Commitments and Contingencies | NOTE 14 – COMMITMENTS AND CONTINGENCIES 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 Effective November 4, 2016, the Company entered into executive employment agreements with Albert Mitrani, the CEO; the CEO’s wife Maria Mitrani, the Chief Science Officer (“CSO”); Bruce Werber, the Chief Operating Officer (“COO”); and Ian Bothwell, the Chief Financial Officer (“CFO”). On March 8, 2017, the Company entered into an executive employment agreement with Terrell Suddarth, the Chief Technology Officer (“CTO”), and amended the CSO’s, the COO’s and CFO’s executive employment agreements. On April 6, 2018, the Company amended the CFO’s and CSO’s executive employment agreements (collectively the CEO, CSO, COO, CFO’s and CTO’s executive employment agreements, as amended, are referred to as the “Executive Agreements”). The terms provided for in the each of the Executive Agreements are summarized below: CEO Mr. Mitrani shall serve as the Company’s CEO and Chairman of the Board of Directors of the Company. The employment term shall be for five years, unless terminated earlier pursuant to the terms of the agreement, and thereafter 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 at least 90 days prior to the applicable renewal date. The CEO’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. 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 execution of the agreement, the Company agreed to pay the CEO a $100,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. In addition, the agreement provided for the settlement of unpaid expenses and prior salary of approximately $120,000 to be paid upon the earliest reasonably practicable time that there is sufficient working capital as determined by the Board. The agreement also contains terms regarding eligibility for future annual bonuses, annual equity awards under the Company’s equity plan, if any, fringe benefits and perquisites consistent with the practices of the Company (including health and dental insurance, an automobile expense allowance of $2,500 per month plus all expenses related to the maintenance, repair and operation of such automobile, reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the CEO in accordance with the Company's expense reimbursement policies and procedures and a personal life insurance policy of up to $2,000,000. The Company may terminate the agreement at any time with or without “Cause” and the CEO may resign at any time with or without “Good Reason” (as defined in the agreement). The nature of the obligations owing to the CEO upon termination is more fully described in the agreement. See discussion below regarding the termination of the agreement and execution of a new employment agreement with the CEO on April 13, 2018. COO Mr. Werber shall serve as the Company’s COO and member of the Board of Directors of the Company. The employment term shall be for three years, unless terminated earlier pursuant to the terms of the agreement, and thereafter 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 at least 90 days prior to the applicable renewal date. The COO’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. 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 execution of the agreement, the Company agreed to pay the COO a $35,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. The agreement also contains terms regarding eligibility for future annual bonuses, annual equity awards under the Company’s equity plan, if any, fringe benefits and perquisites consistent with the practices of the Company (including health and dental insurance, an automobile expense allowance of $650 per month, reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the COO in accordance with the Company's expense reimbursement policies. The Company may terminate the agreement at any time with or without “Cause” and the COO may resign at any time with or without “Good Reason” (as defined in the agreement). The nature of the obligations owing to the COO upon termination is more fully described in the agreement. In connection with the execution of the agreement, the Company granted the COO 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 (see Note 13). See discussion below regarding the termination of the agreement with the COO on February 5, 2018. CFO Mr. Bothwell shall serve as the Company’s CFO and member of the Board of Directors of the Company. The employment term shall be for three years, unless terminated earlier pursuant to the terms of the agreement, and thereafter 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 at least 90 days prior to the applicable renewal date. The CFO’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. 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 execution of the agreement, the Company agreed to pay the CFO a $35,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. The agreement also contains terms regarding eligibility for future annual bonuses, annual equity awards under the Company’s equity plan, if any, fringe benefits and perquisites consistent with the practices of the Company (including health and dental insurance, an automobile expense allowance of $650 per month, reimbursement of office related expenses up to $2,500 per month, reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the CFO in accordance with the Company's expense reimbursement policies. The Company may terminate the agreement at any time with or without “Cause” and the CFO may resign at any time with or without “Good Reason” (as defined in the agreement). The nature of the obligations owing to the CFO upon termination is more fully described in the agreement. In connection with the execution of the agreement, the Company granted the CFO 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 as described in the agreement until the 10th anniversary of the date of issuance (see Note 13). On April 6, 2018, the Company amended the CFO’s employment agreement, which provided among other things, that in the event of an occurrence of a change in control or termination of the employment (as defined in agreement) pursuant to the terms thereof, the exercise price for all outstanding warrants granted to the CFO to purchase common stock of the Company during the term of the agreement shall be reduced to $0.001 per share. In addition, Mr. Bothwell’s employment agreement was amended to increase the initial term and the automatic renewal term provided for in the employment agreement from three years to five years, increased the amount of automobile expense allowance and removed the cap for the reimbursement of office related expenses. See discussion below regarding the termination of the agreement and execution of a new employment agreement with the CFO on April 13, 2018. CSO Dr. Maria Ines Mitrani shall serve as the Company’s CSO and member of the Board of Directors of the Company. The employment term shall be for five years, unless terminated earlier pursuant to the terms of the agreement, and thereafter 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 at least 90 days prior to the applicable renewal date. The CSO’s base annual salary is $250,000 (subsequently amended to $300,000 on March 8, 2017), which shall accrue commencing October 1, 2016 and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing. 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 execution of the agreement, the Company agreed to pay the CSO a $50,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. In addition, the agreement provided for the settlement of unpaid expenses and prior consulting fees owed to MariLuna LLC, an entity owned by the CSO, of approximately $84,000 to be paid upon the earliest reasonably practicable time that there is sufficient working capital as determined by the Board. The agreement also contains terms regarding eligibility for future annual bonuses, annual equity awards under the Company’s equity plan, if any, fringe benefits and perquisites consistent with the practices of the Company (including health and dental insurance, an automobile expense allowance of $1,000 per month plus all expenses related to the maintenance, repair and operation of such automobile and reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the CSO in accordance with the Company's expense reimbursement policies and procedures. The Company may terminate the agreement at any time with or without “Cause” and the CSO may resign at any time with or without “Good Reason” (as defined in the agreement). The nature of the obligations owing to the CSO upon termination is more fully described in the agreement. In connection with the execution of the agreement, the Company granted the CSO 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 (see Note 13). On April 6, 2018, the Company amended the CSO’s employment agreement, which provided among other things, that in the event of an occurrence of a change in control or termination of the employment (as defined in agreement) pursuant to the terms thereof, the exercise price for all outstanding warrants granted to the CSO to purchase common stock of the Company during the term of the agreement shall be reduced to $0.001 per share. See discussion below regarding the termination of the agreement and execution of a new employment agreement with the CSO on April 13, 2018. CTO Mr. Suddarth shall serve as the Company’s CTO and member of the Board of Directors of the Company. The employment term shall be for three years, unless terminated earlier pursuant to the terms of the agreement, and thereafter 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 at least 90 days prior to the applicable renewal date. The CTO’s base annual salary is $300,000, which shall accrue commencing October 1, 2016 and shall be payable upon the Company generating sufficient net revenue or obtaining sufficient third party financing. 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 execution of the agreement, the Company agreed to pay the CTO a $35,000 signing bonus which shall be accrued and paid by the Company upon the Company having sufficient cash flow. The agreement also contains terms regarding eligibility for future annual bonuses, annual equity awards under the Company’s equity plan, if any, fringe benefits and perquisites consistent with the practices of the Company (including health and dental insurance, an automobile expense allowance of $650 per month, and reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the CTO in accordance with the Company's expense reimbursement policies. The Company may terminate the agreement at any time with or without “Cause” and the CTO may resign at any time with or without “Good Reason” (as defined in the agreement). The nature of the obligations owing to the CTO upon termination is more fully described in the agreement. In connection with the execution of the agreement, the Company granted the CTO 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 as described in the agreement until the 10th anniversary of the date of issuance (see Note 13). See discussion below regarding the termination of the agreement with the CTO on February 5, 2018. Termination Of Executive Employment Agreements In connection with Sale (see Note 4), Werber and Suddarth each entered into a Separation and General Release Agreement with the Company effective upon the closing of the Sale which provided for the immediate resignation of Werber and Suddarth of all their respective executive and Board of Director positions held with the Company and/or any of the Company’s subsidiaries, and the termination and settlement of all obligations of each party to the other pursuant to the respective employment agreements, including the release of all rights the Company may have held in any intellectual property of Werber and Suddarth and any non-compete restrictions on Werber and Suddarth. In connection with such releases, Werber and Suddarth each agreed to forfeit all warrants previously granted and outstanding (a total of 77,150,000 warrants to purchase shares of common stock of the Company), forfeit any and all accrued and unpaid amounts owing under the employment agreements for past due wages, benefits, severance obligations, unreimbursed expenses and any other obligations owing to one another as of the date of the Sale in exchange for a grant of 7,500,000 shares of restricted common stock of the Company to each of Werber and Suddarth (the grant date fair value of the newly issued shares issued to each of Werber and Suddarth was $82,500). Effective April 13, 2018, in connection with Reorganization Plan described in Note 5, Manuel Iglesias replaced Albert Mitrani as the Chief Executive Officer of the Company, Ian Bothwell resigned from the Board of Directors of the Company and Maria Mitrani resigned from the Board of Directors of the Company. In addition, effective April 13, 2018, Albert Mitrani, Ian Bothwell, and Maria Mitrani, each agreed to terminate their respective executive employment agreements, dated November 4, 2016, as amended, in favor of new employment agreements (“New Executive Employment Agreements”) under the terms described below. In addition, in connection with the termination of the aforementioned agreements, Albert Mitrani, Ian Bothwell and Maria Mitrani each agreed to release the Company for all amounts owing to them for unpaid salaries through the Effective Date and advances and/or expenses incurred prior to December 31, 2017. New Executive Employment Agreements On April 23, 2018, the Company entered into new employment agreements, effective as of April 13, 2018 (“New Executive Employment Agreements”), with each of Albert Mitrani, Ian Bothwell and Maria Mitrani (each, an “Executive”). Pursuant to the Albert Mitrani’s New Executive Employment Agreement, Mr. Mitrani shall serve as the Company’s President. Mr. Mitrani’s base annual salary is $162,500, which shall accrue commencing Effective Date and shall be payable in equal semi-monthly installments, commencing May 1, 2018, in arrears. 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. Pursuant to Ian Bothwell’s New Employment Agreement, Mr. Bothwell shall continue to serve as the Company’s Chief Financial Officer. Mr. Bothwell’s base annual salary is $162,500, which shall accrue commencing Effective Date and shall be payable in equal semi-monthly installments, commencing May 1, 2018, in arrears. 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. Pursuant to Maria Mitrani’s New Employment Agreement, Dr. Mitrani shall continue serving as the Company’s Chief Science Officer. Dr. Mitrani’s base annual salary is $162,500, which shall accrue commencing Effective Date and shall be payable in equal semi-monthly installments, commencing May 1, 2018, in arrears. 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. Term The term of each New Employment Agreement commences as of the Effective Date and continues until December 31, 2020 (Mr. Bothwell) or December 31, 2023 (Mr. Mitrani and Ms. Mitrani) (“Initial Term”), unless terminated earlier pursuant to the terms of the New Employment Agreement; provided that Unpaid Advances All unpaid advances by the Executive to the Company prior to January 1, 2018 and all unreimbursed expenses of Executive incurred prior to January 1, 2018 are forgiven and shall be written off by Executive. The Company shall repay the unpaid advances subsequent to December 31, 2017, and the unreimbursed expenses incurred subsequent to December 31, 2017, on May 15, 2018. Fringe Benefits and Perquisites During the Employment Term, each Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company. Termination The Company may terminate the New Employment Agreement at any time for good cause, as defined in the New Employment Agreement, including, the Executive’s death, disability, Executive’s willful and international failure or refusal to follow reasonable instructions of the Company’s Board of Directors, reasonable and material policies, standards and regulations of the Company’s Board of Directors or management. 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 and 2017, 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 for the year ended October 31, 2016 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 Life Sciences, Inc. 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. a Florida corporation (“ANU”), 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 move into the premises beginning June 20, 2017. In connection with the Lab Lease, ANU provided 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 2018 $ 95,421 2019 99,663 2020 109,049 2021 111,782 2022 75,758 Total $ 491,673 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. As described in Note 4, in connection with the Sale, ANU sold or transferred to Vera its right, title and interest in the Lab Lease (including the associated security deposits) and all leasehold improvements. 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 Company performed an independent valuation (using “Monte Carlo Simulation Models”) of the underlying value attributable to the fair value of the embedded derivatives liabilities associated with the Notes at the issuance date (the Notes contain full ratchet reset provisions and variable market based conversion derivative features) and determined that the fair value of the derivative liabilities associated with the Note was $759,569 (the derivative liability will be marked-to-market each quarter with the change in fair value recorded in the income statement). As of October 31, 2017, the amounts owed under the SPA, including original issue discount and accrued interest was $536,820. In connection with the Sale, (see Note 4), the Notes were repaid in full and all contingency conversion rights associated with Notes were no longer outstanding. The Company will write-off any remaining balance outstanding of the derivative liabilities as of the date of the Sale. Series A Preferred Stock of Mint Organics Inc. As more fully described in Note 15, each share of the Mint 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 Mint 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 and within the 90-day period thereafter, each holder of the Mint Series A Preferred Stock shall have the right, but not the obligation, to convert some or all of such holder’s shares of Mint Series A Preferred Stock (or Class B Common Stock equivalent) into unregistered shares, par value $0.001 per share, of common stock of Organicell, based on the Stated Value divided by the average trading price of Organicell 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 Mint 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 Mint Series A Preferred Stock or pro rata portion thereof). On April 6, 2018, in connection with Mr. Taddeo’s resignation, the Company and Mr. Taddeo entered into a Share Purchase and General Release Agreement whereby the Company agreed to purchase from Mr. Taddeo his 150 shares of Mint Series A Convertible Preferred Stock of Mint Organics for an aggregate purchase price of $40,000. (see Note 15). Effective May 14, 2018, the conversion rights for the holders of the Mint Series A Preferred Stock (or Class B Common Stock equivalent) to convert into unregistered shares, par value $0.001 per share, of common stock of Organicell had expired. Private Placement Of Convertible 6% Debentures As more fully described in Note 9, the Company issued the $150,000 Debentures and $100,000 Debentures that are each subject to conversion (the principal and all accrued but unpaid interest thereon) at the option of the holder at any time, from time to time, commencing 30 trading days after effectiveness of the Company's pending reverse stock split and continuing up to 5 days prior to maturity and (b) at any time during the period following receipt of a Repayment Notice and up to 5 days prior to the date of Prepayment Date, into shares of the common stock of the Company; in the case of the $150,000 Debentures at a conversion price equal to 80% of the VWAP of the common stock of the Company, or in the case of the $100,000 Debentures, at a conversion price of $0.45 per share. |