Item 1.01
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Entry into a Material Definitive Agreement.
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On February 14, 2020 (the “Closing
Date”), Item 9 Labs Corp., a Delaware corporation (“Parent”), by through its wholly owned entity, I9 NV Lic,
LLC, a Nevada limited liability company (“Buyer”), and entered into and closed on that certain Asset and Equity Purchase
and Contribution Agreement (the “Agreement”) dated February 12, 2020 with Larry Lemons, Donald Burton, and Sara Gullickson,
the Parent’s former Chief Executive Officer and board member (each an “Owner” and collectively the “Owners”),
and Strive Wellness of Nevada, LLC, a Nevada limited liability company (“Strive Wellness”), and Strive Wellness
of Nevada 2 L.L.C., a Nevada limited liability company (“Strive 2”). Owners, Strive Wellness, Strive 2, and
the Company, are sometimes referred to individually as a “Party” and collectively as the “Parties.”
Owners own all of the outstanding membership
interests of Strive Wellness (the “Strive Wellness Interests”) and Strive 2 owns eighty percent (80%) of the outstanding
membership interests of Strive Management L.L.C., a Nevada limited liability company (“Strive Management” and
together with Strive Wellness, each a “Company” and collectively, the “Companies”) (the “Strive
Management Interests” and together with the Strive Wellness Interests, the “Company Interests”). Additionally,
Parent currently owns all of the outstanding membership interests of Buyer and Buyer owns the remaining twenty percent (20%) of
the outstanding membership interests of Strive Management.
Pursuant to the Agreement the Parties
have agreed to the purchase and sale of certain assets owned by Strive Wellness, including, but not limited to, the provisional
certificates issued by the Nye County Planning Department relating to medical cultivation and production to be located in Nye County,
Nevada, inventory, contracts and intellectual property (the “Assets”) and to assume certain liabilities related thereto.
As consideration for the Assets, Buyer
shall pay or issue to Strive Wellness and the Owners: (a) cash in the amount of $500,000 less certain indebtedness amounts and
Owners transaction expenses; (b) a warrant authorizing Owners to purchase Two Million (2,000,000) Buyer units which shall be exchangeable
for Parent shares, and which shall include: (i) a cashless exercise provision, (ii) a limited exercise period providing that the
Warrant cannot be exercised until the earlier of either (1) three (3) months following the date on which each Provisional Certificate
becomes a Final Certificate or (2) September 30, 2020, and after such time the Warrant must be exercised within three (3) years,
and (iii) other customary provisions; (c) an unsecured promissory note in the principal amount of $1,000,000 to be issued by Parent
and Buyer to Strive Wellness and Strive 2 (the “Note”) as further described below, and (d) Three Million Two Hundred
Fifty Thousand (3,250,000) aggregate membership units of Strive Management and Strive Wellness which are exchangeable for Parent
Shares on a 1 for 1 basis subject to certain restrictions as further set out in the Agreement.
The Note shall have a principal balance
of $1,000,000 (“Principal”) with interest of 2% per annum and shall have a maturity date 24 months after the commencement
date, defined as the earlier of either (1) three (3) months following the date on which each Provisional Certificate becomes a
Final Certificate or (2) September 30, 2020. The Note requires payment of ($500,000.00) within ten (10) Business Days following
the Commencement Date with 8 installment payments of principal and interest thereafter.
Further, on the Closing Date, (a) all
loans and the obligations relating thereto between Owners or Strive 2 on the one hand, and either of the Companies, on the other
hand, shall be considered terminated and (b) all loans and the obligations relating thereto between Parent or Affiliates of Parent
on the one hand and either of the Companies, on the other hand, including but not limited to that certain promissory note between
Parent and the Companies in the original principal amount of $800,000, shall be considered terminated.
Concurrently, the Parties executed a
confidential Settlement Agreement and Mutual Release of Claims with respect to any and all disputes amongst the Parties.
The Agreement contains customary representations
and warranties and also contains events of default customary for agreements of this type.