Subsequent Events | 6 Months Ended |
Feb. 28, 2014 |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
Note 13 – Subsequent Events |
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The Natural Way Agreement |
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On March 6, 2014, the Company entered into an agreement with Tony Tucci and Matthew Cohen (the “Agreement”) whereby they agreed to provide the Company with growing, marketing and development support services that it intends to provide to legal marijuana businesses that exist or develop in compliance with federal and state laws as they evolve. In addition, the Company agreed to develop a centralized grow facility in California to support marijuana growing needs of The Natural Way of LA (“Natural Way”). The term of the Agreement is for 12 months and Mr. Tucci and Cohen have agreed not to provide these consulting services to any other public Company for a two year term. The Company agreed to form a subsidiary to provide these consulting services and spin it off to shareholders. The Company agreed to issue each of Tony Tucci and Matthew Cohen 15,000,000 shares of the Company’s common stock in the to be formed subsidiary, half of which shares will be held in escrow for twelve months and released upon performance of the Agreement. |
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In addition, Natural Way agreed to participate in the Company’s Equality Rewards program for a minimum period of 12 months and to forego participation in any other reward program during that time period. |
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The Mulhearn Project Collaboration Agreement |
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On March 6, 2014, the Company entered into an Amendment to Project Collaboration and Profit Sharing Agreement with Kevin T. Mulhearn. On October 2, 2013 the Company entered into a Project Collaboration and Profit Sharing Agreement (“Collaboration Agreement”) with Kevin T. Mulhearn, resulting in the Company reclassifying the balance owed on a $200,000 unsecured convertible note issued to Mr. Mulhearn, to additional paid in capital. In addition, at that time the Company expensed the remaining debt discount balance of $133,333 to interest expense during the three months ended November 30, 2013. |
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The Amendment to the Collaboration Agreement resulted in the Company issuing a $700,000 convertible promissory note and warrants for an aggregate of 8,000,000 shares of common stock to Mr. Mulhearn. The convertible promissory note is payable in twelve months and permits the Company, at its sole discretion, to convert the balance due into shares of the Company’s common stock at market price at any time following which the thirty day weighted average share price is $0.50. Warrants to purchase 5,000,000 shares of common stock are exercisable when the Company’s share price reaches $0.25 and warrants to purchase 3,000,000 shares of common stock are exercisable when the Company’s share price reaches $0.50. All 8,000,000 warrants will be exercisable on a cashless basis and shall expire two years from the date of issuance. In addition, Mr. Mulhearn has an option to provide $200,000 worth of funding to the Company within twenty days from the date of the Amendment. |
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The Mulhearn Funding Agreement |
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On March 18, 2014, the Company entered into a Funding Agreement with Kevin T. Mulhearn whereby the Mr. Mulhearn agreed to invest $100,000 into the Company in exchange for a convertible promissory note with a maturity date twelve months from issuance. The Note is convertible, at the Company’s option, at market price, any time after the thirty day weighted average share price reaches $0.50. In addition, the Company agreed to issue warrants to purchase 833,333 shares of its common stock, which are exercisable without any additional consideration when the Company share price reaches $0.25 and warrants to purchase 500,000 shares of common stock are exercisable without any additional consideration when the Company share price reaches $0.50. In addition, on March 19, 2014, the Company agreed to issued Mr. Mulhearn 5,000,000 shares of restricted common stock as a result of the exercise of a warrant issued on March 5, 2014, which warrant provided that same was exercisable, with no further consideration, upon the share price reaching $0.25. |
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The Executive Agreements |
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On March 5, 2014, the Company entered into an Executive Agreement with Eric Kotch, Eli Feder, Bob Rothenberg and Steven Gormley. In exchange for all rights to past due employment compensation, equity, debt, and conversion rights, in the amounts of: (i) Steven Gormley - $56,436; (ii) Eli Feder - $580,000; (iii) Eric Kotch - $674,000; and (iv) Bob Rothenberg - $311,871; full indemnification protection from the Company and a release of any claims or liabilities through the date of the Executive Agreement, each of the executives agreed to the following: |
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a) to forgive the full balance currently owed as set forth above; |
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b) to terminate all employment agreements and rights thereunder effective on the date of the Executive Agreement; |
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c) that any employment or compensation agreements with any of the listed executives entered into within a date 18 months from the Executive Agreement, will require an approval by 75% of the board of directors; |
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d) the executives will enter into leakout agreements on a pro rata basis and to be determined terms; |
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e) each executive will be subject to a one year non-competition agreement beginning the later of the termination of such directors employment with the Company or resignation or removal from the board of directors; and |
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f) the directors will receive warrants, exercisable on a cashless basis, for the following amount of shares (i) Steven Gormley – 2,000,000; (ii) Eli Feder – 7,500,000; (iii) Eric Kotch – 15,000,000; and (iv) Bob Rothenberg – 10,500,000. Such warrants shall be exercisable at the earlier of six months from issuance or after any three consecutive days where the weighted average share price exceeds $0.50 and shall expire two years from the date of issuance. |
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The Peter Dene Convertible Promissory Note |
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On March 13, 2014 (the “Closing Date”), the Company completed the sale of a convertible promissory note (the “Dene Note”) in the principal amount of $100,000 with an interest rate of 3% per annum to Peter Dene in exchange for $50,000 cash consideration. The Dene Note matures on March 12, 2015 (the “Maturity Date”). As additional consideration, the Company agreed to issue Peter Dene warrants for the purchase of 200,000 shares of common stock which are exercisable without any additional consideration when the Company share price reaches $0.50. |
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The Dene Note may be prepaid in whole or in part, at any time. In addition, the Dene Note is convertible in the Company’s common stock, at Dene’s option, at market price determined by the previous five day weighted average price, at any time after which the twenty day weighted average stock price exceeds $0.50. |
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Issuance of Unregistered Shares of Common Stock |
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On April 1, 2014, the Company issued to Samuel Schonbrun 3,000,000 shares of its unregistered Common Stock, $0.001 par value per share, in exchange for consulting services valued at $3,000. |
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On April 3, 2014, the Company issued to Ben Kotch 4,500,000 shares of its unregistered Common Stock, $0.001 par value per share upon conversion of $5,535 principal amount of the Company’s convertible debt held by Mr. Kotch. |
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On April 3, 2014, the Company issued to Sam Kotch 4,600,000 shares of its unregistered Common Stock, $0.001 par value per share upon conversion of $5,658 principal amount of the Company’s convertible debt held by Mr. Kotch. |
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Issuance of Promissory Note |
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On April 11, 2014, the Company issued a short term Promissory Note to Kevin Mulhearn in the principal amount of $60,000. The Note bears interest at 12% per annum and is due on June 11, 2014. The Note may be pre-paid in whole or in part. |
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Robert Rothenberg Employment Agreement |
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On April 11, 2014 our board approved an employment agreement with Mr. Rothenberg to serve as our President and Chief Executive Officer for the period beginning April 11, 2014 through April 11, 2015. The term may be extended for up to two successive consecutive one year periods unless either party sends notification of non-renewal to the other party not more than 270 days and not less than 90 days before the end of the then existing term. Mr. Rothenberg’s employment agreement provides for, among other things, payment of a base salary of $300,000, an award of 20,000,000 shares of common stock upon execution of the agreement, an award of 100,000 shares of common stock each month during the term of the agreement, eligibility to receive an annual incentive bonus if approved by our board, and participation in certain health and welfare benefit plans. At any time during his employment, Mr. Rothenberg may convert any or all of the funds owed to him into common shares of the Company at a 70% discount to the average closing price for the previous five days of trading on the OTCQB. Mr. Rothenberg may engage in any business activity outside of the Company that is non-competitive with its business so long as such activity does not affect the performance of his duties under as the Company’s Chief Executive Officer. |
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Under the terms of the employment agreement, if Mr. Rothenberg’s employment is terminated as a result of his death, disability, by us without cause, occurrence of a “change of control” or upon a “constructive termination”, Mr. Rothenberg will be entitled to receive (in addition to salary and certain other benefits earned prior to termination) a single lump sum payment in an amount equal to two times the sum of his then-current annual base salary discounted by the U.S. Treasury rate most comparable to the applicable time left in the agreement or as and when normal payroll payments are made, the issuance of any undistributed shares issuable under the agreement and health and welfare benefits for a period of six months following such termination. |
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The agreement obligates Mr. Rothenberg not to compete against us, solicit our employees, disparage us, or disclose confidential information about us during the term of the agreement, if his employment is terminated regardless of the reason. |
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Steve Gormley Employment Agreement |
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On April 11, 2014 our board approved an employment agreement with Mr. Gormley to serve as our Chief Business Development Officer reporting to the Company’s Chief Executive Officer for the period beginning April 11, 2014 through April 11, 2015. The term may be extended for up to two successive consecutive one year periods unless either party sends notification of non-renewal to the other party not more than 270 days and not less than 90 days before the end of the then existing term. Mr. Gormley’s employment agreement provides for, among other things, payment of a base salary of $300,000, an award of 20,000,000 shares of common stock upon execution of the agreement, an award of 100,000 shares of common stock each month during the term of the agreement, eligibility to receive an annual incentive bonus if approved by our board, and participation in certain health and welfare benefit plans. At any time during his employment, Mr. Gormley may convert any or all of the funds owed to him into common shares of the Company at a 70% discount to the average closing price for the previous five days of trading on the OTCQB. Mr. Gormley may engage in any business activity outside of the Company that is non-competitive with its business so long as such activity does not affect the performance of his duties under as the Company’s Chief Executive Officer. |
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Under the terms of the employment agreement, if Mr. Gormley’s employment is terminated as a result of his death, disability, by us without cause, occurrence of a “change of control” or upon a “constructive termination”, Mr. Gormley will be entitled to receive (in addition to salary and certain other benefits earned prior to termination) a single lump sum payment in an amount equal to two times the sum of his then-current annual base salary discounted by the U.S. Treasury rate most comparable to the applicable time left in the agreement or as and when normal payroll payments are made, the issuance of any undistributed shares issuable under the agreement and health and welfare benefits for a period of six months following such termination. |
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The agreement obligates Mr. Gormley not to compete against us, solicit our employees, disparage us, or disclose confidential information about us during the term of the agreement, if his employment is terminated regardless of the reason. |
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Eli Feder Consulting Agreement |
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On April 11, 2014 our board approved a consulting agreement with Mr. Feder to provide food production, logistics, consulting and development services to the Company for its cannabis division for the period beginning April 10, 2014 through April 10, 2017. Mr. Feder’s consulting agreement provides for, among other things, payment of up to $5,000 per month based on the number of hours expensed each month by Mr. Feder and an award of 20,000,000 shares of common stock upon execution of the agreement. The consulting agreement obligates Mr. Feder not to disclose confidential information about us during the term of the agreement. |
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Debt Repayment |
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On April 14, 2014, the Company paid off a portion of its convertible debt in the principal amount of $11,307 plus accrued interest of $4,050.48 for a total payoff of $15,357.48. |