Quarterly report pursuant to Section 13 or 15(d)

Subsequent Events

v3.20.2
Subsequent Events
 9 Months Ended
Sep. 30, 2020
Subsequent Events [Abstract]  
Subsequent Events

NOTE 11 - SUBSEQUENT EVENTS

 

Separation Agreement

 

On November 6, 2020 (the “Effective Date”), the Company entered into an Omnibus Separation Agreement (the “Separation Agreement”) with its unconsolidated investee entity, EPH. Under the terms of the Separation Agreement, the parties have agreed that the Company will continue to operate and pursue opportunities in the biosciences and pharmaceutical fields while EPH will continue to operate in the compost and soil manufacturing fields. More specifically:

 

  1. On the Effective Date, the Management Agreement, dated January 18, 2019, as amended, between EPH and the Company (then Q2Earth) was terminated by mutual agreement of the parties.
         
      a. In lieu of any severance or other termination payments due thereunder, EPH has released QSAM from a total of $993,985 in liabilities, inclusive of advanced management fees and multiple promissory notes, including accrued and unpaid interest. Such promissory notes have been cancelled and are no longer enforceable. An additional $114,700 in promissory notes owed to an affiliate of EPH was agreed to be converted into Company common stock at a price of $0.22 per share.
         
      b. The prior officers and employees of the Company engaged in the compost and soil manufacturing business have been released from any non-competition, non-solicitation or other restricted covenants pursuant to their respective employment agreements (as agreed in the Separation Agreement and further defined in individual release agreements with each such employee).
         
  2. As of the Effective Date, EPH has the right in its sole discretion to use the name “Q2Earth” in all jurisdictions of the United States and worldwide.
         
  3. The Company has agreed to transfer to EPH the License Agreement for the ABS product and all associated knowhow, trade secrets and trademark/service marks. Additionally, the Company has agreed to transfer to EPH the distributorship agreement, dated June 1, 2019, with Senn, Senn & Senn LLC (the “Senn Agreement”). Both these transfers are subject to consent by the granting parties, which has not been received as of the current date. The Company’s Board determined that these agreements had no material value, were not generating revenue, and had accumulated $37,500 in liabilities.
         
  4. The Company has agreed that up to $175,000 in funds raised in a next financing will be used to pay any remaining legacy debt and liabilities after the Effective Date.

 

Conversion of Debt for Common Shares

 

In addition to Bridge Notes settled and converted to common stock as of September 30, 2020, in October 2020, an additional $130,000 of principal and interest in defaulted Bridge Notes were converted into 590,909 shares of common stock issued or to be issued as of the date hereof.

 

On November 6, 2020, $147,797 in deferred employee compensation owed to the Company’s CEO was converted to 444,527 shares of common stock issued or to be issued as of the date hereof, plus the employee forgave an additional $32,598 in deferred compensation.

 

On November 1, 2020, the Company issued 800,000 shares of common stock to a service provider under a 12 month consulting agreement in connection with corporate communications and investor relations activities.

 

Resignation of former CEO and Chairman, and appointment of new CEO and Executive Chairman

 

On November 6, 2020, Kevin Bolin resigned as Chairman and CEO of the Company. At such time, Mr. Bolin was owed $180,395 in deferred unpaid salary, of which $147,797 was converted into 444,527 shares of common stock issued or to be issued, and $32,598 was forgiven. Further, the forfeiture provision on 400,000 shares of common stock issued to Mr. Bolin in 2018 was terminated.

 

On November 6, 2020, Douglas Baum, age 53, was appointed as Chief Executive Officer of the Company. Mr. Baum has been a director of the Company since January 2020. Mr. Baum received a three year employment agreement with the Company providing for $250,000 per year in base salary, of which only half will be paid in the first year or until certain results have been achieved in the ongoing drug development program. He will receive additional equity compensation to be subsequently approved and granted by the Board. Mr. Baum’s employment agreement provides for a 12 month severance payment if he is terminated for cause or leaves for “good reason” as defined in the agreement.

 

On November 6, 2020, C. Richard Piazza, age 73, was appointed as a Member of and the Executive Chairman of the Board of the Company. Mr. Piazza received a three year employment agreement with the Company providing for $220,000 per year in base salary, of which only half will be paid in the first year or until certain results have been achieved in the ongoing drug development program. He will also receive additional equity compensation to be subsequently approved and granted by the Board. Mr. Piazza’s employment agreement provides for a 12 month severance payment if he is terminated for cause or leaves for “good reason” as defined in the agreement. Mr. Piazza also serves as President, and is a minority shareholder, of IGL Pharma Inc., the licensor of the Company’s drug technology, and a consultant to IsoTherapeutics Group, LLC, the inventors of the technology. Mr. Piazza does not have any family relationship with other directors or officers of the Company.