Armeau Brands Inc Just Filed Its Quarterly Report: NOTE 12: SUBSEQUENT ...

NOTE
12: SUBSEQUENT EVENTS


On May 11, 2021 (the “Effective Date”),
the Company entered into a Securities Purchase Agreement (the “SPA”) with The Cornelis F. Wit Revocable Living Trust,
of which Cornelis F. Wit is trustee (the “Purchaser”), an existing shareholder, pursuant to which the Company contemporaneously
sold to the Purchaser an aggregate of (a) 2,000,000 shares of its Series A Convertible Preferred Stock (the “Series A Preferred
Shares
”); and (b) 1,000,000 shares of its Series B Convertible Preferred Stock (the “Series B Preferred Shares,”
and together with the Series A Preferred Shares, collectively, the “Preferred Shares”) in exchange for (i) the payment
of $2,000,000 (including $302,500 principal plus accrued but unpaid interest in bridge financing provided by the Purchaser to the Company
during April 2021); and (ii) the surrender by the purchaser to the Company of 2,000,000 units (the “Units”), each Unit
consisting of two shares of common stock and one warrant to purchase an additional share of common stock in accordance with the terms
of the subscription agreements for the purchase of the Units entered into by the Purchaser and the Company in September and October 2020.
As a result of the transaction and the voting rights accorded the Preferred Shares as set forth below, the Purchaser now holds approximately
88% of the voting power of the Company and accordingly, a “Change in Control” has occurred.


The Series A Preferred Shares have a stated value
of $1.00 per share. Each Series A Preferred Share is convertible into Common Stock at the option of the holder thereof at a conversion
rate of $0.05 per share of Common Stock. The conversion rate is subject to adjustment in the event of stock splits, stock dividends,
other recapitalizations and similar events, as well as in the event of issuance by the Company of shares of Common Stock or securities
exercisable for, convertible into or exchangeable for Common Stock at an effective price per share less than the conversion rate then
in effect (other than certain customary exceptions). In respect of rights to the payment of dividends and the distribution of assets
in the event of any liquidation, dissolution or winding-up of the Company, the Series A Preferred Shares rank (a) junior to the Company’s
Series B Shares; and (b) senior to (i) the Company’s common stock, par value $0.001 per share (the “Common Stock”)
and any other class or series of stock (including other series of Preferred Stock) of the Company (collectively, “Junior Stock”).
From and after the date of the issuance of Series A Preferred Shares, dividends at the rate per annum of 8%, compounded annually, accrue
daily on the Stated Value (the “Accruing Dividends). Accruing Dividends shall accrue from day to day, whether
or not declared, and shall be cumulative; provided, however, such Accruing Dividends shall be payable only when, as, and
if declared by the Board of Directors and the Company shall be under no obligation to pay such Accruing Dividends except as set forth
herein. The Company shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the
Company (other than dividends on (a) shares of Series B Preferred Shares; and (b) Common Stock payable in shares of Common Stock) unless
(in addition to the obtaining of any consents required elsewhere in the Articles of Incorporation) the holders of the Series A Preferred
Shares then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred Share
in an amount at least equal to the sum of (a) the amount of the aggregate Accruing Dividends then accrued on such Series A Preferred
Shares and not previously paid; and (b) (i) in the case of a dividend on Common Stock or any class or series that is convertible into
Common Stock, that dividend per Series A Preferred Share as would equal the product of (A) the dividend payable on each share of such
class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock; and (B) the
number of shares of Common Stock issuable upon conversion of a Series A Preferred Share, in each case calculated on the record date for
determination of holders entitled to receive such dividend; or (ii) in the case of a dividend on any class or series that is not convertible
into Common Stock, at a rate per Series A Preferred Share determined by (A) dividing the amount of the dividend payable on each share
of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class
or series); and (B) multiplying such fraction by an amount equal to the Stated Value of the Series A Preferred Shares; provided,
that if the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital
stock of the Company, the dividend payable to the holders of Series A Preferred Shares shall be calculated based upon the dividend on
the class or series of capital stock that would result in the highest Series A Preferred Share.


The Series B Preferred Shares
have a stated value of $1.00 per share. Each Series A Preferred Share is convertible into Common Stock at the option of the holder thereof
at a conversion rate of $0.20 per share of Common Stock. The conversion rate is subject to adjustment in the event of stock splits, stock
dividends, other recapitalizations and similar events, as well as in the event of issuance by the Company of shares of Common Stock or
securities exercisable for, convertible into or exchangeable for Common Stock at an effective price per share less than the conversion
rate then in effect (other than certain customary exceptions). In respect of rights to the payment of dividends and the distribution of
assets in the event of any liquidation, dissolution or winding-up of the Company, the Series B Preferred Shares rank senior to the (a)
Series A Preferred Shares; (b) the Company’s Common Stock and any other class or series of Junior Stock. From and after the date
of the issuance of Series B Preferred Shares, dividends at the rate per annum of 8%, compounded annually, accrue daily on the Stated Value
(the “Accruing Dividends). Accruing Dividends shall accrue from day to day, whether or not declared, and shall
be cumulative; provided, however, such Accruing Dividends shall be payable only when, as, and if declared by the Board of
Directors and the Company shall be under no obligation to pay such Accruing Dividends except as set forth herein. The Company shall not
declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company (other than dividends on
(a) shares of Series B Preferred Shares; and (b) Common Stock payable in shares of Common Stock) unless (in addition to the obtaining
of any consents required elsewhere in the Articles of Incorporation) the holders of the Series B Preferred Shares then outstanding shall
first receive, or simultaneously receive, a dividend on each outstanding share of Series B Preferred Share in an amount at least equal
to the sum of (a) the amount of the aggregate Accruing Dividends then accrued on such Series B Preferred Shares and not previously paid;
and (b) (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per
Series B Preferred Share as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable,
as if all shares of such class or series had been converted into Common Stock; and (B) the number of shares of Common Stock issuable upon
conversion of a Series B Preferred Share, in each case calculated on the record date for determination of holders entitled to receive
such dividend; or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per Series
B Preferred Share determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock
by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization with respect to such class or series); and (B) multiplying such fraction by
an amount equal to the Stated Value of the Series B Preferred Shares; provided, that if the Company declares, pays or sets aside,
on the same date, a dividend on shares of more than one class or series of capital stock of the Company, the dividend payable to the holders
of Series B Preferred Shares shall be calculated based upon the dividend on the class or series of capital stock that would result in
the highest Series B Preferred Share.


Pursuant to the SPA, the Purchaser and the Company
agreed to fix the number of members of the board of directors of the Company at five (5), three of whom shall be designated by the Purchaser
and two of whom shall be “independent” and acceptable to the Purchaser. In addition, the Purchaser has been accorded
certain registration rights under the Securities Act of 1933, as amended, with respect to the shares of Common Stock issuable upon conversion
of the Preferred Shares and ongoing financial and other information rights with respect to the Company.


On May 14, 2021, the single investor signed a
six-month extension to the $200,000 Convertible Note. The note will become due in September 2021.


The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Entry into a Material Definitive - Oct. 15, 2021
Unregistered Sale of Equity - Oct. 4, 2021
Cornelis F. Wit TTEE, Cornelis F. Wit Revocable Trust just provided an update on share ownership of Armeau Brands Inc - Sept. 29, 2021

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