The interim consolidated financial statements included herein are unaudited but reflect, in management’s opinion, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of our financial position and the results of our operations for the interim periods presented. Because of the nature of our business, the results of operations for the quarterly period ended January 31, 2020 are not necessarily indicative of the results that may be expected for the full fiscal year.
(Expressed in U.S. dollars)
(The accompanying notes are an integral part of these Consolidated financial statements)
(The accompanying notes are an integral part of these Consolidated financial statements)
(The accompanying notes are an integral part of these Consolidated financial statements)
(The accompanying notes are an integral part of these Consolidated financial statements)
Notes to the Consolidated Financial Statements
January 31, 2020
(Expressed in U.S. dollars)
(Unaudited)
1. Nature of Operations and Continuance of Business
Green Hygienics Holdings Inc. (the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources, Inc. On June 30, 2010, the name was changed to Takedown Entertainment Inc. On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc.
The Company is an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol (“CBD”). The Hemp Farming Act of 2018 removed hemp from Schedule I controlled substances (defined as cannabis with less than 0.3% THC) making it an ordinary agricultural commodity.
The Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products; creating trusted global consumer brands; developing valuable IP; and growing the Company rapidly through strategic acquisitions. With direct regard to acquisitions, the Company acts as a business accelerator and a vertical integrator focusing to support rapid growth and development of companies with extraordinary potential.
On June 10, 2019, the Company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five-year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes.
On June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures, a grower registration for industrial hemp cultivation.
On July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina.
The licenses were granted to the Company’s newly formed subsidiary, Coastal Labs North Carolina LLC, by the North Carolina Industrial Hemp Commission. The Company’s second subsidiary in the state is Green Hygienics North Carolina LLC, which will be partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next year’s cultivation.
The Company created Coastal labs and Green Hygienics near the end of July. There was no accounting activity prior to January 31, 2020. The Company’s policy is to consolidate all entities which we control and or own more than 51% of the voting stock. These entities are expected to have accounting activity during subsequent periods and will be consolidated accordingly.
On August 26, 2019, the Company completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,510,000. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses.
Going Concern
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated revenues of $55,774 since 2013. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As of January 31, 2020, the Company has a working capital deficiency of $2,224,249 and has an accumulated deficit of $46,829,684 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Significant Accounting Policies
(a) Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars.
(b) Principles of Consolidation
These financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are all entities (including structured entities) which the Company controls. For accounting purposes, control is established by an investor when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. All inter-company balances and transactions are eliminated.
(c) Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
(d) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.
(e) Inventory
Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary. As of the date of this report, no reserve was deemed necessary.
(f) Impairment of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.
(g) Related Party Transactions
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.
(h) Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
2. Significant Accounting Policies (continued)
(i) Foreign Currency Translation
The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.
(j) Financial Instruments and Fair Value Measures
ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
(k) Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
(l) Revenue
Pursuant to ASC 606, Revenue from contracts with customers. As of the date of this report, the Company has not recognized any revenue related to the business. The only revenue recognized to date is the land use rental income from San Diego Gas and Electric Company in the amount of $55,784. The term of the rental agreement is in effect until December 2020 with a monthly payment of $17,000.
(m) Leases
Pursuant to ASC 842, transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. As of the date of this report, the Company has no material transactions to report.
2. Significant Accounting Policies (continued)
(n) Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of January 31, 2020, the Company does not have any potentially dilutive shares.
(o) Comprehensive Loss
ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.
(p) Recent Accounting Pronouncements
In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. During the three months ended January 31, 2020 the Company assessed the impact this guidance had on its financial statements and concluded that at present ASU No. 2018-10 has no impact on its financial statements.
3. Fixed Assets
Fixed assets are recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.
Fixed assets consist of the following:
|
|
Useful Life
|
|
Balance at
July 31,
2019
$
|
|
|
Additions
$
|
|
|
Accumulated Depreciation
$
|
|
|
Balance at
January 31,
2020
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production equipment
|
|
5 years
|
|
|
46,379
|
|
|
|
305,531
|
|
|
|
(28,137
|
)
|
|
|
323,773
|
|
Furniture and office equipment
|
|
5 years
|
|
|
8,102
|
|
|
|
-
|
|
|
|
(813
|
)
|
|
|
7,289
|
|
Buildings and improvements
|
|
15 years
|
|
|
90,657
|
|
|
|
96,086
|
|
|
|
(5,514
|
)
|
|
|
181,229
|
|
Land
|
|
|
|
|
-
|
|
|
|
4,212,362
|
|
|
|
-
|
|
|
|
4,212,362
|
|
|
|
|
|
|
145,138
|
|
|
|
4,613,979
|
|
|
|
(34,464
|
)
|
|
|
4,724,653
|
|
Fixed asset costs are being depreciated using the straight-line method based on the useful life of the asset.
On August 26, 2019, the Company completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,510,000. The Company will utilize the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses. On August 23, 2019, the Company entered into an agreement payable with the Vendor of the Property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest only at the rate of 6% per annum. The debt is secured by a Promissory Note secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024. On August 23, 2019 the Company entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. The debt is secured by a Promissory Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 15, 2024. To date we have spent $184,342 in property and building improvements and have acquired over $300,000 worth of production equipment.
4. Loans Payable
(a) As of January 31, 2020, the Company owes $155,250 (2019 - $nil) plus accrued interest of $8,336 (2018 - $nil) to a non-related party, which bears interest at the rate of 10% per annum, is unsecured and was due and payable on or before December 19, 2019. This loan payable is in default, and the Company is currently in negotiations to extend the maturity date.
(b) As of January 31, 2020, the Company owes $125,000 (2019 - $nil) to a non-related party. On December 19, 2019, the Company entered into an securities purchase agreement, which was amended on January 8, 2020 (collectively, the “SPA”) with Triton Funds, LP, an accredited investor (“Triton”), pursuant to which the Company issued and sold to Triton (i) a discounted convertible promissory note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share, for an aggregate purchase price of $600,000. If not exercised, the Warrant will expire at 5:00 pm EST on December 31, 2021.
On December 31, 2019, Triton paid an initial purchase price of $100,000 at the initial closing. The Company received net proceeds of $85,000 after paying fees of $15,000. The purchase price balance of $500,000 was to be paid upon a registration statement for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant being declared effective by the Securities & Exchange Commission (the “SEC”). As of January 31, 2020, the Note was vested only as to an aggregate principal amount of $125,000, and the Warrant was vested only as to the right to purchase 41,667 shares. The remainder of the Note (as to an aggregate principal amount of $625,000) and the remainder of the Warrant (as to the right to purchase up to 203,333 shares) was to vest if, and only if, Triton pays the purchase price balance of $500,000. The original issue discount on the Note for the initial purchase price is $25,000, and the original issue discount for the Note, fully vested, is $150,000.
The Note can be prepaid at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”); provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75% of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.
The original issue discount for the Warrant is $85,000 as of January 31, 2020. The Warrants was valued using a Black Scholes model which created a discount of the full value of cash received, bringing the full discount on the note to $125,000, which is to be amortized over the term of the Note. Through January 31, 2020, $7,363 of the discount was amortized, bringing the balance of the note to $7,363.
5. Agreement Payable
As of January 31, 2020, the Company owes $173,119 (2018 - $nil) to a non-related party and requires monthly payments of $4290.40 including interest at the rate of 5.66% per annum for a period of 48 months commencing November 1, 2019. The loan is secured by a collateral charge on production equipment.
6. Mortgage Payable
As of January 31, 2020, the Company owes $2,750,000 (2018 - $nil) to a non-related party, with monthly payments of interest only at the rate of 6% per annum. The debt is secured by a Promissory Note secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024.
7. Second Mortgage Payable
As of January 31, 2020, the Company owes $1,760,000 (2018 - $nil) to a non-related party, with monthly payments of interest only at the rate of 15% per annum. The debt is secured by a Promissory Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 15, 2024.
8. Related Party Transactions
(a) As of January 31, 2020, the Company owes $56,824 (July 31, 2019 - $56,824) to a company controlled by the CEO of the Company. The debt bears interest at 5% per annum, is unsecured, and is due on demand. As of January 31, 2020, accrued interest of $16,257 (July 31, 2019 - $14,825) has been included in amounts due to related parties.
(b) As of January 31, 2020, the Company owes $1,775,522 (July 31, 2019 - $696,074) to a company controlled by the CEO of the Company. The debt includes funds advanced to the Company for business development purposes, is non-interest bearing, unsecured, and due on demand.
(c) As of January 31, 2020, the Company owes $45,000 (July 31, 2019 - $nil) to the CEO of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.
(d) As of January 31, 2020, the Company owes $35,000 (July 31, 2019 - $27,500) to a former director of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.
(e) As of January 31, 2020, the Company owes $45,000 (July 31, 2019 - $15,000) to the CEO of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.
(f) As of January 31, 2020, the Company owes $45,000 (July 31, 2019 - $15,000) to the President of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.
(g) As of January 31, 2020, the Company owes $5,000 (July 31, 2019 - $nil) to the CTO of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.
(h) As of January 31, 2020, the Company owes $25,833 (July 31, 2019 - $nil) to the Chief Agricultural Operations Manager of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is included in accounts payable.
(i) During the six months ended January 31, 2020, the Company incurred $45,000 (2019 - $nil) in consulting fees to the CEO of the Company.
(j) During the six months ended January 31, 2020, the Company incurred $15,000 (2019 - $7,500) in consulting fees to the CTO of the Company.
(k) During the six months ended January 31, 2020, the Company incurred $7,500 (2019 - $7,500) in consulting fees to a former VP and former Director of the Company.
(l) During the six months ended January 31, 2020, the Company incurred $45,000 (2019 - $nil) in consulting fees to the President of a subsidiary of the Company.
(m) During the six months ended January 31, 2020, the Company incurred $45,000 (2019 - $nil) in consulting fees to the CEO of a subsidiary of the Company.
(n) Imputed interest of $55,622 for the six months ended January 31, 2020 and $22,009 for the year ended July 31, 2019 has been recorded for the above related party debts.
9. Share Issuances
(a) During the six months ended January 31, 2020, the Company issued 250,000 common shares to the CEO of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(b) During the six months ended January 31, 2020, the Company issued 50,000 common shares to the Chief Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(c) During the six months ended January 31, 2020, the Company issued 200,000 common shares to the Chief Project Manager of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(d) During the six months ended January 31, 2020, the Company issued 25,000 common shares to the Assistant Agricultural Operations Manager of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(e) During the six months ended January 31, 2020, the Company issued 300,000 common shares to non-related parties in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(f) During the six months ended January 31, 2020, the Company agreed to issue 100,000 common shares to an Independent Director of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(g) During the six months ended January 31, 2020, the Company agreed to issue 250,000 common shares to the Senior Vice President of Corporate Development of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(h) During the six months ended January 31, 2020, the Company agreed to issue 250,000 common shares to a Senior Vice President of Business Development – Agriculture Division of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
10. Commitments/Contingencies
(a) On September 1, 2018, the Company entered into a consulting agreement with the CTO, Jeff Palumbo, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two years commencing August 1, 2018. The agreement can be extended to four years upon mutual agreement. Upon completion of a minimum $1,000,000 financing, the Company will increase this payment to $5,000 per month. Upon completion of a minimum $5,000,000 financing or profitable operations, the Company will increase this payment to an amount mutually agreed upon that reflects the market rate for services provided by the CTO.
(b) On April 1, 2019, the Company entered into a consulting agreement with the Chief Development Officer of the Company, Hamid Rowshan, whereby the Company agreed to pay a to be negotiated consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.
(c) On April 1, 2019, the Company entered into a consulting agreement with the Business Development Officer of the Company, Paymon Omidi, whereby the Company agreed to pay a to be negotiated consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.
(d) On April 1, 2019, the Company entered into a consulting agreement with the Head of Research and Development of a subsidiary of the Company, Kiarash Mirkia. Pursuant to the terms of the agreement, the Company issued the consultant 50,000 common shares upon execution of the agreement.
(e) On June 1, 2019, the Company entered into a consulting agreement with the CEO of a subsidiary of the Company, Kavan Thanasith, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.
(f) On June 1, 2019, the Company entered into a consulting agreement with the President of a subsidiary of the Company, Travis Chrisman, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.
(g) On August 1, 2019, the Company entered into a consulting agreement with the CEO of the Company, Ron Loudoun, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of three years and whereby the Company granted the Consultant an option to acquire 250,000 common shares of the Company or 250,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement for an additional 2 years.
(h) On August 1, 2019, the Company entered into a consulting agreement with the Chief Agricultural Operations Manager, Anthony Curci, whereby the Company agreed to pay a signing bonus of $6,000 and a consulting fee of $6,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the performance with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire 25,000 common shares of the Company or 25,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement.
(i) On August 1, 2019, the Company entered into a consulting agreement with the Chief Project Manager, Greg Stinson, whereby the Company agreed to pay a signing bonus of $15,000 and a consulting fee of $7,500 per month for a period of five years. The Company also granted the Consultant an option to acquire 100,000 common shares of the Company or 100,000 Options priced at $0.50 per share upon execution of the consulting agreement and an additional 100,000 common shares or Options priced at 10% below market value at the date of grant six months after the execution of the agreement.
(j) On August 1, 2019, the Company entered into a consulting agreement with the Assistant Agricultural Operations Manager, Carol Snyder, whereby the Company agreed to pay a signing bonus of $4,000 and a consulting fee of $2,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the performance with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire 25,000 common shares of the Company or Options at $0.50 per share upon execution of the consulting agreement and an additional 25,000 common shares or Options at 10% below market value at the date of grant six months after the execution of the agreement.
(k) During the six months ended January 31, 2020, the Company agreed to issue 100,000 common shares to an Independent Director of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement. The shares were issued in February, 2020.
(l) During the six months ended January 31, 2020, the Company agreed to issue 250,000 common shares to the Senior Vice President of Corporate Development of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement. The shares were issued in February, 2020.
(m) During the six months ended January 31, 2020, the Company agreed to issue 250,000 common shares to a Senior Vice President of Business Development – Agriculture Division of the Company in exchange for consulting services. The shares were valued based on OTC’s closing trade price on the date of the agreement. The shares were issued in February, 2020.
(n) On December 31, 2019, the Company granted to Triton Funds LP a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000 shares of the Company’s common stock at an exercise price of $3.00 per share.
There is currently no pending or threatened litigation.
11. Subsequent Events
As set forth in Note 4(b) above, on December 19, 2019, the Company entered into the SPA with Triton, pursuant to which the Company issued and sold to Triton the Note and the Warrant. On December 31, 2019, Triton paid an initial purchase price of $100,000 at the initial closing. The Company received net proceeds of $85,000 after paying fees of $15,000. The purchase price balance of $500,000 was to be paid upon a registration statement for the registration of the secondary offering and resale of the shares issuable upon conversion of the Note and exercise of the Warrant being declared effective by the Securities & Exchange Commission (the “SEC”). As of January 31, 2020, the Note was vested only as to an aggregate principal amount of $125,000, and the Warrant was vested only as to the right to purchase 41,667 shares. The remainder of the Note (as to an aggregate principal amount of $625,000) and the remainder of the Warrant (as to the right to purchase up to 203,333 shares) was to vest if, and only if, Triton pays the purchase price balance of $500,000. The original issue discount on the Note for the initial purchase price is $25,000, and the original issue discount for the Note, fully vested, is $150,000. The registration was declared effective by the SEC on February 11, 2020. Triton paid the purchase balance, and the Note and Warrant fully vested, on February 20, 2020.
On February 15, 2020, the Company agreed to issue an annual allocation of 100,000 common shares (or options to acquire same) to the Chief Financial Officer of the Company, of which 50,000 shares (or options) vested immediately and 50,000 shares (or options) vest at the end of the initial six month term, in exchange for consulting services.
On February 25, 2020, the Company issued 300,000 shares pursuant to certain consulting agreements executed in November, 2019.