ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On June 21, 2017, Eco Science Solutions, Inc. (ESSI) entered into a Stock Purchase Agreement (“SPA”) with the shareholders of Ga Du Corporation, a Nevada corporation (“Ga Du”, “Sellers”), wherein, ESSI agreed to purchase, and Sellers agreed to sell 100% of the shares of capital stock of Ga Du to ESSI, in exchange of fifteen million (15,000,000) shares of ESSI Common Stock, that shall be issued to Seller’s, pursuant to the SPA. Among the additional material terms of the SPA is Seller’s right to receive additional consideration in the form of cash payment(s) payable only upon the achievement of certain milestones (the “Milestone Payments”) described in
Exhibit B
of the SPA provided that: (i) all of the Milestones must be reached within not more than twelve (12) months from the date of the execution of this Agreement; (ii) each Milestone shall be treated as distinct and the failure to reach any single Milestone shall not effect the availability of the Milestone Payment(s) related to any other Milestone(s).
Additionally, ESSI, on June 21, 2017, entered into Employment and/or Consulting Agreements with each of the Sellers; pursuant to their respective agreements with the wholly owned subsidiary of ESSI, Ga Du Corporation, John Lewis will serve as the Chief Executive Officer of Ga Du Corporation, Andy Tucker will act as Special Consultant to Ga Du Corporation, Dante Jones will serve as a Special Advisor to Ga Du, and Wendy Maguire will serve as the Vice President of Business Development of Ga Du.
Further, ESSI entered into Employment Agreements with Michael D. Rountree, who will serve as Chief Operating Officer of ESSI, and with S. Randall Oveson, who will serve as the Chief Operation Officer of Ga Du Corporation.
Each of the Employment and/or Consulting Agreements are for a term of two years, renewable upon mutual consent, with an annual salary of $120,000 per year and Options to purchase shares of ESSI’s common stock, which will vest in two years.
Additionally, each of the Employees/Consultant Agreements that ESSI entered into pursuant to the Ga Du Corporation transaction executed a Lock Up Leak Out Agreement relative to the exercise of Options.
Following the closing of the SPA, Ga Du Corporation will become and remain a wholly owned subsidiary of ESSI, bringing to ESSI a Financial Services Platform, Testing Labs, as well as Inventory Control and Advisory Software Platforms (Summaries of each respective business segment are attached hereto as Exhibits 99.1, 99.2, and 99.3).
ESSI management believes that the acquisition of the Ga Du Corporation could, over time, increase the business opportunities available to the Company, by offering services throughout the newly developing cannabis industry and the always progressive alternative health and wellness industry.
Previously, on May 2, 2017, ESSI entered into a Letter of Intent with Ga Du Bank, a banking platform with a charter through the Southern Cherokee Nation Red Fire People (“SCNRFP”). After completing its due diligence, ESSI determined that while the banking platform technology was capable and had many advantages, the overall charter and the ability to engage in some of the desired commercial operations through the SCNRFP was not sufficiently developed by SCN
RFP to meet the expectations of ESSI. In light of this, each of ESSI and Ga Du determined not to proceed with the acquisition of the banking charter. Ga Du; however, has continued the refinement of its platform for data capture, financial services, and compliance platform, to develop mobile enterprise applications and to work with existing commercial banks, along with its other enterprise services activities. Ga Du’s management team determined that the direction and vision of ESSI aligned with the interests of Ga Du, and seeing the potential to create additional revenue streams for a combined entity, the Ga Du management team agreed unanimously to become a subsidiary of ESSI and bring to market its other activities under the Eco Sciences brand. With the acquisition of Ga Du Corporation, ESSI has now acquired the Ga Du technology, along with its other activities such as Certified Laboratory Testing and Retail Inventory Control, bringing important enterprise technologies in-house.
Background on Ga Du Corporation and Ga Du’s nature of relationship with ESSI
Ga Du Corporation (“Ga Du”) was originally an association of individuals who had experience in one or more phases of the Cannabis industry (see Bios below) and wished to collaborate to develop and/or discover business opportunities in the industry that were unrelated to sale of Cannabis products. Ga Du felt that there was a lack of business sophistication and business tools in the industry as a whole, and that a significant opportunity existed to supply those.
To that end, Ga Du initially focused on two principal areas of business:
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Quality control, including: (i) verification of quality and content of cannabis consumables, primarily with a state of the art laboratory design and process; (ii) tracking of process from raw materials to finished product, with some overlap into the Ga Du inventory control design and software; and, (iii) handling techniques.
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2)
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Business and enterprise tools, including: (i) inventory control systems; (ii) data management to include both inventory controls as well as customer data; (iii) management and professional advisory services; (iv) branding and package design; (v) workflow management; and, (vi) financial services to include compliance and membership/client data collection and management;
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Below is a summary of the key components of the current Ga Du portfolio
With its quality control initiative, Ga Du has developed a state of the art laboratory design with proprietary processes and methodology, entered into an agreement with an equipment manufacturer and developed tracking software, while putting off developing advisory services concerning product handling.
As to business tools, Ga Du has created a relationship with a design and marketing group and created branding and marketing designs, while setting the stage for a long-term collaborative relationship with a marketing advisory group. Ga Du has also developed a data management software and an inventory control software and system. Ga Du began this development process in early 2016 and continues to develop and test these systems. At approximately the same time Ga Du began work on security software to capture and retain customer and membership data, including the kind of data believed to be necessary to eventually accommodate Know Your Customer (KYC) and compliance issue for purposes of various kinds of financial services; and, (ii) developed a flexible mobile payment platform to facilitate payment for all kinds of services and products in collaboration with an experienced provider.
Ga Du continues to refine and further develop financial services software for bank account opening, compliance and secure transfers.
In early 2017, one of the Ga Du team members, Mr. Andy Tucker was contacted by the Chief of the State of Southern Cherokee Nation and Red Fire People (“SCRFP”). The Chief indicated that he believed that an opportunity existed to market banking and merchant services to cannabis merchants. As discussions developed, the Chief made several key representations: (i) that SCNRFP had opened a central bank (the “Central Bank”); (ii) that SCNRFP was a sovereign nation recognized by several other nations, and that this sovereignty had been clarified by opinion letter and treaty as to the United States; (iii) that SCNRFP had a correspondent relationship with HSBC Bank in London; (iv) that the Central Bank was authorized by Visa and Master Card to engage in merchant transactions with cannabis merchants and would be acting as its own “interchange” (payment processing); (v) that a charter from the Central Bank would permit Ga Du to engage in offering banking services; (vi) that SCNRFP would deposit up to $300 million in a bank to be organized by Ga Du if Ga Du was prepared to develop an automated security and compliance system, with funds transfer software capability.
Subsequently, Ga Du began a due diligence process that consumed several months. During that process, Ga Du obtained a license from SCNRFP, but did not commence to offer banking services. However, Ga Du did survey the market for banking services and, in particular, depository services. In doing so, Ga Du was careful to ask what the interest might be to move cash into deposits in bank accounts should cannabis businesses have the ability to open accounts consistent with the Cole Memorandum. Ga Du discovered an enormous interest and received estimates from third parties of very significant depository capabilities, in addition to those deposits promised by SCNRFP.
As Ga Du’s relationship with SCNRFP developed, Ga Du continued a due diligence process and became involved in advising and assisting SCNRFP as to their banking proposal. Ga Du discovered that the correspondent relationship and merchant relationships, despite representation, were not firm, and had not, in fact, been verified.
Concurrently with work previously commenced on a proprietary banking and compliance software, Ga Du commenced to seek a correspondent relationship with various banks and to develop merchant processing relationship(s). During the later period of this process, Ga Du was introduced to Eco Science Solutions Inc. (“ESSI”) by Mr. Randal Oveson. Mr. Oveson was aware of Ga Du’s work with SCNRFP. Ga Du indicated to ESSI that it believed that it would soon have a solution for cannabis banking with SCNRFP. While Ga Du had received a license from SCNRFP it had not yet received an opinion letter as to sovereignty. Ga Du continued its development work on merchant processing and other payment solutions to assist merchants to avoid the handling of large amounts of cash, and on a depository system for taking cash deposits and digitizing such deposits.
ESSI management clearly indicated to Ga Du that it would require its own due diligence and final confirmation of a banking capability to conclude a transaction; however, both parties agreed the present stage of negotiations required a formalized Letter of Intent surrounding a potential transaction in the event that due diligence was satisfactorily completed.
Shortly after the suspension of trading of ESSI, SCNRFP terminated its relationship with Ga Du. However, by that time Ga Du had developed much of its enterprise solutions business (the “Enterprise Solutions”) including: (i) its laboratory system identified above and called “Lab in a Box”; (ii) development of a data capture, retrieval and management system; (iii) largely completed its development of a complex mobile payment platform; (iv) completed its inventory management software; and (iv) completed the KYC, security and account opening software for potential future use, along with adapting this software to membership, registration and other applications.
Because Ga Du has developed a great many Enterprise Solutions, and in-roads to provide financial services to the Cannabis industry, Management believes there are tremendous complimentary aspects that, when combined, complete one segment of the ESSI business plan; exploration of eco-friendly technology and properties, which align with our health and wellness applications. Alongside of our Herbo Applications, moving forward in the cannabis industry and developing solutions that comport with the cannabis industry, may position ESSI to become a single source provider to consumers, dispensary owners/operators, smoke shops, and supporting professionals in the industry.
How Ga Du is related to ESSI’s operating business
The Cannabis industry that ESSI and Ga Du are working to penetrate, remains fragmented, with rather small owner/operators, all whom are servicing their customer base with limited technologies, unsophisticated business processes and non-existent financial services. While forecasts have the Medical Marijuana industry as quite large, there remains a lack of technologies, business process and financial services that allow for the enterprise and the consumer to transact in an efficient manner. Management believes an analogy can be made that when Amazon.com entered into consumer retail market, the overall categories they targeted presented similar inefficiencies. This premise implies that there are tremendous ecommerce and enterprise opportunities in front of a combined Eco Science Solutions and Ga Du.
ESSI has developed, and offers, a consumer engagement application; e-wallet; location and delivery technologies; e-commerce platform; and a rich educational content platform.
Ga Du has developed, and offers, a security software to capture and retain customer and membership data, to accommodate KYC and compliancy matters for various kinds of financial services; a flexible mobile payment platform to facilitate payment for all kinds of services and products in collaboration with an experienced provider.
When combined, ESSI and Ga Du will have the capability to vertically satisfy the entire transaction flow from consumer to enterprise with a keen focus on the underserved Cannabis industry. The parties believe that this first mover advantage may give the Company a significant competitive advantage on a long-term basis.
Introduction fees
On June 21, 2017, ESSI agreed to the issuance of 1,000,000 restricted shares of the Company’s Common Stock to DEEPSEA SOLUTIONS, LLC, in consideration for arranging the transaction between the Company and Ga Du Corporation Shareholders.