Item
3.02 – Unregistered Sales of Equity Securities
As
a result of completion of the APA, certain amounts owing to Mercuriali Limited, Samuel Asculai, Drasko Puseljic and Frode Botnevik
became payable in shares of the Company and such shares were issued on December 2, 2016 as more particularly set out below.
The
Company issued a total of 168,235,216 common shares to Mercuriali Ltd. This issuance comprised of (a) the issuance of 8,826,595
common shares in conversion of $33,188 of debt at $0.00376 per share under a Termination and Settlement Agreement dated July 12,
2010; (b) the issuance of 50,094,947 common shares in conversion of $188,357 of debt at $0.00376 per share under a Loan Agreement
dated March 4, 2013, as amended September 20, 2013, March 3, 2014, September 29, 2015, January 22, 2016 and March 21, 2016 (the
“Loan Agreements”); (c) the issuance of 71,232,222 common shares in conversion of $128,218 of debt at $0.0018 per
share under the Loan Agreements; (d) the issuance of 27,261,111 common shares in conversion of $49,070 of debt at $0.0018 per
share under a Consultancy Agreement dated March 5, 2013 as amended March 3, 2014, August 1, 2015, March 21, 2016, and October
1, 2016 (the “Mercuriali Consultancy Agreement”); and (e) the issuance of 10,820,340 common shares in conversion of
$110,029 of debt at $0.01017 under the Mercuriali Consultancy Agreement.
The
Company issued a total of 20,558,939 common shares to Samuel Asculai. This issuance comprised of (a) the issuance of 16,333,333
common shares in conversion of $29,400 of debt at $0.0018 per share under a Consultancy Agreement at dated March 5, 2013 as amended
March 3, 2014, August 1, 2015, March 21, 2016, and October 1, 2016 (the “Asculai Consultancy Agreement”); and (b)
the issuance of 4,225,606 common shares in conversion of $42,969 of debt at $0.01017 per share under the Asculai Consultancy Agreement.
The
Company issued a total of 31,213,859 common shares to Drasko Puseljic. This issuance comprised of (a) the issuance of 10,654,920
common shares in conversion of $40,062 of debt at $0.00376 per share under a Termination Agreement dated March 5, 2013; (b) the
issuance of 16,333,333 common shares in conversion of $29,400 of debt at $0.0018 per share under an Employment Agreement dated
March 5, 2013 as amended March 3, 2014, August 1, 2015, March 21, 2016, and October 1, 2016 (the “Puseljic Employment Agreement”);
and (c) the issuance of 4,225,606 common shares in conversion of $42,969 of debt at $0.01017 per share under the Puseljic Employment
Agreement.
The
Company issued a total of 2,447,458 common shares to Frode Botnevik. This issuance comprised of (a) the issuance of 1,944,444
common shares in conversion of $3,500 of debt at $0.0018 per share under a Directors Service Agreement dated August 1, 2015 as
amended March 21, 2016 and October 1, 2016 (the “Botnevik Services Agreement”); and (b) the issuance of 503,013 common
shares in conversion of $5,115 of debt at $0.01017 per share under the Botnevik Services Agreement.
The
sale of all the securities set out above was made in reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933.
The
conversion price of $0.01017 is based on the estimated value of the consideration attributable to equity shareholders on a fully
diluted basis in pounds sterling translated into US dollars at the closing sterling/dollar interbank rate on October 19, 2016.
This price is subject to change based on any adjustments under the APA and the exchange rate at completion. Any adjustments to
the number of shares to be issued will be made to the number of shares to be issued to related parties under the consultancy,
employment and service agreements for services rendered after October 20, 2016.
On
conversion of the above advances Mercuriali Limited and Dr. Asculai released all security held over all the assets of the Company
as required by the APA.
*The
UK Pound Sterling (£) amount of the total consideration amount have been converted into US dollars at the closing US$/£
sterling interbank spot rate on December 2, 2016 of 1.2675 for the convenience of readers.
The
foregoing description of APA and the conversions does not purport to be complete and is qualified in its entirety by reference
to the complete text of the APA, and the amendments to the Consulting Agreements, Employment Agreement and Services Agreement
which were filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to the Company’s Current Report on Form 8-K filed on October
5, 2016 and Schedule 14C Information Statement filed October 31, 2016 all of which are incorporated herein by reference.