Item 1.01 Entry into a Material Definitive Agreement.
On January 31, 2022, NovAccess Global Inc. (“NovAccess,” “we” or “our”) entered into a preferred stock redemption agreement (the “Agreement”) with TN3, LLC (“TN3”), Mr. Daniel G. Martin, Irvin Consulting, LLC (“IC”), and Dr. Dwain Morris-Irvin. Mr. Martin is our chairman of the board and owns TN3. Dr. Irvin is our chief executive officer and owns IC.
TN3 owns 25,000 shares of our Series B Convertible Preferred Stock, $0.01 par value per share (the “Shares”). Each Share is convertible at the option of TN3 into 10,000 shares of our common stock and entitles TN3 to cast 40,000 votes on any action presented to our shareholders. Pursuant to the Agreement, we will redeem 24,400 of the Shares and IC will purchase 600 of the Shares.
To redeem the preferred shares, we will pay TN3 a total of $250,000 over a period of ten months, with payment accelerated if the company raises significant capital. Currently, we owe TN3 $370,852 under a management services agreement. Pursuant to the Agreement, TN3 will agree to forgo these amounts and the parties will terminate the management agreement. IC will pay NovAccess $6,000 to reimburse the company for IC’s share of the purchase price.
In addition to the cash payments, we will issue to TN3 1,502,670 unregistered common shares, which is equal to 10% of the outstanding common stock of NovAccess on the date the Agreement was signed. Pursuant to their terms, the Shares are convertible into 250,000,000 shares of common stock. IC will pay NovAccess $1,223 to reimburse the company for IC’s share of the common stock portion of the purchase price.
Upon completion of the redemption, Mr. Martin will resign from the NovAccess board and be replaced by Dr. Irvin and John Cassarini. In addition, IC will own 600 Shares but there will be no other shares of NovAccess preferred stock outstanding.
The proposed redemption is subject to various conditions, including the mailing of a Schedule 14F-1 to our shareholders describing the transaction in additional detail. Although we expect to close the redemption in late February or early March, we cannot guarantee when or if the transaction will be completed.
The Agreement includes customary representations and covenants of the parties, including release and indemnification provisions. The Agreement is filed as an exhibit to this Current Report on Form 8-K and the description above is qualified in its entirety by reference to the full text of the Agreement.