Item 1.01. Entry Into a Material Definitive Agreement.
Merger Agreement
On
The Merger Agreement provides that at the closing (the "Closing"), subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. At Closing of the Merger, the issued and outstanding common shares of the Company ("Company Common Shares") will automatically be converted into the right to receive an aggregate of 623,500 shares of Series AA Preferred Stock of Parent (the "Merger Consideration").
Each of the Company, Parent, and Merger Sub has made various representations and
warranties and agreed to certain covenants in the Merger Agreement, including a
covenant by Parent that it would raise
Consummation of the Merger is subject to the satisfaction or, if permitted by
applicable law, waiver, by Parent, the Company, or both of various conditions.
For the Company, these conditions include, without limitation, (i) an agreeable
plan to spin out the existing Parent cannabis assets and operations, (ii) an
agreeable plan to transfer the outstanding shares of Series C Preferred Stock of
Parent to
The Merger Agreement contains certain termination rights including the right of the parties to mutually agree upon termination, and by each of the Company and the Parent unilaterally if the other party has committed a violation of the covenants, representations and warranties in the Merger Agreement.
The Merger Agreement, the Merger, and the transactions contemplated thereby were unanimously approved by the board of directors of the Parent, and unanimously approved by the board of directors of the Company.
The Closing of the Merger is expected to occur as soon as practicable after the satisfaction or waiver of all the conditions to Closing in the Merger Agreement, which is currently expected to be in the 3rd quarter of calendar year 2023.
The Merger Agreement has been included to provide investors with information
regarding its terms. The representations, warranties, and covenants contained in
the Merger Agreement were made only for the purposes of the Merger Agreement,
were made as of specific dates, were made solely for the benefit of the parties
to the Merger Agreement, and may not have been intended to be statements of
fact, but rather as a method of allocating risk and governing the contractual
rights and relationships among the parties to the Merger Agreement. In addition,
such representations, warranties, and covenants may have been qualified by
certain disclosures not reflected in the text of the Merger Agreement and may
apply standards of materiality and other qualifications and limitations in a way
that is different from what may be viewed as material by the Parent's
shareholders. None of the Parent's shareholders or any other third party should
rely on the representations, warranties, and covenants, or any descriptions
thereof, as characterizations of the actual state of facts or conditions of the
Company, Parent, Merger Sub, or any of their respective subsidiaries or
affiliates. Moreover, information concerning the subject matter of
representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in the
Parent's public disclosures. The Merger Agreement should not be read alone, but
should instead be read in conjunction with the other information regarding
Parent that is or will be contained in, or incorporated by reference into, the
Forms 10-K, Forms 10-Q, Forms 8-K, and other documents that Parent files or has
filed with the
The foregoing descriptions of the Merger Agreement and the Merger are summaries, do not purport to be complete, and are qualified in their entirety by reference to the full text of the Merger Agreement, and the exhibits attached thereto, a copy of which is attached as Exhibit 2.1 to this Current Report on Form 8-K and incorporated by reference herein.
Bridge Financing
On
Parent received
The maturity date for repayment of the Parent Note is
As additional consideration, Parent agreed to issue to the Investor 1,318,000
shares of its common stock as commitment shares. Parent is required to issue
additional commitment shares in the event the Parent Note is not prepaid at 60
days. Pursuant to a Registration Rights Agreement (the "Registration
Agreement"), Parent has agreed to register the Investor shares with the
In the Purchase Agreement, Parent agreed to certain restrictive covenants, including a restriction on borrowing and a most favored nation clause in favor of Investor for any future offerings not specifically exempted.
On
The foregoing description of the Purchase Agreement, the Registration Agreement, the Parent Note, the Company Loan, and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Purchase Agreement, the Registration Agreement, the Parent Note, and the Company Loan, which are included in this Current Report as Exhibits 10.1, 10.2, 4.1 and 10.3, respectively, and are incorporated herein by reference.
Item 2.03 - Creation of a Direct Financial Obligation
The information provided in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
FORWARD-LOOKING STATEMENTS
This document includes forward-looking statements which reflect management's
current views and estimates regarding the ability of the parties to complete the
proposed transaction and the expected timing of completion of the proposed
transaction, among other matters. The words "anticipate", "assume", "believe",
"continue", "could", "estimate", "expect", "forecast", "future", "guidance",
"imply", "intend", "may", "outlook", "plan", "potential", "predict", "project",
and similar terms and phrases are intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. The Company cannot assure investors that future developments
affecting the Company will be those that it has anticipated. Actual results may
differ materially from these expectations due to uncertainties related to the
successful completion of our acquisition by Parent and Merger Sub, or our
failure to complete such acquisition; the impact of the pendency of our
acquisition by Parent and Merger Sub on our business and operations; the timing
and expected financing and the merger; the possibility that any or all of the
various conditions to the consummation of the merger may not be satisfied or
waived in a timely manner, if at all; the possibility of business disruptions
due to transaction-related uncertainty; the occurrence of any event, change or
other circumstance that could give rise to the termination of the merger
agreement; and other risks and uncertainties including those identified under
the heading "Risk Factors" in the Company's most recent Annual Report on Form
10-K and Quarterly Reports on Form 10-Q, each of which are filed with the
Section 9.01. Financial Statements and Exhibits
Exhibit No. Description 2.1 Agreement and Plan of Merger, datedJune 20, 2023 4.1 15% OID Senior Promissory Note, datedJune 20, 2023 10.1 Securities Purchase Agreement, datedJune 20, 2023 10.2 Registration Rights Agreement, datedJune 20, 2023 10.3 Company Loan and Security Agreement, datedJune 20, 2023
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