UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

November 27, 2019

 

Date of Report (Date of earliest event reported)

 

Kinetic Group Inc.

 

(Exact Name of Registrant as Specified in Charter)

 

Nevada   333-216047   47-4685650
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)

 

665 Fifth Avenue

New York, NY

10022

 

(Address of Principal Executive Offices)

 

(516) – 567-7967

 

(Registrant’s telephone number, including area code)

 

N/A

 

(Former Name or Former Address, if Changed Since Last Report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

     
 

 

SECTION 1 – REGISTRANT’S BUSINESS AND OPERATIONS

 

Item 1.01 Entry into a Material Definitive Agreement

 

Kinetic Note

 

On November 20, 2019, Kinetic Group Inc., a Nevada corporation (the “Company”), entered into a $125,000 12% convertible redeemable note due November 20, 2020 (the “Note”). Any amount of principal or interest on the Note, which is not paid when due shall be an event of default and bear interest at the rate of eighteen (18%) per annum from the due date thereof until the same is paid unless the (“Default Interest”) unless the Holder has the option to receive such payment in shares of common stock of the Company by converting such principal amount and accrued, but unpaid, interest into shares of common stock of the Company in accordance with the terms of the Note (provided that no other event of default is outstanding or in effect).

 

The holder of the Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of the Note then outstanding and/or any accrued, but unpaid, interest into shares of the Company’s common stock at a price (“Conversion Price”) for each share of common stock equal to 70% of the lowest closing price of the common stock as reported on the National Quotations Bureau OTC Market exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the fifteen prior trading days including the day upon which a notice of conversion is received by the Company.

 

In the case of an Event of Default (as defined in the Note), the Note shall become immediately due and payable and interest shall accrue at the rate of Default Interest.

 

A copy of the Note is attached to this report as Exhibit 10.1.

 

Warrant Assignment and Conveyance Agreement

 

On November 26, 2019, the Company entered into a warrant assignment and conveyance agreement (the “Warrant Agreement”) with 2672237 Ontario Limited, an Ontario corporation (“Ontario”), pursuant to which the Company agreed to issue one-third of its outstanding shares of common stock to Ontario in exchange for 100% of Ontario’s right, title and interest in, to and under a warrant agreement dated November 26, 2019 between Ontario and Fairway LLC, a limited liability company organized and existing under the laws of the State of Nevada (“Fairway”) that is becoming a wholly-owned subsidiary of the Company by virtue of the transactions contemplated hereby.

 

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SECTION 2 – FINANCIAL INFORMATION

 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

Acquisition of Solstice

 

On November 26, 2019, the Company indirectly acquired 100% of the outstanding shares of Solstice Marketing Concepts LLC, a Delaware limited liability company (“Solstice”) by way of contribution of Fairway by Corette LLC, Fairway’s owner (“Corette”), in exchange for Fairway’s 2,349,800 shares of common stock of the Company. The Company now owns Fairway, which, in turn, owns 100% of Solstice.

 

Solstice is the second largest retailer of sunglasses in the United States, carrying a wide range of contemporary and luxury brands with 72 physical stores and an online presence.

 

SECTION 5 – CORPORATE GOVERNANCE AND MANAGEMENT

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

(b) Resignation of Officer

 

In connection with the transactions described above, Yaroslav Startsev resigned as Director, President and Chief Executive Officer of the Company and Nikolai Kuzmin resigned as Director, Chief Financial Officer, Principal Accounting Officer, Principal Financial Officer, Treasurer and Secretary of the Company.

 

(c) Appointment of Officers

 

In connection with the transactions described above, Nathan Rosenberg became the sole Director, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary of the Company and Mark Radom became the Company’s general counsel.

 

Professional History of Nathan Rosenberg

 

Nathan Rosenberg began working in the optics and eye-wear business in 1979 when he joined his family’s company, Vita Frame as an executive officer. By 1983, Vita Frame became the largest Ray Ban sunglasses distributor in North America. In 1996, Nathan decided to expand distribution by creating GSI Corp, an umbrella corporation managing all product lines and avenues of sale. In 2006, Nathan became chief executive officer and president of GSI Corp. In 2007, GSI Corp., under Nathan’s leadership, re-entered the frame import business and opened Niche Optics, whose mission was to bring current trends of optical frames to retail stores and chains. In 2010-2012, Nathan formed a partnership to enter the contact lens solution business in the United States with OTE Pharma, which is based in The Netherlands. At the same time, Nathan formed a partnership to open Gaffos.Com, one of the largest internet providers of eyewear and sunwear.

 

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Professional History of Mark Radom

 

From September 16, 2019 to-date, Mark Radom has served as general counsel to Slinber Bag Inc. and from July 2018 to-date, Mark Radom has served as general counsel of The Greater Cannabis Company, Inc. From February 2010 through July 2015, Mr. Radom served as the chief carbon officer and general counsel of Blue Sphere Corporation. From 2009 through 2010, Mr. Radom was managing director of Carbon MPV Limited, a Cyprus company focused on developing renewable energy and carbon credit projects. From 2007 to 2009, Mr. Radom was general counsel and chief operating officer of Carbon Markets Global Limited, a London-based carbon credit and renewable energy project developer. Mr. Radom has extensive experience in business development in the renewable energy and carbon credit sectors. He has sourced over U.S. $100,000,000 in renewable energy, industrial gas and carbon credit projects and managed many complex aspects of their implementation. He was legal counsel for a number of carbon and ecological project developers and was responsible for structuring joint ventures and advising on developing projects through the CDM/JI registration cycle and emission reduction purchase agreements under the auspices of the Kyoto Protocol. Prior to this, he worked on Wall Street and in the City of London as a US securities and capital markets lawyer where he represented sovereigns, global investment banks and fortune 500 companies across a broad range of capital raising and corporate transactions. He is a graduate of Duke University and Brooklyn Law School. Mr. Radom is admitted to practice law in New York and New Jersey and speaks fluent Russian.

 

(d) Appointment of Directors

 

Nathan Rosenberg was appointed as a director of the Company. Mr. Rosenberg does not have any family relationships with any other executive officers or directors of the Company, or persons nominated or chosen by the Company to become directors or executive officers. There is no arrangement or understanding pursuant to which Mr. Rosenberg was appointed as a member of the Board. Furthermore, the Company is not aware of any transaction requiring disclosure under Item 404(a) of Regulation S-K, except for the Solstice Acquisition. It is contemplated that Mr. Rosenberg may serve on certain committees of the Board, but no such committee appointments have been made at this time.

 

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS

 

Item 9.01 Financial Statements and Exhibits

 

(a) Financial Statements of Business Acquired

 

The audited financial statements of Solstice required pursuant to this Item 9.01(a) will be filed by amendment within 71 calendar days after the date that this Current Report on Form 8-K was required to be filed.

 

(b) Pro Forma Financial Information

 

The pro forma financial information of Solstice required pursuant to this Item 9.01(b) will be filed by amendment within 71 calendar days after the date that this Current Report on Form 8-K was required to be filed.

 

(d) Exhibits

 

Exhibit 10.1 $125,000 12% Convertible Redeemable Note dated November 20, 2019
   
Exhibit 10.2 Warrant Assignment and Conveyance Agreement dated November 26, 2019
   
Exhibit 10.3 Mark Radom Service Agreement dated November 26, 2019
   
Exhibit 10.4 Yaroslav Startsev and Nikolai Kuzmin Resignation Letter

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

KINETIC GROUP inc.

a Nevada corporation

     
Dated: November 27, 2019 By: /s/ Nathan Rosenberg
    Chief Executive Officer and Sole Director

 

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This Assignment and Conveyance Agreement (this “Agreement”) is dated November 26, 2019 and is entered into by and between 2672237 Ontario Limited, an Ontario corporation (“Assignor”), and Kinetic Group Inc., a Nevada corporation (“Assignee”).

 

For good and valuation consideration, the receipt and sufficiency of which is hereby acknowledged, the Assignor hereby assigns, conveys and transfers 100% of its right, title and interest in, to and under the warrant agreement and warrants forms of which attached hereto as Annex A to the Assignee in exchange for 1/3 of the Assignee’s common stock on a Fully-diluted and fully-issued basis to be issued, transferred and delivered to the order of Assignor (subject, in each case to beneficial ownership limitations of 4.99% and/or 9.99% of the Assignee’s common stock) as soon as practicable upon written request of the Assignor after the date hereof.

 

The term “Fully-diluted and fully issued basis” means that all options, warrants or other convertible securities or instruments or other rights to acquire common stock or any other existing or future classes of stock of the Company have been exercised or converted, as applicable, in full regardless of whether any such options, warrants or other convertible securities or instruments or other rights are then vested, convertible or exercisable in accordance with their terms.

 

This Agreement shall be governed by the laws of the State of New York without reference to its conflicts of laws principles or the conflicts of laws principles of any other jurisdiction.

 

Agreed and accepted on the date first written above:

 

2672237 Ontario Limited  
     
By: Elisha Kalfa  
/s/ Elisha Kalfa  
Title: Authorized signatory  
     
Kinetic Group Inc.  
     
By: Nathan Rosenberg  
/s/ Nathan Rosenberg  
Title: Authorized signatory  

 

     
 

 

Annex A

 

WARRANT AGREEMENT

 

THIS WARRANT AGREEMENT (this “Agreement”), dated as of this 26th day of November 2019 (the “Effective Date”), is entered into by and between Fairway LLC, a Nevada limited liability company, with its principal business address at 1000 North Green Valley Parkway, Suite 440, Las Vegas NV 89074 (the “Company”) and 2672237 Ontario Limited a corporation incorporated under the laws of the Province of Ontario with its principal business address at 535 Millway Avenue, Unit 3, Vaughan, Ontario L4K 3V4 (the “Investor”). The Investor and the Borrower shall be collectively referred to as “Parties”.

 

RECITALS

 

WHEREAS, the parties entered into a promissory note and loan agreement dated May 23, 2019 (the “Original Note”), pursuant to which the Investor received warrants convertible into thirty-three percent (33%) of all outstanding membership interests/units of the Company on a Fully-diluted and fully-issued basis (the “Warrants”) on the earlier of (i) the date that any initial public offering, acquisition, merger, reverse merger or other transaction not in the ordinary course of business is consummated or (ii) any date on which the Investor elects to convert such Warrants into membership interests/units of the Company so long as such date is no later than 12 months from the date of the Original Note at an agreed and confirmed valuation of the Company of Nine Million Dollars ($9,000,000); and

 

WHEREAS, in order to obtain certain tax and structuring benefits in connection with a series of transactions that will result in the Company becoming an indirect subsidiary of Kinetic Group Inc., a Nevada corporation, the Parties now wish to (i) enter into this agreement in respect of the Warrants and (ii) amend and restate the Original Note.

 

AGREEMENT

 

Now, therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. Warrants.

 

1.1 In consideration for the loan made by the Investor to the Company pursuant to the Original Note, the Company hereby issues to the Investor warrants covering 100% of the Loan (as defined in the Original Note) in the form attached hereto as Annex A and reflecting the following terms and conditions (the “Warrants”):

 

a. The Warrants are convertible into thirty-three percent (33%) of all outstanding membership interests/units of the Company or, at the election of Investor in its sole discretion, common or preferred stock of any publicly-held company owned by or that owns the Company (“PubCo”) on a Fully-diluted and fully-issued basis on the earlier of (i) the date that any initial public offering, acquisition, merger, reverse merger or other transaction not in the ordinary course of business is consummated or (ii) any date on which the Investor elects to convert the Warrants into membership interests/units of the Company or common or preferred stock of PubCo so long as such date is no later than 12 months from the date hereof at an agreed and confirmed valuation of the Company of Nine Million Dollars (U.S. $9,000,000). For the avoidance of doubt, it is agreed that “membership interests/units”, as used in this agreement, carry full membership/ownership rights and benefits, including, but not limited to voting rights, and are not limited to economic interests.

 

     
 

 

b. The term “Fully-diluted and fully issued basis” means that all options, warrants or other convertible securities or instruments or other rights to acquire membership interests/units or any other existing or future classes of membership interests/units of the Company or common stock or any other existing or future classes of stock of PubCo have been exercised or converted, as applicable, in full regardless of whether any such options, warrants or other convertible securities or instruments or other rights are then vested, convertible or exercisable in accordance with their terms.

 

c. The Warrants and the underlying membership interests/units or common stock exercisable thereto shall be collectively referred to as the “Securities.”

 

1.2 The Warrants shall be exercisable for a period of 12 months of the Effective Date.
     
2. Provisions Pertaining to Registration and Transfer of the Warrants

 

a. The Parties further acknowledge and are aware that the Securities may only be disposed of in compliance with respective U.S. state and U.S. federal securities laws (including without limitations, any holding period requirements). In connection with any transfer of Securities other than pursuant to an effective registration statement, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act of 1933, as amended (the “Securities Act”).

 

     
 

 

b. The Investor agrees to the imprinting, so long as is required by this Section 3.3 of a legend on any of the Securities in the following form:

 

“THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURIT!ES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”

 

c. Certificates evidencing the Securities shall not contain any legend (including the legend set forth in this Section): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Securities pursuant to Rule 144, (iii) if the Securities are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Securities and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Securities Exchange Commission).
     
d. In the event that the Investor will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if the Securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing the Securities as set forth herein is predicated upon the Company’s reliance upon this understanding.
     
e. If applicable, with respect to any Warrants issued hereunder, the Company shall, immediately upon such issuance, cause PubCo to provide its transfer agent with an irrevocable instruction to reserve sufficient respective number of underlying securities issuable per such Warrant, so long as each such respective Warrant is exercisable.

 

  3. This Warrant Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its principles regarding conflicts of law.

 

     
 

 

Please indicate your acceptance of these terms by countersigning where indicated below.

 

Fairway LLC  
     
By: Nathan Rosenberg  
Title: Authorized signatory  
     
Agreed and accepted:  
     
2672237 Ontario Limited  
     
By: Elisha Kalfa  
Title: Authorized signatory  

 

     
 

 

Annex A

 

THIS WARRANT AND THE MEMBERSHIP INTERESTS/UNITS OR SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 4 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

WARRANT TO PURCHASE MEMBERSHIP UNITS / SHARES OF COMMON STOCK

 

Company: Fairway LLC

 

Holder: 2672237 Ontario Limited

 

Membership Units: thirty-three percent (33%) of the membership interests/units (“Membership Units”) of the Company or, if applicable shares of common stock of PubCo (as defined in the Warant Agreement) on a Fully-diluted and fully-issued basis on the earlier of (i) the date that any initial public offering, acquisition, merger, reverse merger or other transaction not in the ordinary course of business is consummated or (ii) any date on which the Investor elects to convert the Warrants into Membership Units of the Company or common stock of PubCo so long as such date is no later than 12 months from the date hereof at an agreed and confirmed valuation of the Company of Nine Million Dollars (U.S. $9,000,000) (collectively, “One Third of the Company”)

 

Class of Stock/Equity: Membership Units of the Company or common stock of PubCo

 

Exercise Price: not applicable; the Warrants evidenced hereby are exercisable without consideration

 

Issue Date: November 26, 2019

 

Term: See Section 4.1

 

THIS WARRANT CERTIFIES THAT, for value received as consideration pursuant to that certain Original Note dated May 23, 2019 (as defined in the Solstice Warrant Agreement of even date herewith (the “Warrant Agreement”)) and for other good and valuable consideration the sufficiency of which is hereby acknowledged, Holder is entitled to receive One Third of the Company in the form of (i) fully paid and nonassessable membership units of the Company or common stock of PubCo at the Exercise Price, all as set forth herein, subject to the provisions and upon the terms and conditions set forth in this Warrant. It is agreed that the Holder, in its sole discretion, may elect to receive shares of preferred stock instead of common stock and, as such, all references herein to common stock shall, if applicable, include shares of preferred stock.

 

     
 

 

ARTICLE 1. EXERCISE.

 

1.1 Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 hereto to the principal office of the Company.

 

1.2 Delivery of Certificate and New Warrant. Promptly after Holder exercises this Warrant, the Company shall deliver to Holder certificates for or other evidence (reasonably acceptable to the Holder) of the Membership Units or common stock received and, if this Warrant has not been fully exercised and has not expired, a new Warrant representing the Membership Units or common stock not so received.

 

1.3 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

ARTICLE 2. ADJUSTMENTS TO THE MEMBERSHIP UNITS.

 

2.1 Dividends, Splits, Combinations, Etc. If the Company declares or pays a dividend on the Membership Units payable in membership units, or other securities, or common stock payable in common stock, or other securities, then upon exercise of this Warrant, for each Membership Unit or share of common stock acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Membership Units or, if applicable, shares of common stock of PubCo of record as of the date the dividend occurred. If the Company subdivides the Membership Units or if PubCo subdivides its common stock by reclassification or otherwise into a greater number of interests/units or shares or takes any other action which increases the amount of units into which the Membership Units are convertible shares of common stock into which such shares of common stock are convertible, the number of interests/units or shares of common stock of PubCo purchasable hereunder shall be proportionately increased and the Exercise Price shall be proportionately decreased. If the outstanding interests/units of the Company or common stock of PubCo are combined or consolidated, by reclassification or otherwise, into a lesser number of interests/units, the Exercise Price shall be proportionately increased and the number of Membership Units or, if applicable shares of common stock of PubCo shall be proportionately decreased.

 

2.2 Reclassification, Exchange or Substitution, Etc. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or net exercise of this Warrant, Holder shall be entitled to receive, upon exercise or net exercise of this Warrant, the number and kind of securities and property that Holder would have received for the Membership Units or, if applicable, common stock of PubCo if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or net exercise of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or net exercise of this Warrant.

 

     
 

 

2.3 Merger or Consolidation. Upon any capital reorganization of the Company’s/PubCo’s capital stock or membership interests (other than a subdivision, combination, reclassification or exchange of membership interests/units or common stock provided for elsewhere in this Section 2) or a merger or consolidation of the Company or PubCo with or into another limited liability company or corporation, then as a part of such reorganization, merger or consolidation, provision shall be made so that the Holder shall thereafter be entitled to receive upon the exercise of this Warrant, the number and kind of securities and property of the Company, or of the successor company/corporation resulting from such reorganization, merger or consolidation, to which that Holder would have received for the Membership Units if this Warrant had been exercised immediately before such reorganization, merger or consolidation.

 

2.4 Fractional Membership Units. No fractional Membership Units or shares of common stock shall be issuable upon exercise or net exercise of this Warrant and the number of Membership Units or shares of common stock to be issued shall be rounded up to the nearest whole Membership Unit or share of common stock.

 

ARTICLE 3. COVENANTS OF THE COMPANY.

 

3.1 Notice of Certain Events. If the Company or PubCo proposes at any time (a) to declare any dividend or distribution upon or in respect of any of its membership interests/units or common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to effect any reclassification or recapitalization of any of its membership interests/units or stock; or (c) to merge or consolidate with or into any other company or corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up, then, in connection with each such event, the Company shall give Holder: (1) at least three (3) days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of its membership interests/units will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) above; and (2) in the case of the matters referred to in (b) and (c) above at least three (3) days prior written notice of the date when the same will take place (and specifying the date on which the holders of its membership interests/units or common stock will be entitled to exchange their membership interests/units or common stock for securities or other property deliverable upon the occurrence of such event).

 

3.2 No Stockholder Rights or Liabilities. Except as provided in this Warrant, the Holder will not have any rights as a member of the Company or PubCo until the exercise of this Warrant. Absent an affirmative action by the Holder to purchase the Membership Units or common stock of PubCo, the Holder shall not have any liability as a member of the Company or PubCo.

 

     
 

 

3.3 Closing of Books. The Company will at no time close and will procure that PubCo will at no time close its transfer books against the transfer of this Warrant or of any Membership Units or shares of common stock issued or issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant.

 

ARTICLE 4. MISCELLANEOUS.

 

4.1 Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the earlier of 5:00 pm Israel Time on the first (1st) anniversary of the Issue Date.

 

4.2 Legends. This Warrant and the Membership Units or common stock of PubCo (and the securities issuable, directly or indirectly, upon conversion of the Membership Units or common shares of PubCo, if any) shall be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

4.3 Transfers. This Warrant and any securities issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Membership Units or common shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). After compliance with all restrictions on transfer set forth in this Section 4.3, and within a reasonable time after the Company’s receipt of an executed Assignment Form in the form attached hereto, the transfer shall be recorded on the books of the Company or PubCo upon the surrender of this Warrant, properly endorsed, to the Company at its principal offices. In the event of a partial transfer, the Company shall issue to the new holders one or more appropriate new warrants.

 

4.4 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such Holder from time to time. Effective upon receipt of the fully executed Warrant, all notices to the Holder shall be addressed as set forth on the signature page hereto until the Company receives notice of a change of address in connection with a transfer or otherwise. Notice to the Company shall be addressed as set forth on the signature page hereto until the Holder receives notice of a change in address.

 

4.5 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

4.6 Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

4.7 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its principles regarding conflicts of law.

 

     
 

 

Appendix 1

FAIRWAY LLC

CONVERSION NOTICE

 

Reference is made to the Warrant Agreement dated November 26, 2019 between Fairway LLC and 2672237 Ontario Limited (the “Warrant Agreement”). In accordance with and pursuant to the Warrant Agreement, the undersigned hereby elects to convert the Warrant into thirty-three percent (33%) of all outstanding membership interests/units of the Company or shares of common stock of PubCo on a Fully-diluted and fully-issued basis ordinary/common, as of the date specified below. Capitalized terms used but not defined herein have the meanings assigned to such terms in the Warrant Agreement.

 

  Date of Conversion:  

 

  Number of membership interests/units of to be issued:  

 

 

Number of shares of common stock of ___________________ to be issued:

 

Please issue the membership interests/units (or its equivalent) or shares of common stock of _________________in the following name and to the following address:

 

Issue to: _________________________________________

_________________________________________

 

Address: _________________________________________

 

Telephone Number: ________________________________

 

Email address: _________________________________

 

Holder: __________________________________________

By:

Title:

 

     
 

 

 

SERVICE AGREEMENT

 

THIS AGREEMENT made this 26th day of November 2019 (the “Effective Date”).

 

BETWEEN:

 

Kinetic Group Inc., a Nevada company

 

(the “Company”)

 

AND:

 

Mark Radom, an individual residing in Bet Shemesh, Israel (the “Executive”)

 

A. The Company has offered the Executive the position of General Counsel of the Company.

 

B. The Company and the Executive wish to formally record the terms and conditions upon which the Executive will be hired by and serve as chief legal officer of the Company.

 

C. Each of the Company and the Executive has agreed to the terms and conditions set forth in this Agreement, as evidenced by their respective execution hereof.

 

NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

 

Article 1

CONTRACT FOR SERVICES

 

1.1 Engagement the Executive as General Counsel. (a) The Company hereby agrees to hire the Executive as General Counsel in accordance with the terms and provisions hereof.

 

  (i) Term. Unless terminated earlier in accordance with the provisions hereof, this Agreement will commence on the Effective Date and will continue for a period of three (3) years therefrom (the “Term”).

 

  (b) Service. The Executive agrees to faithfully, honestly and diligently serve the Company and to devote the time, attention efforts to further the business and legal interests of the Company and utilize his professional skills and care during the Term.

 

 
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1.2 Duties: The Executive’s services hereunder will be provided on the basis of the following terms and conditions:

 

  (a) Reporting directly to the chief executive officer of the Company, the Executive will serve as the Director of Investor Relations;
     
  (b) The Executive will be responsible for setting and managing the Company’s investor relations and supervising, liaising and instructing outside service providers, in each case, subject to any applicable law and to instructions provided by the chief executive officer of the Company from time to time.
     
  (c) The Executive will faithfully, honestly and diligently serve the Company and cooperate with the Company and utilize maximum professional skill and care to ensure that all services rendered hereunder are to the satisfaction of the Company, acting reasonably, and the Executive will provide any other services not specifically mentioned herein, but which by reason of the Executive’s capability, the Executive knows or ought to know to be necessary to ensure that the best interests of the Company are maintained.
     
  (d) The Executive will assume, obey, implement and execute such duties, directions, responsibilities, procedures, policies and lawful orders as may be determined or given from time to time by the Company.
     
  (e) The Executive will report the results of his duties hereunder to the Company as it may request from time to time.

 

Article 2

COMPENSATION

 

2.1 Remuneration.

 

  (a) The Executive’s monthly base salary shall be four thousand United States dollars ($4,000 (together with any increases thereto as hereinafter provided, the “Base Salary”). The Base Salary shall be payable from August 20, 2019 in accordance with the Company’s normal payroll procedures in effect from time to time except that the first payment of $12,000 covering the three-month period from August 20 – November 19, 2019 shall be due at the earlier of (i) during the first five days of December 2019 or (ii) the date on which outside capital is raised to the Company. All subsequent monthly payments of Base Salary shall be paid within the first five days of the following calendar month. The Base Salary may be increased by the Board from time to time during the Term, but shall be reviewed by the Board at least annually. The Company shall also issue Executive as soon as reasonably practicable preferred shares convertible into one and seventy four hundredths percent (1.74%) of the outstanding shares of its common stock on a fully issued, converted and diluted basis up to a maximum of 1,890,000 shares of common stock. For the avoidance of doubt, it is agreed that the number of preferred shares that the Executive shall receive pursuant to this clause 2.1(a) shall be limited to the lesser of (i) 1,890,000 shares of the Company’s common stock or (ii) 1.74% of the Company’s common stock on a fully issued, converted and diluted basis outstanding on the date that is 12 months from the date hereof. The Company agrees to bear all costs and fees to be charged by the Company’s transfer agent in respect of such shares. The term “on a fully issued, converted and diluted basis” means that to the extent that there are outstanding any notes, preferred shares, options, warrants or other securities that are convertible into shares of common stock (collectively, “Convertible Securities”), then the number of shares of common stock outstanding shall include 100% of the shares of common stock into which the Convertible Securities are convertible. Notwithstanding anything else to the contrary in this paragraph (i.e., excluding any shares, options or other securities to be issued to Consultant as part of any incentive plan), it is agreed that the Consultant shall not at any time have more than 1.74% of the then outstanding shares of the Company’s common stock.

 

 
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    Starting in the second year of this Agreement, Executive’s monthly base salary shall be increased in accordance with industry standard compensation for chief legal officers so long as the Company has completed a capital raise or has the cash flow available to do so.
     
    To the extent that the Company does not have sufficient funds to pay Executive his Base Salary, the Executive agrees that he shall defer the aggregate unpaid amount (the “Deferral Amount”) which will be registered in the Company’s books as a loan given to the Company by the Executive. As and when the Company has additional funds from any source, the Company will pay as much of Executive’s Base Salary as possible. So long as any amount of the Executive’s Base Salary remains unpaid, the Executive will have the option to convert such amount, or part of it into shares of the Company at the average trading price of the 10 days prior to the date of the request by the Executive to exercise this option. This option will survive the Term of this agreement.
     
  (b) The Executive shall be eligible to participate in employee benefit plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company, including, without limitation, the Company’s group medical, dental, vision, disability, life insurance, and flexible-spending account plans. Subject to the following sentence, the Executive will be entitled to receive up to a one-time bonus of one and a half percent (1.5%) of the then outstanding shares of common stock of the Company promptly after the value of the Company’s outstanding stock equals $100 million dollars. Notwithstanding the foregoing, the Executive will only receive such number of shares of common stock as will bring the total number of shares of common stock to be received by the Executive pursuant to clause 2.1(a) to 1,890,000 (i.e., not counting any shares to be received from participating in the the Company’s benefit plans or other grants/awards of shares of common stock).

 

 
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  (c) In addition to the foregoing, the Company will grant the Executive additional compensation in the form of cash or shares in cases of extraordinary contribution by him to the benefit of the Company as the Board of Directors of the Company will decide.
     
  (d) The Executive’s position with the Company requires a special degree of personal trust, and the Company is not able to supervise the number of working hours of the Executive. Therefore, the Executive will not be entitled to any additional remuneration whatsoever for his work with the exception of that specifically set out in this Agreement. The Executive has other business interests and, as such, shall be permitted to spend such time as the Executive deems necessary or expedient on such interests, so long as there is no adverse material impact on the Executive’s performance of his obligations hereunder.

 

2.2 Incentive Plans. The Executive will be entitled to participate in any bonus plan or incentive compensation plans (including, without limitation, equity or option plans) for its directors, officers or employees adopted by the Company.
   
2.3 Expenses. The Executive will be reimbursed by the Company for all reasonable business expenses incurred by the Executive in connection with his duties. This includes, but is not limited to, payments of expenses incurred when traveling abroad and others. In this connection, the Executive will be issued, as soon as practicable, a Company credit card that the Executive will use to pay for any and all expenses that pertain to the Company.

 

Article 3

Insurance and Benefits

 

3.1 Liability Insurance Indemnification. The Company will insure the Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at the Company’s expense.

 

Article 4

CONFIDENTIALITY AND NON-COMPETITION

 

4.1 Maintenance of Confidential Information.

 

  (a) The Executive acknowledges that, in the course of performing his obligations hereunder, the Executive will, either directly or indirectly, have access to and be entrusted with confidential information (whether oral, written or by inspection) relating to the Company or its respective affiliates, associates or customers (the “Confidential Information”).
     
  (b) The Executive acknowledges that the Company’s Confidential Information constitutes a proprietary right, which the Company is entitled to protect. Accordingly, the Executive covenants and agrees that, as long as he works for the Company, the Executive will keep in strict confidence the Company’s Confidential Information and will not, without prior written consent of the Company, disclose, use or otherwise disseminate the Company’s Confidential Information, directly or indirectly, to any third party.
     
  (c) The Executive agrees that, upon termination of his services for the Company, he will immediately surrender to the Company all Company Confidential Information then in his possession or under his control.

 

 
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4.2 Exceptions. The general prohibition contained in Section 4.1 against the unauthorized disclosure, use or dissemination of the Company’s Confidential Information will not apply in respect of any Company Confidential Information that:

 

  (a) is available to the public generally;
     
  (b) becomes part of the public domain through no fault of the Executive;
     
  (c) is already in the lawful possession of the Executive at the time of receipt of the Company’s Confidential Information; or
     
  (d) is compelled by applicable law or regulation to be disclosed, provided that the Executive gives the Company prompt written notice of such requirement prior to such disclosure and provides commercially reasonable assistance at the request and expense of the Company, in obtaining an order protecting the Company’s Confidential Information from public disclosure.

 

Article 5

termination

 

5.1 Termination of Employment. The Executive’s employment may be terminated only as follows:

 

  (a) Termination by the Company

 

  (i) For Cause. The Company may terminate the Executive’s employment for Cause.
     
  (ii) Without Cause. The Company may terminate Executive’s employment at any time by giving Executive 60 days prior written Notice of the termination. In such case, 100% of the Executive’s unvested stock and option compensation of any nature will vest without any further action required on the part of the Executive or the Company and the Company will deliver to the order of the Executive promptly upon receipt of a written demand of the Executive such shares of common stock or options at its sole expense as become due to Executive hereunder. The Executive’s right to receive compensation whether in cash or securities shall survive any termination of this Agreement Without Cause.

 

 
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  (b) Termination by the Executive

 

  (i) For Good Reason. The Executive may terminate the Executive’s employment with the Company for Good Reason.
     
  (ii) Without Good Reason. The Executive may voluntarily terminate the Executive’s employment with the Company at any time by giving the Company 120 days prior written Notice of the termination.

 

  (c) Termination Upon Death or Disability

 

  (i) Death. The Executive’s employment shall terminate upon the Executive’s death.
     
  (ii) Disability. The Company may terminate the Executive’s employment upon the Executive’s Disability.

 

  (d) For the purpose of this Article 5, “Cause” means:

 

  (i) Breach of Agreement. Executive’s material breach of Executive’s obligations of this Agreement, not cured after 30 days’ Notice from the Company.
     
  (ii) Gross Negligence. Executive’s gross negligence in the performance of Executive’s duties.
     
  (iii) Crimes and Dishonesty. Executive’s conviction of or plea guilty to any crime involving, dishonesty, fraud or moral turpitude.
     
  (iv) In the event of termination of this agreement for Cause, the Company may terminate the Executive’s employment after 30 days’ Notice.

 

  (e) For the purpose of this Article 5, “Good Reason” means:

 

  (i) Breach of Agreement. The Company’s material breach of this Agreement, which breach has not been cured by the Company within 30 days after receipt of written notice specifying, in reasonable detail, the nature of such breach or failure from Executive.
     
  (ii) Non-Payment. The failure of the Company to pay any amount due to Executive hereunder, which failure persists for 30 days after written notice of such failure has been received by the Company.
     
  (iii) Change of Responsibilities/Compensation. Any material reduction in Executive’s title or a material reduction in Executive’s duties or responsibilities or any material adverse change in Executive’s Base Salary or any material adverse change in Executive’s benefits.
     
  (iv) Change of Location. Any relocation of the premises at which Executive works to a location more than 20 kilometers from such location, without Executive’s consent.

 

 
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  (f) It is agreed that in the event of termination of this agreement if the Company decides that the Executive’s services are not needed during the termination period, the Company will continue to be responsible for paying cash and equity compensation as defined in Article 2 of this Agreement for the entire termination period. Neither the Company, nor the Executive will be entitled to any notice, or payment in excess of that specified in this Article 5.
     
  (g) Upon the termination (whether for cause, disability, death, without cause, or by way of change of control), the Company shall pay to Executive on the date required under applicable law: (i) any accrued but unpaid Base Salary for services rendered as of the date of termination, (ii) (if applicable) any accrued but unpaid vacation pay, and (iii) the business expenses reasonably incurred by the Executive up to the date of termination or resignation and properly reimbursable, in each case less any applicable deductions or withholdings required by law.

 

Section 5.2 Termination for Cause, Disability or Death

 

In the event that this Agreement and the Executive’s employment with the Company is terminated for Cause, the Company shall provide the Executive written notice thereof and Executive shall be entitled only to the amounts specified in Section 5.1 plus all vested common or preferred shares and, if applicable options and warrants.

 

Section 5.3 Termination without Cause

 

In the event this Agreement and the Executive’s employment with the

 

Company is terminated by the Company without Cause (other than for death or Disability or in connection with a change of control), then in addition to the amounts specified in Section 5.1 and subject to the Executive’s execution and non-revocation of a separation agreement containing a general release and waiver of liability against the Company and anyone connected with it in form acceptable to the Company, the Executive shall be entitled to receive, and the Company shall pay the Executive, two (2) years Base Salary (less statutory deductions and withholdings) in a single lump sum, paid in full within 30 days of termination. Further, Executive shall be entitled to all vested common or preferred shares and, if applicable, options and warrants with vesting continuing for 12 months following termination as applicable.

 

 
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Article 6

Mutual Representations

 

6.1 The Executive represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof

 

  (a) will not constitute a default under or conflict with any agreement or other instrument to which he is a party or by which he is bound; and
     
  (b) do not require the consent of any person or entity.

 

6.2 The Company represents and warrants to the Executive that this Agreement has been duly authorized, executed and delivered by the Company and that the fulfillment of the terms hereof

 

  (a) will not constitute a default under or conflict with any agreement of other instrument to which it is a party or by which it is bound; and
     
  (b) do not require the consent of any person of entity.

 

6.3 Each party hereto warrants and represents to the other that this Agreement constitutes the valid and binding obligation of such party enforceable against such party in accordance with its terms subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity (regardless if enforcement is sought in proceeding in equity or at law).

 

Article 7

notices

 

7.1 Notices. All notices required or allowed to be given under this Agreement must be made either personally by delivery to or by facsimile transmission to the address as hereinafter set forth or to such other address as may be designated from time to time by such party in writing:

 

  (a) in the case of the Company, to:

 

Kinetic Group Inc.

 

To be provided under separate cover within three days after the date hereof; in the event that Executive does not receive notice of address within such period, then Executive shall be entitled to send any notice to any email address of the Company known to Executive and the sending of any such notice shall constitute receipt of notice whether the Company receives such notice or not.

 

  (b) and in the case of the Executive, to the Executive’s last residence address known to the Company or mark@gcanrx.com.

 

 
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7.2 Change of Address. Any party may, from time to time, change its address for service hereunder by written notice to the other party in the manner aforesaid.

 

Article 8

GENERAL

 

8.1 Further Assurances. Each party hereto will promptly and duly execute and deliver to the other party such further documents and assurances and take such further action as such other party may from time to time reasonably request in order to more effectively carry out the intent and purpose of this Agreement and to establish and protect the rights and remedies created or intended to be created hereby.
   
8.2 Waiver. No provision hereof will be deemed waived and no breach excused, unless such waiver or consent excusing the breach is made in writing and signed by the party to be charged with such waiver or consent. A waiver by a party of any provision of this Agreement will not be construed as a waiver of a further breach of the same provision.
   
8.3 Amendments in Writing. No amendment, modification or rescission of this Agreement will be effective unless set forth in writing and signed by the parties hereto.
   
8.4 Assignment. Except as herein expressly provided, the respective rights and obligations of the Executive and the Company under this Agreement will not be assignable by either party without the written consent of the other party and will, subject to the foregoing, inure to the benefit of and be binding upon the Executive and the Company and their permitted successors or assigns. Nothing herein expressed or implied is intended to confer on any person other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement. For the avoidance of doubt, it is agreed that in the event that the Company participates in a merger, acquisition, restructuring, regoranization or other transaction in which the Company is merged into, sold to or otherwise becomes part of or owned by another company or entity, this Agreement will remain in force and be binding on any such successor, surviving or acquiring company or entity.
   
8.5 The Company acknowledges and agrees that the Executive may submit to the Company invoices from a company that employs him in lieu of invoices on his name. The Executive confirms that any such invoice will replace his own invoice and he agrees that his fees will be paid by the Company to third parties provided that it is done as per his instructions to the Company.
   
8.6 Severability. In the event that any provision contained in this Agreement is declared invalid, illegal or unenforceable by a court or other lawful authority of competent jurisdiction, such provision will be deemed not to affect or impair the validity or enforceability of any other provision of this Agreement, which will continue to have full force and effect.

 

 
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8.7 Headings. The headings in this Agreement are inserted for convenience of reference only and will not affect the construction or interpretation of this Agreement.
   
8.8 Number and Gender. Wherever the singular or masculine or neuter is used in this Agreement, the same will be construed as meaning the plural or feminine or a body politic or corporate and vice versa where the context so requires.
   
8.9 Time. Time is of the essence in this Agreement.
   
8.10 Governing Law. This Agreement will be construed and interpreted in accordance with the laws of the State of New York without reference to its conflicts of laws principles or the conflicts of laws principles of any other jurisdiction, and each of the parties hereto expressly attorns to the jurisdiction of the courts of the State of New York. The sole and exclusive place of jurisdiction in any matter arising out of or in connection with this Agreement will be the applicable New York state or federal court.
   
8.11 This Agreement (including all Annexes thereto) constitutes the entire agreement between the Parties with respect to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between the Parties with respect to this matter.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written.

 

Kinetic Group Inc.  
     
By:    
Title:    

 

Agreed and accepted:  
   
Mark Radom  
   
   

 

 
 

 

 

DIRECTORS RESOLUTIONS OF

KINETIC GROUP INC.

(the “Company”)

 

WHEREAS:

 

A. YAROSLAV STARTSEV has consented to step down as President, CEO and as a Member of the Board of Directors of the Company.
   
B. NIKOLAI KUZMIN has consented to step down as Treasurer, Secretary, C.F.O., Principal Accounting Officer, Principal Financial Officer and as a Member of the Board of Directors of the Company.
   
C. NATHAN ROSENBERG has consented to act as a Member of the Board of Directors of the Company and the new President, Secretary and Treasurer of the Company.

 

BE IT RESOLVED THAT:

 

1. YAROSLAV STARTSEV, immediately after appointing Nathan Rosenberg as a Member of the Board of Directors and President, Secretary and Treasurer of the Company, has stepped down as President, CEO and as a Member of the Board of Directors of the Company.
   
2. NIKOLAI KUZMIN, immediately after appointing Nathan Rosenberg as a Member of the Board of Directors and President, Secretary and Treasurer of the Company, has stepped down as Treasurer, Secretary, C.F.O., Principal Accounting Officer, Principal Financial Officer and as a Member of the Board of Directors of the Company.
   
3. NATHAN ROSENBERG, who has consented to act as a Member of the Board of Directors of the Company and as the President of the Company, is appointed to the Board of Directors of the Company and as President of the Company.

 

Effective date:                               , 2019

 

  /s/ Yaroslav Startsev
  YAROSLAV STARTSEV
   
  /s/ Nikolai Kuzmin
  NIKOLAI KUZMIN
   
  /s/ Nathan Rosenberg
  NATHAN ROSENBERG