Item 1.01
Entry into a Material Definitive Agreement.
On March 22, 2019, Mineral Mountain Mining & Milling Company the “Company”) entered into two Share Exchange Agreements (collectively the “SEA’s”) with: (i) PR345, Inc., a newly organized Texas corporation (“PR345”); and (ii) NuAxess 2, Inc., a newly organized Delaware corporation (NuAxess”). Pursuant to the SEA’s, which were filed as Exhibits 2.1 and 2.2 to the March 27, 2019 Form 8-K, the Company agreed to acquire all of the capital stock of P345 and NuAxess in exchange of the issuance of shares of Series C and D Preferred Stock, par value $0.10 per share, to the shareholders of PR345 and NuAxess as discussed more fully below.
The entry into the two SEA’s was authorized and approved by resolutions of the Company’s Board of Directors (the “Board”) on March 17, 2019 in furtherance of the Company’s plan to diversify its business beyond its historic mining operations (the “MMMM Mining Operations”), as disclosed in the Company registration statement on Form S-1 that was declared effective by the SEC on March 8, 2019, Registration No. 333-227839.
PR345 is a minority-owned business enterprise that was formed to provide staffing services to a variety of industries as well as back office services including accounting, payroll and a full complement of HR benefits in its role as a Professional Employer Organization (“PEO”). NuAxess serves as a full service financial, employee benefit and insurance consulting company providing health plans and comprehensive benefits to employees of small and medium size businesses.
Upon the closing of the SEA’s (the “Closing”), PR345 and NuAxess will become wholly-owned subsidiaries of the Company in exchange for the issuance of 400,000 shares of newly designated Series C Convertible Preferred Stock (the “Series C Shares”) as follows: (i) 200,000 Series C Shares issuable to Sunlight Financial, LLC (“Sunlight”), a Texas limited liability company and the control shareholder of PR345, owning 75% of its capital stock; and (ii) 200,000 Series C Shares issuable to IDH Holdings 2, Inc. (“IDH Holdings”), a Delaware corporation and the control shareholder of NuAxess, owning 75% of the capital stock its capital stock.
Upon the Closing, the Company will also issue the minority shareholders of PR345 and NuAxess a total of 400,000 shares of newly designated Series D Convertible Preferred Stock (“the Series D Shares”) as follows: (i) 200,000 Series D Shares to Draper, Inc (“Draper”), a Nevada corporation: and (ii) 200,000 Series D Shares to Carriage House, Inc (“Carriage House”), a Delaware corporation, in exchange for all of their shares in NuAxess and PR345, representing 12.5% and 12.5% respectively.
The Series C and Series D Preferred Stock will represent 92.5% of the outstanding capital stock of the Company as of the date of Closing. Reference is made to the disclosure under Item 3.02, “Unregistered Sales of Equity Securities” below. The outstanding common stock holders of the Company at the Closing shall retain 7.5% of the issued and outstanding common stock, par value $0.001 (the “Common Stock”), which Common Stock will be subject to dilution upon the conversion on existing convertible notes and subsequently issued convertible note issued for the purpose of funding the MMMM Mining Operations, subject to certain anti-dilution protections as set forth in the SEA’s.
In addition, at the Closing, the Company shall place in escrow the shares of Series B Super Voting Preferred Stock (the “Super Voting Shares”) issued in the name of its Chairman, Sheldon Karasik, to be released to IDH Holdings or its designee at or after Closing, which shares were issued on March 21, 2019, pursuant to resolutions of the Board of Directors dated November 5, 2018. The Certificate of Designation for the Super Voting Shares was attached as Exhibit 99.1 to the Company’s Form 8-K filed on March 21, 2019.
Reference is made by the Company to the SEA’s attached as Exhibits 2.1 and 2.2 to the March 27, 2019 Form 8-K for a complete description of the Conditions of Closing.
The Company currently owns and controls two wholly-owned subsidiaries, Nomadic Gold Mines, Inc. and Lander Gold Mines, Inc. (collectively the “MMMM Mining Subsidiaries”), each of which has exclusive rights to and/or owns mining claims in the States of Alaska and Wyoming, respectively. Since its inception, the Company has not generated significant revenues and during the past two fiscal years ended September 30, 2017 and 2018, the Company generated no operational revenues and had limited liquid assets. The Company believes that in order for it to be successful in its mining operations and in order to diversify its business and generate revenue from its mining and other business operations, it is in its best interests and in the interests of its shareholders to enter into separate share exchange agreements with NuAxess and PR345.
The Company’s Board determined to enter into the NuAxess SEA because of the reasonably based projected growth potential and new business opportunities afforded by NuAxess’ business plan which, in substance, provides that NuAxess shall: (i) serve as a full service financial, employee benefit and insurance consulting company offering, either directly or indirectly, through proven third parties, innovative ways to provide employees of client companies with affordable and manageable health plans and comprehensive benefits, based upon a new system being developed throughout the country for the rapidly expanding market of small and medium-sized businesses (“SMBs”) which are experiencing significant problems with their existing programs, to the extent that they even provide programs because of their costs and complexities; (ii) creating an international professional employer association (“IPEA”) headquartered in San Juan, Puerto Rico, that will sponsor and provide professional outreach programs offering health insurance, healthcare and financial education to its PEO and financial services members globally; and (iii) additionally, the IPEA will offer these and other services to leading rural hospital providers via a proprietary program called ‘Community Health Exchanges’, which will work directly with SMB employers in rural communities providing access to private insured health plans with contracted medical services through the rural hospitals.
The Company’s Board also determined to enter into the PR345 SEA because of the reasonably based projected growth potential and new business opportunities afforded by PR345’s business plan which, in substance, provides that PR345, a designated minority-owned business enterprise consulting firm, shall: (i) provide specialized staffing services for a variety of professional industries including, but not limited to, medical, education, financial services, technology and hospitality, among others; (ii) provide specific back office services including accounting, payroll, and a full complement of Human Resource (“HR”) benefits; and (iii) either directly or indirectly through third-party relationships and strategic affiliations, acts as a PEO.
The SEA’s provide that PR345 and/or NuAxess shall provide or otherwise secure for the benefit of the MMMM Mining Operations, which shall be operated by the MMMM Mining Subsidiaries, 75% of which will be owned by a private entity and 25% of which will be retained by the Company after the Closing. The new privately- owned company, the owner of 75% of the MMMM Mining Subsidiaries, will assume responsibility for 100% of the liabilities of the MMMM Mining Subsidiaries.
The Closing of both SEA’s is subject to the satisfaction of the conditions to Closing set forth in Section 1.03 of the respective SEA’s at or prior to the Closing, which shall take place during the week of April 1, 2019 or shortly thereafter. The conditions of Closing include, but are not limited to: (i) filing of Certificates of Designation for the Series B Super Voting Preferred Stock (which has been filed with the Secretary of State of Idaho) and the Series C and Series D Preferred Stock (which have been submitted for filing with the Secretary of State of Idaho); (ii) Felix Keller, a member of the Board since October 23, 2017, shall resign as a member of the Board, which resignation shall be executed and delivered to the Board on or prior to the Closing; (iii) Sheldon Karasik shall submit to the Board his resignation as CEO of the Company; (iv) the Board shall approve the appointment of Pat Dileo as new CEO of the Company and, pursuant to the terms of the SEA’s, ratify and approve the appointment of Carl Dorvil, Pat Dileo and Derrick Chambers to the Board, joining Sheldon Karasik and Michael Miller, on the newly constituted Board of Directors; (v) NuAxess and/or PR345 shall pay $100,000 into an account designated by the management of the MMMM Mining Subsidiaries as working capital for the operations of those subsidiaries; and (vi) the Company, NuAxess and PR345 shall amend and/or modify the Equity Financing Agreement with Crown Bridge Partners, LLC (“CBP”), dated October 1, 2018, to provide that 20% of all proceeds from the Equity Financing Agreement, will be paid and deposited into an account designated by the MMMM Mining Subsidiaries for the sole benefit and use in the operations of the operations of the MMMM Mining Subsidiaries, for use primarily as working capital for in furtherance of their mining operations. The Company, NuAxess and PR345 have been informed telephonically that CPB has agreed to the foregoing amendment, which amendment shall be executed during the week of April 1, 2019 or shortly thereafter.
The parties also agreed that: (i) within 30 days of the Closing, NuAxess, PR345, MMMM and their designated representatives or third-party investors selected by NuAxess and/or PR345 and approved by MMMM, which approval will not be unreasonably withheld, shall make an additional payment of $400,000 to the MMMM Mining Subsidiaries assuming funding is received, and, in the event such anticipated financing is not received, the Company will be obligated to deliver to the MMMM Mining Subsidiaries the first $400,000 of debt or equity raised by the Company within 5 business days of receipt of such new financing.; and (ii) the Company and the management of the MMMM Mining Subsidiaries consisting of Sheldon Karasik and other individuals designated by Sheldon Karasik (the “Mining Management”), shall enter into an Option Agreement, in a form mutually agreed prior to the Closing (the “MBO Agreement”) pursuant to which the Mining Management shall have the exclusive right to exercise at any time the purchase of 75% of the shares and any other equity interests of the MMMM Mining Subsidiaries by a Mining Management or an entity created and controlled by the Mining Management, in consideration for a payment of $10 to the Company and assumption by the Mining Management of 100% of the liabilities of the MMMM Mining Subsidiaries. The MBO Agreement shall also provide that the Management Group shall have full and exclusive control over the management of the daily operations of the MMMM Mining Subsidiaries prior to the exercise of the Option and the closing of the MDO Agreement.
In addition, the SEA’s also provide in Section 4.08 that the Company’s existing Common Stock Holders and the new Preferred Stock Holders have anti-dilution rights and protections, subject to certain limitations. Reference is made to the full terms and conditions of the anti-dilution provisions contained in Section 4.08 of the SEA’s.
The foregoing is a summary of the SEA’s and reference is made to the express terms and conditions of the SEA’s, attached as Exhibits 2.1 and 2.2 to the Company’s March 27, 2019 Form 8-K.