On September 1, 2016 the Company entered into an employment agreement with Michael Hawkins, the Chief Financial Officer and an employment agreement with Paul Rosenberg, the Chief Executive Officer of the Company (“employees”). Mr. Hawkins was the Interim Chief Financial Officer which agreement was scheduled to expire on September 6, 2016. Mr. Rosenberg has been the CEO since inception and served without an agreement. The terms of the Agreement are the same. The agreements call for $156,000 per year base salary with a three year term. Only $3,000 per month guaranteed to be paid in cash, while the remainder ($10,000 per month) is booked as a note due, which may be converted into shares of the company at the current price on April 30, of each year for all income earned.The initial year’s conversion option was accrued upon entering into the agreement. The employees earn annual bonuses based upon gross sales, net profits, and annual increases in sales and profits. The Company and employees may elect to convert a portion of this salary into equity of the company based upon the fair market value on April 30, of each year for the bonuses earned. In addition, each employee was issued a seven year warrant to acquire four percent (4%) of the Company Stock, based upon the issued and outstanding, fully diluted, as of September 1, 2016, at the fair market value on September 1, 2016 with 25% vested immediately and 25% on each subsequent year anniversary of employment.
On August 15, 2016 the Company entered into an Asset Purchase Agreement with Gray Matter, LLC. The Agreement was consummated on September 1, 2016. The Company acquired all inventory and intellectual property in exchange for $35,000 in common stock. As a condition to this acquisition, the Company entered into a Consulting Agreement with John James Southard who became the President, mCig CBD Division.
On August 31, 2016, the Company issued 1,067,241 shares of common stock for services and was recorded as Stock Based Compensation in the amount of $30,950.
On September 1, 2016, the Company issued 2,000,000 shares of common stock for services and was recorded as Stock Based Compensation in the amount of $58,000.
It looks like any future stock based compensation, for Mike and Paul at least, won't be distributed until after April 30, 2017. As executives, they will also have to report any stock sales. It looks like a large chunk will be written off this quarter. Also...
Operating Expenses
Our operating expenses decreased by $544,847 to $245,245 for the three months ended July 31, 2016, from $790,092 for the three months ended July 31, 2015.
The decrease was primarily due to the decrease in stock based compensation of $476,929, selling, general and administrative expenses of $111,560, and amortization and depreciation of $6,098, offset by an increase in consulting of $28,155 and professional fees of $9,419.
Our total operating expenses for the three months ended July 31, 2016 of $245,245 consisted of $27,522 of selling, general and administrative expenses, $13,100 of professional fees, consulting expense of $28,155, stock based compensation of $168,300, and $8,168 of amortization and depreciation expenses. Our general and administrative expenses consist of bank charges, telephone expenses, meals and entertainments, computer and internet expenses, postage and delivery, office supplies and other expenses.
So there have been significant gains in reducing stock based compensation with further gains promised in future quarters. There is substantial growth in store for this company as construction revenue kicks in this quarter. There will be even less need for stock compensation in the future and the impact will be minimized as the share price increases. The number of shares entering the market per quarter is easily manageable at the current trading volumes.
