Item 2.01 Completion of Acquisition or Disposition of Assets
On February 23, 2017, Stony Hill Corp., a Nevada corporation (the “Company”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with mCig, Inc., a Nevada corporation (“mCig”). Pursuant to the terms and conditions of the Asset Purchase Agreement, the Company acquired 80% of those certain assets that comprise the VitaCBD business (the “Assets”) from mCig, and an option (the “Option”) to acquire the remaining 20% of assets related to the Assets for a purchase price of $200,000. The VitaCBD business is primarily a line of cannabidiol (“CBD”) retail products available for purchase at vitacbd.com, which products include CBD tinctures, ejuices, edibles, islates, salves, waxes, oils and capsules, as well as related trade names, social media, accounts and other related assets. Information on the vitacbd.com website is not part of the disclosure on this Current Report on Form 8-K.
The purchase price the Company paid for the Assets was $150,000 and 200,000 shares of the common stock of the Company. Additionally, on May 24, 2017, the Company is obligated issue (the “Second Stock Issuance”) to mCig either (i)150,000 shares of the Company’s common stock or (ii) that number of shares of common stock of the Company valued at $300,000, whichever has a lesser “Market Value,” defined as average of the closing prices for the common stock of the Company on any quotation tier of the OTC Markets, as reported by the OTC Markets, for the 90 trading days subsequent to February 23, 2017. If the market value of the Second Issuance on the anniversary date of such issuance is greater than $300,000, the additional value shall be offset against of the purchase price of the Option to purchase the remaining 20% of assets related to the Assets. The 200,000 shares of the common stock of the Company issued to mCig is equal to approximately 1.34% of the issued and outstanding shares of common stock of the Company.
If the average during any 7-day period during the first year following the Second Stock Issuance, the Market Value of the share of common stock of the Company owned by mCig is less than $550,000 (which amount represents the minimum target Market Value of the shares of common stock of the Company held by mCig immediately following the issuance of shares of common stock of the Company), then the Company is obligated to issue to mCig that additional number of common stock of the Company, on the one year anniversary date, to increase the Market Value of the total outstanding shares of common stock of the Company held by mCig to $550,000, without the payment of any additional consideration.
In connection with the Asset Purchase Agreement, the Company also entered into a Lock-up Agreement dated February 23, 2017, with mCig, pursuant to which mCig agreed to not resell any shares of common stock it received in connection with the Asset Purchase Agreement for a period of one year.
In connection with the Asset Purchase Agreement, the shares issued under the Second Stock Issuance are subject to a Security and Pledge Agreement, pursuant to which mCig pledged and granted a security interest in the shares issued under the Second Stock Issuance to the Company to cover claims by the Company against mCig that may arise under the terms and conditions of the Asset Purchase Agreement in the 90 days following the closing of the Asset Purchase Agreement.