversion
of this Note is delayed,
hindered or frustrated
due to a balance
owed by the Borrower
to its transfer
agent. If at
the option of the Holder,
the Holder advances
any funds
to the Borrower’s
transfer
agent
in order
to process
a conversion,
such advanced
funds shall
be paid by
the Borrower
to the Holder
within forty
eight
(48) hours
of a demand
from the
Holder.
3.3
Breach
of Covenants.
The Borrower
breaches
any
material
covenant
or other material
term or
condition
contained
in this Note
and any
collateral
documents
including but not limited
to the Purchase
Agreement
and such
breach
continues for
a period
of ten (10)
days
after written
notice thereof
to the Borrower
from the Holder.
3.4
Breach
of Representations
and Warranties.
Any
representation
or warranty
of the Borrower
made
herein
or in any
agreement,
statement
or certificate
given
in writing
pursuant
hereto or
in connection
herewith (including,
without limitation,
the Purchase
Agreement),
shall be false
or misleading
in any material
respect
when made
and the breach
of which has
(or with the
passage
of time
will have)
a material
adverse
effect
on the rights
of the Holder
with respect
to this Note or the
Purchase
Agreement.
3.5
Receiver
or Trustee.
The
Borrower
or any
subsidiary
of the
Borrower
shall make
an assignment
for the
benefit
of creditors,
or apply
for or
consent
to the appointment
of a receiver
or trustee
for it
or for
a substantial
part of
its property
or business,
or such
a receiver
or trustee
shall otherwise
be appointed.
3.6
Judgments.
Any
money judgment,
writ or
similar process
shall be
entered
or filed
against
the Borrower
or any
subsidiary
of the
Borrower
or any
of its property
or other
assets for
more than
$50,000, and
shall remain
unvacated,
unbonded or unstayed
for a period
of twenty
(20) days
unless otherwise
consented
to by the Holder,
which consent
will not be
unreasonably withheld.
3.7
Bankruptcy.
Bankruptcy,
insolvency,
reorganization
or liquidation
proceedings
or other
proceedings,
voluntary
or involuntary,
for relief
under
any
bankruptcy
law or any
law for the relief
of debtors shall
be instituted by or against
the Borrower
or any subsidiary
of the
Borrower.
3.8
Delisting of
Common Stock.
The Borrower
shall fail
to maintain
the listing
of the Common
Stock
on at
least one
of the OTC
(which
specifically
includes
the Pink
Sheets electronic
quotation system)
or an equivalent
replacement
exchange,
the Nasdaq
National
Market,
the Nasdaq
SmallCap
Market,
the New York
Stock
Exchange,
or the American
Stock Exchange.
3.9
Failure
to Comply
with the Exchange
Act. The
Borrower
shall fail
to comply
with the reporting
requirements
of the Exchange
Act; and/or
the Borrower
shall cease
to be subject to the
reporting
requirements
of the Exchange
Act.
3.10
Liquidation.
Any dissolution,
liquidation,
or winding up
of Borrower
or any
substantial portion
of its business.
3.11
Cessation
of Operations.
Any
cessation
of operations
by Borrower
or Borrower
admits it
is otherwise
generally
unable
to pay its
debts as
such debts
become due,
provided, however,
that any
disclosure
of the Borrower’s
ability
to continue
as a “going
concern”
shall not be an admission
that the Borrower
cannot pay
its debts as they
become
due.
3.12
Maintenance
of Assets.
The failure
by
Borrower
to maintain
any
material
intellectual
property
rights,
personal,
real
property
or other
assets
which are
necessary
to conduct its business
(whether
now or in the future).
3.13
Financial
Statement
Restatement.
The restatement
of any
financial
statements
filed
by the Borrower
with the SEC
for
any date
or period
from
two years
prior to
the Issue
Date of
this Note and
until this Note
is no longer
outstanding, if
the result of
such restatement
would, by comparison
to the unrestated
financial
statement,
have constituted
a material
adverse
effect
on the rights
of the Holder
with respect
to this Note or
the Purchase
Agreement.
3.14
Reverse
Splits. The Borrower
effectuates
a reverse
split of its Common Stock
without twenty (20)
days prior
written
notice to the
Holder.
3.15
Replacement
of Transfer
Agent. In
the event
that the
Borrower
proposes to replace
its transfer
agent,
the Borrower
fails to
provide,
prior to the
effective date
of such replacement,
a fully
executed
Irrevocable
Transfer
Agent
Instructions
in a form
as initially
delivered
pursuant
to the Purchase
Agreement
(including but
not limited
to the provision
to irrevocably
reserve
shares
of Common
Stock
in the
Reserved
Amount) signed
by the successor
transfer
agent
to Borrower
and the Borrower.
3.16
Cross-Default.
Notwithstanding
anything
to the contrary
contained
in this Note or
the other
related
or companion
documents,
a breach
or default
by the Borrower
of any
covenant
or other
term
or condition
contained
in any
of the Other
Agreements,
after
the passage
of all applicable
notice and
cure
or grace
periods,
shall, at the
option of the Holder,
be considered
a default
under this Note
and the
Other Agreements,
in which
event
the Holder shall
be entitled
(but in
no event
required)
to apply
all rights
and remedies
of the
Holder
under
the terms
of this Note and
the Other
Agreements
by reason
of a
default
under
said Other
Agreement
or hereunder.
“Other Agreements”
means, collectively,
all agreements
and instruments
between, among
or by:
(1) the
Borrower,
and, or for
the benefit
of, (2)
the Holder and
any
affiliate
of the Holder,
including,
without limitation,
promissory
notes; provided,
however,
the term
“Other Agreements”
shall not include
the related
or companion
documents to this
Note. Each
of the loan transactions
will be cross-defaulted
with each
other loan
transaction
and with
all other
existing
and future
debt of
Borrower
to the Holder.
Upon
the occurrence
of any
Event of
Default
specified
in Section
3.1 (solely
with respect
to failure
to pay the
principal
hereof
or interest
thereon when
due at
the Maturity
Date),
the Note shall
become immediately
due and
payable
and the
Borrower
shall
pay to
the Holder,
in full satisfaction
of its obligations
hereunder,
an amount
equal to the
Default
Sum (as defined
herein).
UPON THE
OCCURRENCE
OF ANY EVENT
OF DEFAULT
SPECIFIED
IN SECTION
3.2, THE NOTE SHALL BECOME
IMMEDIATELY
DUE AND PAYABLE
AND THE BORROWER
SHALL
PAY TO
THE HOLDER,
IN FULL
SATISFACTION
OF ITS
OBLIGATIONS
HEREUNDER,
AN AMOUNT EQUAL
TO: (Y)
THE DEFAULT
SUM (AS
DEFINED
HEREIN);
MULTIPLIED
BY (Z)
TWO
(2).
Upon the occurrence
of any
Event
of Default, other
than
Section 3.2,
exercisable
through
the delivery
of written
notice
to the Borrower
by such
Holders
(the “Default
Notice”),
the Note shall
become
immediately
due and payable
and the
Borrower
shall pay
to the Holder,
in full
satisfaction
of its obligations
hereunder,
an amount
equal
to the greater
of (i)
150% times
the sum of
(w) the
then outstanding
principal
amount of
this Note plus (x)
accrued
and unpaid
interest on
the unpaid principal
amount of
this Note to the
date of
payment
(the “Mandatory
Prepayment
Date”)
plus (y)
Default
Interest,
if any,
on the amounts
referred
to in clauses
(w) and/or
(x)
plus (z)
any amounts
owed to
the Holder pursuant
to Sections
1.3 and
1.4(g)
hereof
(the then
outstanding principal
amount of
this Note to the
date of
payment
plus the amounts
referred
to in clauses
(x),
(y)
and (z)
shall collectively
be known as
the “Default
Sum”)
or (ii)
the “parity
value”
of the Default
Sum to be
prepaid,
where parity
value
means (a)
the highest
number of
shares
of Common
Stock
issuable
upon conversion
of or otherwise
pursuant
to such
Default
Sum in
accordance
with Article
I, treating
the Trading
Day immediately
preceding
the Mandatory
Prepayment
Date as
the “Conversion
Date”
for purposes
of determining
the lowest applicable
Conversion
Price,
unless the Default
Event arises
as a
result of
a breach
in respect
of a specific
Conversion
Date in
which
case such
Conversion
Date shall
be the Conversion
Date),
multiplied by
(b) the
highest
Closing Price
for the
Common Stock
during the
period beginning
on the
date of
first
occurrence
of the
Event of
Default and
ending one
day prior
to the Mandatory
Prepayment
Date (the
“Default
Amount”) and
all other
amounts payable
hereunder
shall immediately
become due and
payable,
all without demand,
presentment
or notice,
all
of which
hereby
are
expressly
waived,
together
with all
costs, including,
without limitation,
legal
fees
and expenses,
of collection,
and
the Holder shall
be entitled to exercise
all other
rights and
remedies
available
at law or
in equity.
If
the Borrower
fails to
pay the
Default
Amount within five
(5) business
days
of written
notice that
such amount
is due and
payable,
then
the Holder
shall
have the
right
at any
time, so long and
to the extent
that there
are sufficient
authorized
shares, to
require
the Borrower,
upon written
notice, to
convert
the Default Amount
into shares
of Common Stock
of the Borrower
pursuant to Section
1.1 hereof.
ARTICLE
IV. MISCELLANEOUS
4.1
Failure
or Indulgence
Not Waiver.
No failure
or delay
on the part
of the Holder
in the
exercise
of any power,
right
or privilege
hereunder
shall
operate
as a waiver
thereof, nor shall
any
single or partial
exercise
of any such
power, right
or privilege preclude
other or further
exercise
thereof or of any
other right,
power or privileges.
All rights and
remedies
existing
hereunder
are cumulative
to, and not exclusive
of, any
rights
or remedies
otherwise available.
4.2
Notices. All
notices, demands,
requests,
consents,
approvals,
and
other communications
required
or permitted
hereunder
shall be in
writing and,
unless otherwise
specified
herein,
shall be
(i) personally
served,
(ii)
deposited
in the mail,
registered
or certified,
return
receipt
requested,
postage prepaid,
(iii) delivered
by reputable
air
courier
service
with charges
prepaid,
or (iv)
transmitted
by hand
delivery,
telegram,
or facsimile,
addressed
as set
forth below
or to
such other
address
as such
party
shall
have specified
most recently
by written
notice. Any notice
or other
communication
required
or permitted
to be given
hereunder
shall be
deemed
effective
(a)
upon hand
delivery
or delivery
by facsimile,
with accurate
confirmation
generated
by the transmitting
facsimile machine,
at the
address
or number
designated
below
(if delivered
on a business
day
during
normal business
hours where
such notice
is to be received),
or the first
business day
following
such
delivery
(if delivered
other
than on a business
day during
normal
business hours
where such
notice is to
be received)
or (b) on
the second business
day following
the date
of mailing
by express
courier
service,
fully
prepaid,
addressed
to such
address, or
upon actual
receipt
of such
mailing,
whichever
shall first
occur.
The addresses
for such communications
shall be:
If
to the Borrower,
to:
AGRITEK
HOLDINGS,
INC.
319
Clematis
Street -
Suite 1008
West
Palm Beach,
FL 33401
Attn:
BARRY S.
HOLLANDER,
Chief
Financial
Officer
facsimile:
With
a copy
by fax
only to (which
copy
shall not constitute
notice):
[enter
name of
law firm]
Attn:
[attorney
name]
[enter
address line
1]
[enter
city,
state, zip]
facsimile:
[enter
fax number]
If
to the Holder:
VIS
VIRES GROUP,
INC.
111
Great Neck
Road –
Suite 216,
Great
Neck, NY
11021
Attn:
Curt Kramer,
President
e-mail:
info@visviresgroup.com
With
a copy
by fax
only to (which
copy
shall not constitute
notice):
Naidich
Wurman
LLP
111
Great Neck
Road –
Suite 214
Great
Neck, NY
11021
Att:
Judah A. Eisner,
Esq.
facsimile:
516-466-3555
4.3
Amendments.
This Note
and any
provision
hereof
may only
be amended
by an
instrument
in writing
signed
by the
Borrower
and the
Holder. The
term “Note”
and all
reference
thereto,
as used
throughout
this instrument,
shall mean
this instrument
(and the other
Notes issued
pursuant
to the Purchase
Agreement) as
originally
executed,
or if later amended
or supplemented,
then as so
amended
or supplemented.
4.4
Assignability.
This Note shall be binding upon
the Borrower
and its successors
and assigns,
and shall
inure to be the benefit
of the Holder and
its successors
and assigns.
Each
transferee
of this Note must
be an
“accredited
investor” (as
defined
in Rule 501(a)
of the 1933
Act).
Notwithstanding anything
in this Note
to the
contrary,
this Note may
be pledged
as collateral
in connection
with a
bona fide margin
account
or other
lending arrangement.
4.5
Cost of Collection.
If default is made
in the payment
of this Note, the
Borrower
shall pay
the Holder
hereof
costs of collection,
including reasonable
attorneys’
fees.
4.6
Governing
Law.
This Note shall
be governed
by and
construed
in accordance
with the laws
of the State of New
York
without regard
to principles
of conflicts
of laws. Any
action brought
by either
party
against
the other
concerning
the transactions
contemplated
by this Note shall
be brought
only in
the state
courts
of New
York or
in the federal
courts
located
in the state
and county
of Nassau.
The parties
to this Note
hereby
irrevocably
waive any
objection
to jurisdiction and
venue of any
action instituted
hereunder
and shall not assert
any defense
based
on lack
of jurisdiction
or venue or
based
upon forum non
conveniens.
The Borrower
and Holder
waive trial
by jury. The
prevailing
party
shall be entitled
to recover
from the other
party
its reasonable
attorney's
fees
and costs.
In the event
that any
provision
of this Note
or any
other agreement
delivered
in connection
herewith
is invalid
or unenforceable
under any
applicable
statute or rule
of law, then
such provision
shall be deemed
inoperative
to the extent
that it may
conflict
therewith and
shall be deemed
modified to conform
with such statute or rule
of law. Any
such provision
which may
prove
invalid
or unenforceable
under any
law
shall not
affect
the validity or
enforceability
of any
other provision
of any
agreement.
Each party
hereby
irrevocably
waives
personal
service
of process
and
consents
to process
being
served
in any
suit, action or
proceeding
in connection
with this Agreement
or any
other Transaction
Document
by mailing
a copy
thereof
via registered
or certified
mail or
overnight
delivery
(with evidence
of delivery)
to such
party at
the address
in effect
for notices
to it under
this Agreement
and agrees
that such
service shall
constitute good
and sufficient
service of process
and notice
thereof. Nothing
contained
herein
shall be
deemed
to limit
in any
way
any
right
to serve
process
in any
other manner
permitted
by law.
4.7
Certain
Amounts. Whenever
pursuant
to this Note
the Borrower
is required
to pay an
amount in
excess
of the outstanding
principal
amount (or
the portion
thereof required
to be paid
at that
time)
plus accrued
and unpaid
interest plus
Default Interest
on such interest,
the Borrower
and the Holder
agree that
the actual
damages
to the Holder
from the receipt
of cash payment
on this Note
may be difficult
to determine
and the amount
to be so paid
by the Borrower
represents
stipulated damages
and not a penalty
and is intended
to compensate
the Holder in part
for loss of the opportunity
to convert
this Note and
to earn
a return
from
the sale of shares
of Common Stock
acquired
upon conversion
of this Note at a price
in excess
of the price paid
for such
shares
pursuant to
this Note. The Borrower
and the Holder
hereby agree
that such amount
of stipulated
damages
is not plainly disproportionate
to the possible loss to the Holder from
the receipt
of a cash payment
without the opportunity to convert
this Note into shares of Common
Stock.
4.8
Purchase
Agreement.
By
its acceptance
of this Note,
each
party
agrees
to be bound by
the applicable
terms of
the Purchase
Agreement.
4.9
Notice of
Corporate
Events. Except
as otherwise
provided
below, the
Holder of
this Note shall
have
no rights
as a
Holder of
Common Stock
unless and
only to the
extent
that it converts
this Note into
Common Stock.
The Borrower
shall provide
the Holder
with prior notification
of any
meeting
of the Borrower’s
shareholders
(and copies
of proxy
materials
and other
information
sent
to shareholders).
In the event
of any
taking
by the Borrower
of a record
of its shareholders
for the
purpose of
determining
shareholders
who are
entitled
to receive
payment
of any
dividend or other distribution,
any right
to subscribe for,
purchase or
otherwise acquire
(including
by way
of merger,
consolidation,
reclassification
or recapitalization)
any
share of
any
class
or any
other
securities
or property,
or to receive
any
other
right,
or for
the purpose
of determining
shareholders
who are
entitled
to vote
in connection
with any
proposed
sale,
lease
or conveyance
of all
or substantially
all of
the assets
of the Borrower
or any
proposed
liquidation, dissolution or winding up of the Borrower,
the Borrower
shall mail a notice
to the Holder, at least
twenty (20)
days
prior to
the record
date specified
therein
(or thirty
(30) days
prior to the consummation
of the transaction
or event,
whichever
is earlier),
of the
date on
which any
such record
is to be taken
for the purpose of
such dividend,
distribution, right
or other event,
and a brief
statement
regarding
the amount and
character
of such
dividend, distribution,
right
or other
event
to the extent
known at
such time.
The Borrower
shall make
a public announcement
of any
event
requiring
notification
to the Holder
hereunder
substantially
simultaneously
with the notification
to the Holder
in accordance
with the terms of
this Section 4.9.
4.10
Remedies.
The Borrower
acknowledges
that a breach
by it of its obligations
hereunder
will cause
irreparable
harm
to the Holder,
by vitiating
the intent
and purpose of
the transaction
contemplated
hereby.
Accordingly,
the Borrower
acknowledges
that the remedy
at law
for a
breach of
its obligations
under this
Note will be inadequate
and agrees,
in the event of
a breach
or threatened
breach
by the
Borrower
of the
provisions of
this Note, that the
Holder shall
be entitled,
in addition
to all
other available
remedies
at law
or in equity,
and in addition
to the penalties
assessable
herein,
to an
injunction or
injunctions restraining,
preventing
or curing
any breach
of this Note
and to
enforce
specifically
the terms
and provisions
thereof,
without the necessity
of showing
economic loss
and without
any bond
or other
security
being required.
IN
WITNESS
WHEREOF,
Borrower
has
caused
this Note
to be signed
in its
name by
its duly authorized
officer
this February
23, 2015.
AGRITEK
HOLDINGS,
INC.
By:
________________________________
BARRY
S. HOLLANDER
Chief
Financial
Officer
EXHIBIT
A -- NOTICE OF CONVERSION
The
undersigned
hereby
elects
to
convert
$ principal
amount
of the
Note
(defined
below) into
that
number
of
shares
of
Common
Stock
to
be
issued
pursuant
to
the
conversion
of the
Note
(“Common
Stock”)
as set
forth
below,
of AGRITEK
HOLDINGS,
INC.,
a Delaware
corporation
(the
“Borrower”)
according
to the
conditions
of
the
convertible
note
of
the
Borrower
dated
as of
February
23, 2015
(the
“Note”),
as
of
the date
written
below.
No fee
will
be
charged
to
the
Holder
for
any
conversion,
except
for
transfer
taxes,
if any.
Box
Checked as
to applicable
instructions:
[
] The
Borrower
shall
electronically
transmit
the Common
Stock issuable
pursuant
to this
Notice
of Conversion
to the
account of
the
undersigned
or its
nominee
with
DTC
through
its Deposit
Withdrawal
Agent
Commission
system
(“DWAC
Transfer”).
Name
of DTC
Prime
Broker:
Account Number:
[
] The
undersigned
hereby requests
that the
Borrower
issue
a certificate
or certificates
for the
number of
shares
of Common
Stock set forth
below
(which
numbers
are
based
on the
Holder’s
calculation
attached
hereto)
in the
name(s)
specified
immediately
below
or, if
additional
space is
necessary,
on an attachment
hereto:
VIS
VIRES GROUP, INC.
111
Great Neck
Road –
Suite 216,
Great
Neck, NY
11021
Attention:
Certificate
Delivery
e-mail:
info@visviresgroup.com
Date
of Conversion
__________
Applicable
Conversion
Price:
$__________
Number
of Shares
of Common
Stock to
be Issued
Pursuant
to Conversion
of the
Notes: __________
Amount
of Principal
Balance
Due remaining
Under
the Note
after
this
conversion:
__________
VIS
VIRES GROUP, INC.
By:
_______________________
Name: Curt
Kramer
Title:
President
Date:
February
23, 2015
EXHIBIT
10.2
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT”)
US $78,750.00
AGRITEK
HOLDINGS, INC.
8% CONVERTIBLE
REDEEMABLE NOTE
DUE MARCH
27, 2016
FOR
VALUE RECEIVED, Agritek Holdings, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and
its authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of Seventy Eight
Thousand Seven Hundred Fifty Dollars exactly (U.S. $78,750.00) on March 27, 2016 ("Maturity Date") and to pay
interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on March 27, 2015. The interest
will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers
of this Note. The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially,
and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time.
The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such
Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute
a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent
of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to
paragraph 4(b) herein.
This
Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act") and
applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior
to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this
Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue,
and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing
to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a),
and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being
converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including
receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this
Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion
Price") for each share of Common Stock equal to 58% of the lowest closing bid price of the Common
Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange
upon which the Common Stock may be traded in the future ("Exchange"), for the eighteen
prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice
of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or
Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder's intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank.
Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company
experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 48% instead of 58% while that
“Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along
with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding
shares of the Common Stock of the Company.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company
in Common Stock ("Interest Shares"). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) The
Notes may be prepaid with the following penalties:
PREPAY
DATE |
PREPAY
AMOUNT |
<
30 days |
118%
of principal plus accrued interest |
31-
60 days |
124%
of principal plus accrued interest |
61-90
days |
130%
of principal plus accrued interest |
91-120
days |
136%
of principal plus accrued interest |
121-150
days |
142%
of principal plus accrued interest |
151-180
days |
148%
of principal plus accrued interest |
This Note
may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of
redemption of the right to redeem shall be null and void.
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series
of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of
the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company
with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected
solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as
a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150%
of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such
Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares
of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e)
In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection
with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of
this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number
of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon
exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing
provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other
than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good
faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the
Holder in collecting any amount due under this Note.
8. If
one or more of the following described "Events of Default" shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy
relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under
federal or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the
Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(l)
The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n)
The Company shall lose the “bid” price for its stock in a market (including the OTCQB marketplace or other exchange).
Then, or
at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been
waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the
Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per
annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In
the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th
day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case
of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at
maturity, the outstanding principal due under this Note shall increase by 10%.
If the
Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging
an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Make-Whole
for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the
conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder
incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable
to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure
to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of conversion shares)]
The Company
must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the
time of the Holder’s written notice to the Company.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired
thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144 opinion
to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 27,851,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall
be cancelled. The Company shall pay all costs associated with issuing and delivering the shares. The company should at all times
reserve a minimum of four times the amount of shares required if the note would be fully converted. The Holder may reasonably
request increases from time to time to reserve such amounts.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be
performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and
the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of
New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: __________________
AGRITEK
HOLDINGS, INC.
By: __________________________________
Title: _________________________________
EXHIBIT A
NOTICE OF
CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Agritek
Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date of Conversion: _______________________________________________________
Applicable Conversion
Price: ________________________________________________
Signature: ______________________________________________________________
[Print Name
of Holder and Title of Signer]
Address: _______________________________________________________________
_______________________________________________________________
SSN or EIN: ________________________
Shares are to be registered
in the following name: _________________________________
Name: _________________________________________________________________
Address: _______________________________________________________________
Tel: _______________________________
Fax: _______________________________
SSN or EIN: _________________________
Shares are to be sent or delivered
to the following account:
Account Name: __________________________________________________________
Address: _______________________________________________________________
EXHIBIT
10.3
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT”)
US
$27,000.00
AGRITEK
HOLDINGS, INC.
8%
CONVERTIBLE REDEEMABLE NOTE
DUE
MARCH 30, 2016
FOR
VALUE RECEIVED, Agritek Holdings, Inc. (the “Company”) promises to pay to the order of GW HOLDING GROUP, LLC and its
authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of Twenty Seven Thousand
Dollars exactly (U.S. $27,000.00) on March 30, 2016 ("Maturity Date") and to pay interest on the principal amount
outstanding hereunder at the rate of 8% per annum commencing on March 30, 2015. The interest will be paid to the Holder in whose
name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of,
and interest on, this Note are payable at 137 Montague Street, Suite #291, Brooklyn, NY 11201, initially, and if changed, last
appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay
each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required
by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address
appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding
principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented
by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This
Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act") and
applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior
to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this
Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue,
and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing
to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a),
and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being
converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including
receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this
Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion
Price") for each share of Common Stock equal to 58% of the lowest closing bid price of the Common
Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange
upon which the Common Stock may be traded in the future ("Exchange"), for the eighteen
prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice
of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or
Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder's intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank.
Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company
experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 48% instead of 58% while that
“Chill” is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along
with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding
shares of the Common Stock of the Company.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company
in Common Stock ("Interest Shares"). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) The
Notes may be prepaid with the following penalties:
PREPAY
DATE |
PREPAY
AMOUNT |
<
30 days |
118%
of principal plus accrued interest |
31-
60 days |
124%
of principal plus accrued interest |
61-90
days |
130%
of principal plus accrued interest |
91-120
days |
136%
of principal plus accrued interest |
121-150
days |
142%
of principal plus accrued interest |
151-180
days |
148%
of principal plus accrued interest |
This
Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice
of redemption of the right to redeem shall be null and void.
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series
of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of
the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company
with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected
solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as
a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150%
of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such
Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares
of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e)
In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection
with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of
this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number
of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon
exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing
provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other
than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good
faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the
Holder in collecting any amount due under this Note.
8. If
one or more of the following described "Events of Default" shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy
relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under
federal or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the
Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(l)
The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n)
The Company shall lose the “bid” price for its stock in a market (including the OTCQB marketplace or other exchange).
Then,
or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have
been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option
of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per
annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In
the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th
day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case
of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at
maturity, the outstanding principal due under this Note shall increase by 10%.
If
the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging
an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Make-Whole
for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the
conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder
incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable
to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure
to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of conversion shares)]
The
Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day
from the time of the Holder’s written notice to the Company.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired
thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144 opinion
to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 9,310,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall
be cancelled. The Company shall pay all costs associated with issuing and delivering the shares. The company should at all times
reserve a minimum of four times the amount of shares required if the note would be fully converted. The Holder may reasonably
request increases from time to time to reserve such amounts.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be
performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and
the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of
New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: __________________
AGRITEK
HOLDINGS, INC.
By: __________________________________
Title: _________________________________
EXHIBIT
A
NOTICE
OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Agritek
Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date of Conversion: _______________________________________________________
Applicable Conversion
Price: ________________________________________________
Signature: ______________________________________________________________
[Print Name
of Holder and Title of Signer]
Address: _______________________________________________________________
_______________________________________________________________
SSN or EIN: ________________________
Shares are to be registered
in the following name: _________________________________
Name: _________________________________________________________________
Address: _______________________________________________________________
Tel: _______________________________
Fax: _______________________________
SSN or EIN: _________________________
Shares are to be sent or delivered
to the following account:
Account Name: __________________________________________________________
Address: _______________________________________________________________
EXHIBIT 31.1
Certifications
I, Justin Braune, certify that:
1. I have reviewed this
Quarterly Report on Form 10-Q of Agritek Holdings, Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15-d-15(f)) for the registrant and have:
a. Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b. Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report
any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
a. All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or
not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: May 18, 2015 |
/s/ Justin Braune |
|
Justin Braune |
|
Chief Executive Officer (principal executive officer) |
EXHIBIT 31.2
Certifications
I, Barry Hollander, certify that:
1. I have reviewed this
Quarterly Report on Form 10-Q of Agritek Holdings, Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15-d-15(f)) for the registrant and have:
a. Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b. Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report
any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
a. All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or
not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: May 18, 2015 |
/s/ Barry Hollander |
|
Barry Hollander |
|
Chief Financial Officer (principal financial officer) |
EXHIBIT
32.1
Section 1350
Certification
In
connection with the Quarterly Report on Form 10-Q of Agritek Holdings, Inc. (the "Company") for the three months ended
March 31, 2015 as filed with the Securities and Exchange Commission (the "Report"), I, Justin Braune, Chief Executive
Officer, and Barry Hollander, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1. The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: May 18, 2015 |
/s/ Justin Braune |
|
Justin Braune, Chief Executive Officer (principal executive officer) |
|
|
|
|
Date: May 18, 2015 |
/s/ Barry Hollander |
|
Barry Hollander, Chief Financial Officer (principal financial officer) |
This certification
accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except
to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into
any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference.
Agritek (CE) (USOTC:AGTK)
Historical Stock Chart
From Aug 2024 to Sep 2024
Agritek (CE) (USOTC:AGTK)
Historical Stock Chart
From Sep 2023 to Sep 2024