Item 2.01 Completion of Acquisition or Disposition of Assets.
On May 14, 2019 (the “
Closing Date
”), Cure Pharmaceutical Holding Corp., a Nevada corporation (the “
Company
”), and CURE Chemistry Inc., a Delaware corporation and wholly owned subsidiary of the Company (“
Merger Sub
”), completed the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated March 31, 2019 (the “
Merger Agreement
”), with Chemistry Holdings, Inc., a Delaware corporation (“
Chemistry Holdings
”). As agreed in the Merger Agreement, the Company acquired Chemistry Holdings pursuant to a merger of the Merger Sub with and into Chemistry Holdings (the “
Merger
”). Pursuant to the Merger, Chemistry Holdings became a wholly-owned subsidiary of the Company and the stockholders of Chemistry Holdings received shares of the Company’s common stock, par value $0.001 per share (the “
Common Stock
”) in exchange for all of the issued and outstanding shares of Chemistry Holdings.
In connection with signing the Merger Agreement, the Company received an investment of $2,000,000 (the “
Principal Amount
”) from Chemistry Holdings pursuant to a convertible note (the “
Note
”). Such Note, on the Closing Date, became an intercompany payable and will be cancelled. As a condition to closing, Chemistry Holdings had a cash balance at closing of at least $8,000,000 plus the amount of certain liabilities and expenses (the “
Closing Cash Requirement
”).
The maximum number of shares of Common Stock that may be issued to the stockholders of Chemistry Holdings in connection with the Merger, including escrowed shares and shares issuable pursuant to earn-out provisions and warrants, is 32,072,283 shares allocated as follows: (i) 5,700,000 shares of Common Stock as upfront consideration issued at the Closing (the “
Upfront Consideration
”); (ii) 7,128,913 shares to be held in escrow, subject to indemnification and clawback rights that lapse upon the achievement of certain milestones; (iii) 3,207,228 shares that may be issued pursuant to an earn-out over five years upon the achievement of certain technological implementations; (iv) 8,018,071 shares that may be issued pursuant to an earn-out over two years upon the achievement of certain revenue goals; and (v) 8,018,071 shares issuable upon exercise of warrants that become exercisable upon achieving certain revenue goals between the second and fourth anniversary of the Closing Date at an exercise price of $5.01 per share, exercisable, to the extent vested, for five years from the Closing Date.
On the Closing Date, upon the issuance of the pro rata portion of the Upfront Consideration, each share of Chemistry Holdings’ common stock issued and outstanding immediately prior to the closing, other than shares with respect to which the holders have properly perfected a demand for appraisal rights in accordance with applicable law and have not effectively withdrawn such demand, shall be automatically canceled. Chemistry Holdings stockholders shall be subject to a Lock-Up Agreement pursuant to which one-third of the shares issued to Chemistry Holdings stockholders will be released from the lockup 6 months after issuance, one-third of the shares 12 months after issuance and one-third of the shares 18 months after issuance.
The closing of the Merger was subject to several closing conditions, including, among other things, (i) Chemistry Holdings’ founder and CEO, Joshua Held being appointed to the Board of Directors of the Company; (ii) confirmation that the Closing Cash Requirement was met; (iii) certain contract termination and patent assignment conditions specific to Chemistry Holdings; and (iv) other customary closing conditions.
In addition to the shares issued pursuant to the Merger, the Company has undertaken to issue warrants to purchase an additional 4,143,706 shares of Common Stock to certain affiliates of Chemistry Holdings in consideration for consulting and advisory services to be provided following the closing. The warrants will have a four-year term and an exercise price equal to at least $5.01 per share. The issuance of the warrants is conditioned on Cure amending its articles of incorporation to increase its authorized number of shares of Common Stock.