On December 13, 2019, CanaFarma signed the Merger Agreement with the Company for a three-cornered merger transaction which will constitute a reverse take-over of the Company. Pursuant to the terms of the Merger Agreement, CanaFarma will amalgamate with Subco, a wholly-owned subsidiary of KYC, pursuant to a statutory procedure of the laws of the State of Delaware.
In connection with such Merger, holders of CanaFarma Shares will be entitled to receive the following consideration in exchange for each CanaFarma Share:
(a) One for one, for each CanaFarma share
(b) One for one, for each KYC Unit share
Upon completion of the Merger, the amalgamated corporation will become a wholly-owned subsidiary of KYC. Immediately prior to the completion of the Merger KYC will also complete the KYC Share Split.
CanaFarma is a private company incorporated in Delaware which intends to provide ” Seed-to Sale ” Industrial Hemp cultivation, and the resulting conversion to biomass and manufacturing of CBD infused consumer products. CanaFarma’s business and stated business objectives will be the business and stated business objectives of the Resulting Issuer upon completion of the merger, indirectly through the operation of CanaFarma as a wholly-owned subsidiary.
Simple Solutions Purchase Agreement On April 16, 2019, CanaFarma entered into an agreement to acquire all of the voting securities of Simple Solutions by Hemp Inc. with forty-nine percent (49%) of the voting shares having been acquired on April 16, 2019. On March 11, 2019, Simple Solutions entered a partner agreement with the State of New York and on April 30, 2019, was granted a license by the State of New York Department of Page 34 of 111 Agriculture and Markets pursuant to which it is authorized to possess, grow and cultivate industrial hemp.
This Hemp Cultivation License is valid for a period of three years, terminating on April 30, 2022. The partner agreement between Simple Solutions and the State of New York Department of Agriculture and Markets governs the terms of the Hemp Cultivation License which, among other things, includes a change of control provision whereby the terms of the Hemp Cultivation License would be reviewed in the event of a change of control of Simple Solutions. For this reason, CanaFarma has acquired only (49%) of the voting shares of Simple Solutions to date. The Simple Solutions Purchase Agreement provides that the remaining fifty-one percent (51%) of the voting shares of Simple Solutions shall be acquired by CanaFarma after the conclusion of the 2019 harvest season. Pursuant to the aforementioned agreement, CanaFarma has invested $2,137,000 into Simple Solutions and an aggregate of 5,000,000 CanaFarma Shares have been issued to the owners of Simple Solutions as consideration. Simple Solutions, in turn, has committed to produce at least 125,000 pounds of hemp per annum, with profits to be shared equally between the parties.
AXIM Agreement CanaFarma entered into a private label manufacturing and supply agreement, effective as of April 19, 2019, with AXIM Biotechnologies, Inc. a manufacturer and supplier of proprietary hemp-based CBD products, pursuant to which CanaFarma has obtained exclusive rights to sell several hemp-oil based consumer products under its own YOOFORIC brand, including a chewing gum that CanaFarma has begun to distribute for sale. For a discussion of CanaFarma’s products that are to be offered and sold pursuant to the AXIM Agreement,
Products and Services. The foregoing exclusive private label right applies in respect of the entire world, with the exception of Australia and Canada, and includes minimum purchase obligations on the part of CanaFarma in order to maintain exclusivity, being a minimum of 75,000 units per three (3) month period and 300,000 units for each twelve (12) month period. These products will be produced for CanaFarma at AXIM’s production facilities in Italy and distributed by CanaFarma within the aforementioned territories of exclusive jurisdiction.
The AXIM Agreement is for a term of twelve (12) months, with automatic renewal for additional twelve (12) month periods unless earlier notice is provided. Currently, all AXIM products are produced in Italy and imported into the United States. CanaFarma is currently exploring alternatives for a manufacturing facility in the United States, which it expects to acquire within the first quarter of the 2020 calendar year. Intelanyze Agreement On April 22, 2019 CanaFarma entered into a Service Bureau Agreement with Intelanyze, LLC, a Delaware limited liability company. An important component of CanaFarma’s strategy and business model is the online sales and marketing intellectual property that it obtains through its relationship with Intelanyze. Intelanyze has 20 years of experience in Direct-To-Consumer marketing and has built a significant presence on the Internet through its “Affiliate Marketing” network. This network drives consumer web-based traffic to its various E-commerce sites and landing pages, and because the business model is based upon “pay for performance”, CanaFarma will not incur a marketing expense unless results are actually realized. For a further discussion regarding CanaFarma’s marketing approach, Marketing Strategy and Customer Engagement”. EK Ads Agreement
On June 3, 2019, CanaFarma entered into an agreement with EK Ads Inc. who is tasked with building, maintaining and managing the relationships with CanaFarma’s Affiliate Marketing Network. EK Ads has significant experience in the field of affiliate marketers and will be paid purely based upon the results that are delivered.
Other Arrangements In addition to the private label agreement with AXIM, which governs the sale of CanaFarma’s YOOFORIC chewing gum, CanaFarma also purchases a tincture product from F&B Cosmetics through an open purchase order. This tincture product is also packaged and sold under the YOOFORIC brand. CanaFarma’s subsidiary, Simple Solutions, has entered into a property lease agreement in respect of a 55-acre parcel of land in Duchess, County, New York, upon which it operates CanaFarma’s hemp farm. The lease initially ran until December 31, 2019.
* All of the information in this article is taken directly from the December 2019 Prospectus, and edited for simplification.