Item 3.02 Unregistered Sales of Equity Securities.
Since the filing of the Form 10-Q for the quarter ended March 31, 2022, the
Company has issued unregistered common and preferred stock in two transactions.
The aggregate common stock issued exceeded 5% of the total common stock
outstanding. The two transactions are described below:
Issuance to Related Parties on Debt Conversion. On June 29, 2022, three
individuals consisting of two directors and one affiliate by ownership
(including beneficial ownership), agreed to convert an aggregate of $1,417,851
of debt into common stock at $0.20 per share. An aggregate of 7,089,255 shares
were issued upon conversion. The debts were owed for advances made to the
Company, including accrued interest.
Issuance to Related Parties on Conversion of Preferred Stock. On June 29, 2022,
two affiliates by ownership (including beneficial ownership), agreed to convert
an aggregate of 288,223 shares of preferred stock into common stock at the
approximate value per share paid for the preferred stock when the preferred
shares were acquired. An aggregate of 5,476,237 shares of common stock were
issued upon conversion of the preferred shares. The amount paid for the
preferred shares at the time of acquisition equated to approximately $575,000
($2.00 per share) and the aggregate value of the common stock issued on
conversion at the closing price of the shares on June 29, 2022 was $600,000
($0.11 per share). The Board considered the conversion an important step to the
restructuring of the balance sheet in anticipation of expected merger and
acquisition efforts, and the conversion exchange rate was considered fair to the
Company in light of these circumstances.
Deferred Issuance to Related Parties on Conversion of Preferred Stock. On June
29, 2022, one director agreed to convert an aggregate of 695,708 shares of
preferred stock into common stock at an exchange ratio of 2 shares of common
stock for each 1 share of preferred stock converted. As of June 29, 2022, the
Company does not have sufficient common shares authorized to complete the
conversion of these shares and the director has elected to defer conversion
until the Company increases its authorized common shares. On June 30, 2022, the
Company's board of directors and a majority of the shareholders consented to a
resolution to increase the authorized shares of common stock to 495,000,000, and
on July 1, 2022, filed a Schedule 14C with the Securities and Exchange
Commission to notify the shareholders of the increase in authorized shares. The
Schedule 14C has been mailed to the shareholders of record and the Company
expects Articles of Amendment to the Articles of Incorporation to be filed with
the State of Nevada on or about August 9, 2022, to make the increase effective.
The remaining shares of preferred stock held by the Director will be converted
shortly thereafter.
An aggregate of 1,391,416 shares of common stock will be issued upon conversion
of these preferred shares. The preferred shares were issued to the Director as
compensation for services as Director and Chief Executive Officer of the Company
and the parties considered the exchange ratio fair to the Company. At the
Closing price of the common stock on the OTCQB Market on June 29, 2022, ($0.11
per share), the common shares issued on conversion would be valued at $153,000
in the aggregate.
In the aggregate, since the last quarterly report filed by the Company, a total
of 12,565,492 shares were issued. Following these issuances, the Company has
44,870,657 shares of common stock outstanding. Counting the deferred issuance
pending filing of the amendment to the Articles of Incorporation for the
increase in authorized shares, the Company will have issued 13,956,908 shares of
common stock and will then have 46,262,073 common shares outstanding.
The issuances of the common stock in each of these transactions were made (or
will be made) in reliance on the exemption provided by Section 4(a)(2) of the
Securities Act for the offer and sale of securities not involving a public
offering. The Company's reliance upon Section 4(a)(2) of the Securities Act in
issuing the securities was based on the following factors: (a) the issuance of
the securities were in isolated private transactions by us which did not involve
a public offering; (b) there was only a small number of buyers, each of which
served in capacities as officers, directors, or independent contractors of the
Company and are knowledgeable about the operations of the Company through the
positions and roles in which they serve; (c) there were no contemporaneous
public offerings of securities by MJHI; and (c) the negotiations for the
issuance of the securities took place directly between the Company and the
recipients of the shares. No selling commissions or other remuneration was paid
by MJHI in these transactions.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses
CANNABIS SATIVA, INC. 