Commitments and Contingencies | NOTE 11 – COMMITMENTS AND CONTINGENCIES On June 22, 2015, the Company entered into an agreement with a consultant whereby the Company agreed to issue the consultant a warrant to purchase shares of common stock for up to 4.9% of the outstanding common stock of the Company. The terms of the warrant agreement were not determined or authorized by the Board of Directors of the Company, and accordingly, the warrant obligation has not been recorded by the Company. Employment Agreements On August 1, 2015, the Company entered into employment agreements with two employees. Each employment agreement contained the following terms: (a) if net monthly sales generated by the Company are less than $50,000 and net profit margin on the aggregate sales is less than 35%, no Base Salary is payable; (b) if net monthly sales generated by the Company are $50,000 or more but less than $75,000 and net profit margin on the aggregate sales is less than 35%, the Base Salary shall be $6,000; (b) if net monthly sales generated by the Company are $75,000 or more but less than $100,000 and net profit margin on the aggregate sales is less than 35%, the Base Salary shall be $9,000; and (d) if net monthly sales generated by the Company are $100,000 or more and net profit margin on the aggregate sales is less than 35%, the Base Salary shall be $15,000. In addition, the Company agreed to issue each employee 225,000 restricted shares of common stock of the Company upon achieving certain milestones. On November 17, 2015, the Company executed a Termination Agreement and Mutual Release in connection with both of the above-mentioned employment agreements. The parties released each other from any claims or liabilities one to the other, and the employment agreements between the Company and each of the employees were terminated in their entirety. The Company was not required to issue any of the shares of common stock provided for in the agreements or make any settlement payments in connection with the terminations. Executive Employment Agreements Albert Mitrani On November 4, 2016, the Company entered into an executive employment agreement, (“A. Mitrani Agreement”) effective November 4, 2016, with Albert Mitrani (“A. Mitrani”), pursuant to which A. Mitrani agreed to continue to serve as the Company’s Chief Executive Officer and Chairman of the Board of Directors of the Company for the term of the A. Mitrani Agreement, subject to state and federal law and the bylaws of the Company, as long as A. Mitrani beneficially owns at least 3% of the common stock of the Company. Below is a summary of the material terms of the A. Mitrani Agreement: Term The employment term shall continue until the fifth anniversary thereof, unless terminated earlier pursuant to the terms of the A. Mitrani Agreement; provided that, on such fifth anniversary of the effective date and each fifth anniversary thereafter, the A. Mitrani Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of five years, unless either party provides written notice of its intention not to extend the term of the A. Mitrani Agreement at least 90 days prior to the applicable renewal date. Base Salary A. Mitrani’s base annual salary is $360,000, which shall accrue commencing October 1, 2016 and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing; and thereafter payable in periodic installments in accordance with the Company’s customary payroll practices, but no less frequently than monthly. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase the base salary during the employment term. Annual and Signing Bonus A. Mitrani is eligible to receive an annual bonus, as established by the Board and based on established performance milestones being achieved. In connection with the execution of the A. Mitrani Agreement, the Company agreed to pay A. Mitrani a $100,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. Past Due Amounts As of the effective date, A. Mitrani and/or his affiliates were owed for unpaid expenses, salary and consulting fees of approximately $120,000. The past due amounts shall be paid upon the earliest reasonable practicable time that there is sufficient working capital as determined by the Board. Dr. Bruce Werber On November 4, 2016, and amended March 8, 2017, the Company entered into an executive employment agreement, (“Werber Agreement”) effective November 4, 2016, with Dr. Bruce Werber (“Werber”), pursuant to which the Company appointed Werber as the Chief Operating Officer (“COO”) of the Company and the Chief Executive Officer of ANU and General Surgical. Pursuant to the Werber Agreement, the Company agreed to appoint Werber as a member of the board of directors of the Company for the term of the Werber Agreement, subject to state and federal law and the bylaws of the Company, as long as Werber beneficially owns at least 3% of the common stock of the Company. Below is a summary of the material terms of the Werber Agreement: Term The employment term shall continue until the third anniversary thereof, unless terminated earlier pursuant to the terms of the Werber Agreement; provided that, on such third anniversary of the effective date and each annual anniversary thereafter, the Werber Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Werber Agreement at least 90 days’ prior to the applicable renewal date. Base Salary Werber’s base annual salary is $360,000, which shall accrue commencing October 1, 2016 and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing; and thereafter payable in periodic installments in accordance with the Company’s customary payroll practices, but no less frequently than monthly. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase the base salary during the employment term. Annual and Signing Bonus Werber is eligible to receive an annual bonus, as established by the Board and based on established performance milestones being achieved. In connection with the execution of the Werber Agreement, the Company agreed to pay Werber a $35,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. Warrant In connection with the execution of the Werber Agreement, the Company granted Werber a warrant to purchase, on a cashless basis, up to 31,800,000 shares of common stock of the Company for $0.06 per share, the closing price of the Company’s common stock on the Effective Date, fully vested at the time of the grant and exercisable until the 10th anniversary of the date of issuance. Dr. Maria Ines Mitrani On November 4, 2016, and amended March 8, 2017, the Company entered into an executive employment agreement, (“M. Mitrani Agreement”) effective November 4, 2016, with Dr. Maria Ines Mitrani (“M. Mitrani”), pursuant to which the Company appointed M. Mitrani as the Chief Science Officer (“CSO”) of the Company. Pursuant to the M. Mitrani Agreement, the Company agreed to appoint M. Mitrani as a member of the board of directors of the Company for the term of the M. Mitrani Agreement, subject to state and federal law and the bylaws of the Company, as long as M. Mitrani beneficially owns at least 3% of the common stock of the Company. Below is a summary of the material terms of the M. Mitrani Agreement: Term The employment term shall continue until the fifth anniversary thereof, unless terminated earlier pursuant to the terms of the M. Mitrani Agreement; provided that, on such fifth anniversary of the effective date and each fifth anniversary thereafter, the M. Mitrani Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of five years, unless either party provides written notice of its intention not to extend the term of the M. Mitrani Agreement at least 90 days’ prior to the applicable renewal date. Base Salary M. Mitrani’s base annual salary is $250,000, which shall accrue commencing October 1, 2016 and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing; and thereafter payable in periodic installments in accordance with the Company’s customary payroll practices, but no less frequently than monthly. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase the base salary during the employment term. In connection with the amendment of the M. Mitrani Agreement on March 8, 2017, M. Mitrani’s base annual salary was increased to $300,000. Annual and Signing Bonus M. Mitrani is eligible to receive an annual bonus, as established by the Board and based on established performance milestones being achieved. In connection with the execution of the M. Mitrani Agreement, the Company agreed to pay M. Mitrani a $50,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. Past Due Amounts As of the effective date, M. Mitrani and/or her affiliates were owed for unpaid expenses and consulting fees of approximately $84,000. The past due amounts shall be paid upon the earliest reasonable practicable time that there is sufficient working capital as determined by the Board. Warrant In connection with the execution of the M. Mitrani Agreement, the Company granted M. Mitrani a warrant to purchase, on a cashless basis, up to 10,000,000 shares of common stock of the Company for $0.06 per share, the closing price of the Company’s common stock on the Effective Date, fully vested at the time of the grant and exercisable until the 10th anniversary of the date of issuance. Ian T. Bothwell On November 4, 2016, and amended March 8, 2017, the Company entered into an executive employment agreement, (“Bothwell Agreement”) effective November 4, 2016, with Ian T. Bothwell (“Bothwell”), pursuant to which the Company appointed Bothwell as the Chief Financial Officer (“CFO”) of the Company. Pursuant to the Bothwell Agreement, the Company agreed to appoint Bothwell as a member of the board of directors of the Company for the term of the Bothwell Agreement, subject to state and federal law and the bylaws of the Company, as long as Bothwell beneficially owns at least 3% of the common stock of the Company. Below is a summary of the material terms of the Bothwell Agreement: Term The employment term shall continue until the third anniversary thereof, unless terminated earlier pursuant to the terms of the Bothwell Agreement; provided that, on such third anniversary of the effective date and each annual anniversary thereafter, the Bothwell Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Bothwell Agreement at least 90 days’ prior to the applicable renewal date. Base Salary Bothwell’s base annual salary is $360,000, which shall accrue commencing October 1, 2016 and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing; and thereafter payable in periodic installments in accordance with the Company’s customary payroll practices, but no less frequently than monthly. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase the base salary during the employment term. Annual and Signing Bonus Bothwell is eligible to receive an annual bonus, as established by the Board and based on established performance milestones being achieved. In connection with the execution of the Bothwell Agreement, the Company agreed to pay Bothwell a $35,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. Warrant In connection with the execution of the Bothwell Agreement, the Company agreed to issue Bothwell a warrant to purchase, on a cashless basis, up to 31,800,000 shares of common stock of the Company for $0.06 per share, the closing price of the Company’s common stock on the Effective Date, exercisable in accordance with the vesting schedule below until the 10th anniversary of the date of issuance (“Bothwell Warrant”): Immediately on the effective date, 50% of the Bothwell Warrant shall vest and the remaining 50% shall vest in 18 equal monthly installments beginning on November 30, 2016 or until Bothwell no longer remains employed by the Company, whichever is earlier. Notwithstanding the foregoing vesting schedule, the unvested portion of the Bothwell Warrant shall be accelerated upon the achievement of the milestones set forth below, to the satisfaction of the Board in its sole discretion and contingent upon Bothwell’s continued employment at the time of consummation: a) 25% upon the consummation of an equity or debt financing subsequent to the effective date and resulting in gross proceeds of at least $300,000, including, but not limited to, the financing obtained in connection with the SPA; and b) 25% upon the consummation of a series of equity or debt financings subsequent to the effective date resulting in aggregate gross proceeds to the Company in excess of $1,500,000. Terrell Suddarth The Company entered into an executive employment agreement, (“Suddarth Agreement”) effective March 8, 2017, with Terrell Suddarth (“Suddarth”), pursuant to which the Company appointed Suddarth as the Chief Technology Officer (“CTO”) of the Company. Pursuant to the Suddarth Agreement, the Company agreed to appoint Suddarth as a member of the board of directors of the Company for the term of the Suddarth Agreement, subject to state and federal law and the bylaws of the Company, as long as Suddarth beneficially owns at least 3% of the common stock of the Company. Below is a summary of the material terms of the Suddarth Agreement: Term The employment term shall be effective on effective date and shall continue until the third anniversary thereof, unless terminated earlier pursuant to the terms of the Suddarth Agreement; provided that, on such third anniversary of the effective date and each annual anniversary thereafter, the Suddarth Employment Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Suddarth Agreement at least 90 days’ prior to the applicable renewal date. Base Salary Suddarth’s base annual salary is $300,000, which shall accrue commencing on the effective date and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing; and thereafter payable in periodic installments in accordance with the Company’s customary payroll practices, but no less frequently than monthly. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required to, increase the base salary during the employment term. Annual and Signing Bonus Suddarth is eligible to receive an annual bonus, as established by the Board and based on established performance milestones being achieved. Notwithstanding the foregoing, the Company shall pay Suddarth the following bonuses on the achievement of the following milestones and subject to the Board’s determination that the Company has sufficient capital: (i) $35,000 upon the commercial availability of a sheet type human amnion product; and (ii) $35,000 upon the third commercially available product; and (iii) $35,000 upon the fourth commercially available product In connection with the execution of the Suddarth Agreement, the Company agreed to pay Suddarth a $35,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. Warrant In connection with the execution of the Suddarth Agreement, the Company agreed to issue Suddarth a warrant to purchase, on a cashless basis, up to 23,850,000 shares of common stock of the Company for $0.02 per share, the closing price of the Company’s common stock on the effective date, exercisable in accordance with the vesting schedule below until the 10th anniversary of the date of issuance (“Suddarth Warrant”): Immediately on the effective date, 50% of the Suddarth Warrant shall vest and the remaining 50% shall vest in 18 equal monthly installments beginning on March 31, 2017 or until Suddarth no longer remains employed by the Company, whichever is earlier. Notwithstanding the foregoing vesting schedule, the unvested portion of the Suddarth Warrant shall be accelerated upon the achievement of the milestones set forth below, to the satisfaction of the Board in its sole discretion and contingent upon Suddarth’s continued employment at the time of consummation: a) 25% for the commercial availability of a sheet type human amnion product; and b) 15% for the third commercially available product; and c) 10% for the fourth commercially available product. Leases Ethan NY On September 3, 2015, Ethan NY entered into a five-year lease agreement (“Ethan Lease”) for a store located in New York City, New York. The Ethan Lease commenced on October 1, 2015. Under the terms of the Ethan Lease, Ethan NY provided an $18,585 security deposit and a former employee of Ethan NY provided a personal guaranty for a portion of the amounts due under the Ethan Lease. During June 2016, Ethan NY exited from its leased premises. Under the terms of the Ethan Lease, minimum monthly lease payments of $9,500 per month were to commence in December 2015 through October 2020. Ethan NY has not made any of the required minimum monthly lease payments as required including approximately $66,500 and $104,785 for the seven months ended June 30, 2016 and the eleven months ended October 31, 2016, respectively. The total amount of minimum lease payments that Ethan NY is obligated to pay pursuant to this 5-year lease is $586,242 (excluding late fees and interest provided for under the Ethan Lease). The lease payments pursuant to the Ethan Lease were as follows: Year Ended Minimum October 31, Rent 2016 $ 104,785 2017 117,714 2018 121,245 2019 124,882 2020 117,616 2021 - Total $ 586,242 All of Ethan NY’s obligations under the Ethan Lease are recourse only to the assets at Ethan NY, except for certain obligations under the Ethan Lease that were guaranteed by a former employee. Under the terms of the Ethan Lease, the obligations of Ethan NY for future rents are to be mitigated based on the amount of any future rents that are received for the rental of the leased premises to other tenants during the initial term. During August 2016, Ethan NY received confirmation that the leased premises had been leased to another tenant. In connection with the termination of the Ethan Lease, Ethan NY has made several unsuccessful attempts to contact the landlord for the purpose of obtaining a settlement and release for any amounts that the landlord may claim are owing under the Ethan Lease, if any. Ethan NY is not aware of any claim pending or threatened in connection with the Ethan Lease. At October 31, 2016, Ethan NY has recorded in liabilities of discontinued operations the amount of rent obligations through June 30, 2016 and a reserve for estimated losses in connection with termination of the Ethan Lease of $76,000 and $25,905, respectively. In addition, in connection with the termination of the Ethan Lease, Ethan NY recorded in its loss from discontinued operations the loss of the $18,585 security deposit made in connection with the execution of the Ethan Lease that is non-returnable to Ethan NY upon the occurrence of certain defined events prescribed under the Ethan Lease and the impairment loss of $5,463 associated with the remaining net amounts of furniture & fixtures and leasehold improvements that were remaining on the books and are not recoverable in connection with the termination of the Ethan Lease and the closing of the store location. Anu In connection with the Company’s decision to relocate its existing placental tissue bank processing laboratory in Miami, Florida, on May 23, 2017, our wholly-owned subsidiary, Anu Life Sciences Inc. entered into a five-year lease agreement (“Lab Lease”) for an approximately 3,500 square foot laboratory and administrative office facility in Sunrise, Florida. The Lab Lease is effective July 1, 2017 and expires on June 30, 2022 and provided for the ability of Anu to beginning moving into the premises beginning June 20, 2017. Under the terms of the Lab Lease, Anu has the option to renew the Lab Lease for two additional 5-year periods. Anu is also required to provide a $37,275 security deposit of which $18,638 is to be returned to Anu after the 2 nd Year Ended Minimum October 31, Rent 2017 $ 23,007 2018 90,020 2019 94,022 2020 102,877 2021 105,455 Thereafter 71,470 Total $ 486,850 The minimum lease payments described above exclude applicable Florida sales tax and additional rents as may be required under the terms of the Lab Lease. In accordance with the terms of the lease for the Company’s existing laboratory facility, the Company provided its notice of termination and as of June 20, 2017, completed the relocation of the lab facilities to the Sunrise leased premises. Termination of Contract On February 23, 2016, the Distribution Agreement, dated August 11, 2015, between Amnio Technology, LLC (“Amnio Technology”) and the Company’s wholly-owned subsidiary, BD Source, was terminated by Amnio Technology. Pursuant to the Distribution Agreement, Amnio Technology had engaged BD Source pursuant to the Distribution Agreement in connection with the marketing, sales and distribution of certain of Amnio Technology’s products. Amnio Technology is engaged in the business of human tissue procurement, processing and distribution to customers and third party distributors. Amnio Technology terminated the Distribution Agreement due to BD Source’s non-payment of the outstanding balance of $4,815 under the Distribution Agreement. BD Source has since paid such balance and believes that all obligations owed to Amnio Technology have been satisfied. Convertible Equity Securities Conversion of Notes issued in connection with the SPA In connection with the SPA, at any time after the six (6) month anniversary of the closing date and until the Note is no longer outstanding, any outstanding principal portion of the Note shall be convertible, in whole or in part, into shares of common stock of the Company at the option of each Purchaser (subject to the conversion limitations set forth in the SPA). The conversion price in effect on any conversion date shall be equal to the lower of (i) $0.15, and (ii) 60% of the lowest daily volume weighed average price in the 20 trading days prior to the conversion Date. Under the terms of the SPA, Bothwell and Werber are not eligible to convert their portion of the Note until the Agent has been fully repaid. In connection with the SPA, the Company will determine the underlying value attributable to the fair value of the embedded derivatives liabilities associated with the Notes at the issuance date based on an independent valuation using a Monte Carlo Model (the Notes contain full ratchet reset provisions and variable market based conversion derivative features). The Company will record the amount of the derivative liabilities at the time of closing as a reduction of the remaining initial carrying amount of the Notes and the excess amount after reducing the initial carrying amount of the Note to $0, if any, as a charge to the income statement. The derivative liability will be marked-to-market each quarter with the change in fair value recorded in the income statement. As of April 30, 2017, the amounts owed under the SPA, including original issue discount and accrued interest was approximately $531,826. Series A Preferred Stock of Mint Organics As more fully described in Note 12, each share of the Series A Preferred Stock shall automatically convert into 1.5 shares of Class B Common Stock of Mint Organics upon the earlier of (a) the fifth anniversary of the date such share of Series A Preferred Stock was issued; or (b) Mint Organics’ receipt of the necessary licenses and permits required to operate business operations in the medical cannabis industry. In addition, commencing on the first anniversary of the issuance date, each holder of the Series A Preferred Stock shall have the right, but not the obligation, to convert some or all of such holder’s shares of Series A Preferred Stock (or Class B Common Stock equivalent) into unregistered shares, par value $0.001 per share, of common stock of BPSR, based on the Stated Value divided by the average trading price of BPSR common stock for the ten trading days prior the conversion date. Notwithstanding the foregoing, the number of shares of Class B Common Stock issuable upon the conversion of the outstanding Series A Preferred Stock shall be adjusted to ensure that the outstanding Class B Common Stock represents 45% of the outstanding capital stock of Mint Organics (based on conversion of 300 shares of the Series A Preferred Stock or prorate portion thereof). |