SHOTW Safety Shot Inc

 

 

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

 

Date of Report (Date of earliest event reported): January 7, 2025

 

SAFETY SHOT, INC.

(Exact name of registrant as specified in charter)

 

Delaware		001-39569		83-2455880
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

1061 E. Indiantown Rd., Ste. 110, Jupiter, FL 33477

(Address of principal executive offices) (Zip Code)

 

(561) 244-7100

(Registrant’s telephone number, including area code)

 

Not Applicable

(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))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		SHOT		The Nasdaq Stock Market LLC (The Nasdaq Capital Market)
Warrants, each exercisable for one share of Common Stock at $8.50 per share		SHOTW		The Nasdaq Stock Market LLC (The Nasdaq Capital Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mart if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 1.01. Entry Into a Material Definitive Agreement

 

Arrangement Agreement

 

On January 7, 2025, Safety Shot, Inc., a Delaware corporation (the “Company”) entered into a definitive Arrangement Agreement (the “Arrangement Agreement”) with Yerbaé Brands Corp., (“Yerbaé”), a corporation organized under the laws of the Province of British Columbia, pursuant to which, among other things, the Company will acquire all of the issued and outstanding common shares of Yerbaé (the “Arrangement”). The Arrangement will be implemented by way of a plan of arrangement (the “Plan of Arrangement”) in accordance with the Business Corporations Act (British Columbia) and is subject to approval by the Supreme Court of British Columbia (the “Court”), the stockholders of the Company and the shareholders of Yerbaé, among other customary closing conditions for a transaction of this nature and size.

 

Consideration

 

On the terms and subject to the conditions of the Arrangement Agreement and the Plan of Arrangement, at the effective time of the Arrangement (the “Effective Time”) all of the common shares of Yerbaé then issued and outstanding immediately prior to the Effective Time (including the common shares of Yerbaé to be issued on the settlement of all of the performance share units and restricted share units of Yerbaé, which will be settled immediately prior to the Effective Time) will be acquired by the Company in consideration for the right to receive an aggregate of 20,000,000 shares of common stock of the Company (collectively, the “Consideration Shares). Each option (each a “Replaced Option”) to purchase common shares of Yerbaé outstanding immediately prior to the Effective Time (whether or not vested) will be deemed to be exchanged for an option (“Replacement Option”) entitling the holder to purchase shares of common stock of the Company. The number of shares of common stock of the Company underlying each Replacement Option will equal the number of common shares of Yerbaé underlying the corresponding Replaced Option multiplied by the exchange ratio. The exercise price of each Replacement Option will equal the exercise price of the corresponding Replaced Option divided by the exchange ratio and each Replacement Option will be fully vested. In accordance with the respective terms of Yerbaé’s outstanding warrants and debentures, the terms of each warrant and debenture of Yerbaé will entitle the holder thereof to receive, upon exercise or conversion, as applicable, in substitution for the number of Yerbaé common shares subject to such warrant or debenture, a number of shares of Company common stock. In addition, if the Arrangement is consummated, the Company will pay up to $500,000 of Yerbaé’s transaction expenses.

 

Representations and Warranties; Covenants

 

Pursuant to the Arrangement Agreement, each of the Company and Yerbaé made customary representations and warranties for transactions of this type. All of the representations and warranties of the Company and Yerbaé will expire and be terminated at the Effective Time. Each of the Company and Yerbaé have also agreed to be bound by certain covenants that are customary for transactions of this type, including obligations of the parties during the period between the date of the execution of the Arrangement Agreement and the Effective Time (the “Interim Period”) to, in all material respects, conduct their respective businesses in the ordinary course consistent with past practice, and to refrain from taking certain specified actions without the prior written consent of the other party, in each case, subject to certain exceptions and qualifications. The covenants and agreements of the Company and Yerbaé that by their terms are to be performed at or after the Effective Time shall, in each case, survive until fully performed.

 

Closing Conditions

 

The respective obligations of each party to consummate the Arrangement are subject to the satisfaction or waiver of certain customary mutual closing conditions, including (i) the issuance of the interim and final orders by the Court with respect to the Arrangement; (ii) the adoption by the requisite Yerbaé shareholders of a resolution approving the Arrangement (the “Yerbaé Shareholder Approval”); (iii) the approval by the requisite Company stockholders of the issuance of the Consideration Shares and an amended and restated equity incentive plan reserving a number of shares of Company common stock equal to no less than 10% of the fully diluted shares of Company common stock issued and outstanding immediately following the Effective Time (the “Company Stockholder Approval”); (iv) the absence of any law or order prohibiting, rendering illegal or permanently enjoining the consummation of the Arrangement; (v) the obtainment of any regulatory approvals required in connection with the Plan of Arrangement, except for such approvals the failure of which to obtain would not reasonably be expected to have a material adverse effect on the parties or would not materially impede or delay the completion of the Arrangement; (vi) the approval by the TSX Venture Exchange; (vii) the approval of the listing of the Consideration Shares by Nasdaq; (viii) the exemption of the issuance of the Consideration Shares from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 3(a)(10) thereof; (ix) that the representations of the other party in the Arrangement Agreement are true and correct as of the date of the Arrangement Agreement and the Effective Time (subject to certain materiality qualifiers) and (x) that the other party will have complied in all material respects with its covenants in the Arrangement Agreement.

 

 

Additionally, the obligation of the Company to consummate the Arrangement is subject to the satisfaction or waiver of the following conditions, among others: (i) that there will not have occurred during the Interim Period any material adverse effect with respect to Yerbaé; (ii) that the Company shall have received Support Agreements (as defined below) from certain shareholders of Yerbaé representing not less than 40.1% of the issued and outstanding common shares of Yerbaé (collectively, the “Supporting Yerbaé Shareholders”) no later than 30 days following the date of the Arrangement Agreement (and such shareholders shall not have breached their obligations or covenants thereunder in any material respect as of the Effective Time); and (iii) that the Yerbaé shareholders shall have not validly exercised and not withdrawn dissent rights with respect to more than 5% of the common shares of Yerbaé then outstanding.

 

The obligation of Yerbaé to consummate the Arrangement is also conditioned upon (i) the Company appointing Todd Gibson to the board of directors of the Company as of the Effective Time and (ii) that there will not have occurred during the Interim Period any material adverse effect with respect to the Company.

 

Termination

 

The Arrangement Agreement may be terminated prior to the Effective Time, including, among others, (i) by the mutual written consent of both parties; (ii) by either party if the Yerbaé Shareholder Approval or Company Stockholder Approval are not obtained at the applicable securityholder meeting; (iii) by either party if the Effective Time shall not have occurred prior to July 7, 2025, unless such party’s failure to fulfill any of its obligations has been the cause of, or resulted in, the failure of the Effective Time to occur by such date; (iv) by either party if the closing conditions for such party’s benefit have failed to be satisfied or waived by the date required for performance thereof and, if capable of cure and not the result of a willful breach, the other party has not cured such failure within 10 days of its receipt of notice thereof; (v) by either party if the other party has breached certain representations, warranties or covenants, subject to certain materiality and other qualifications (a “Termination for Breach”); and (vi) by either party if there has occurred a material adverse effect with respect to the other party that is incapable of cure.

 

Yerbaé has additional termination rights if (i) prior to the receipt of the Yerbaé Shareholder Approval, the board of directors of Yerbaé authorizes Yerbaé to enter into a definitive written agreement with respect to a superior proposal, Yerbaé is otherwise in compliance with its non-solicit obligations under the Arrangement Agreement and Yerbaé pays the Company a termination fee of $1,750,000 plus up to $250,000 of the Company’s transaction expenses (the “Termination Fee”); or (ii) the board of directors of the Company, among other things, withdraws or changes its recommendation with respect to the Company Stockholder Approval, in which case the Company will be obligated to pay to Yerbaé a fee of $500,000 plus up to $250,000 of transaction expenses (the “Expense Reimbursement Fee”). The Company has additional termination rights if (i) Yerbaé breaches its non-solicit obligations under the Arrangement Agreement or (ii) the board of directors of Yerbaé, among other things, withdraws or changes its recommendation with respect to the Yerbaé Shareholder Approval, and, in each case, such termination would result in Yerbaé being obligated to pay the Termination Fee to the Company. If either party effects a Termination for Breach, such party will owe the non-terminating party the Expense Reimbursement Fee.

 

The foregoing description of the Arrangement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Arrangement Agreement filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference. The Arrangement Agreement provides investors with information regarding its terms and is not intended to provide any other factual information about the parties. In particular, the assertions embodied in the representations and warranties contained in the Arrangement Agreement were made as of the execution date of the Arrangement Agreement only and are qualified by information in confidential disclosure schedules provided by the parties in connection with the signing of the Arrangement Agreement. These disclosure schedules contain information that modifies, qualifies, and creates exceptions to the representations and warranties set forth in the Arrangement Agreement. Moreover, certain representations and warranties in the Arrangement Agreement may have been used for the purpose of allocating risk between the parties rather than establishing matters of fact. Accordingly, you should not rely on the representations and warranties in the Arrangement Agreement as characterizations of the actual statements of fact about the parties. Any terms not defined herein shall have the same meaning attributed to them in the Arrangement Agreement.

 

 

Fairness Opinion

 

The Company has obtained an independent fairness opinion from Newbridge Securities Corporation dated January 7, 2025, which states that in the opinion of Newbridge Securities Corporation, the consideration being offered to the shareholders of Yerbaé is fair, from a financial point of view, to the Company’s stockholders.

 

Support Agreements

 

In connection with entry into the Arrangement Agreement, the Company will enter into support agreements (each, a “Support Agreement”) with Supporting Yerbaé Shareholders. Pursuant to the Support Agreements, each Supporting Yerbaé Shareholder will agree, among other things, to vote its respective shares in favor of the Yerbaé Shareholder Approval.

 

Item 3.02 Unregistered Sales of Equity Securities

 

The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K with respect to the issuance of common stock of the Company in connection with the Arrangement is incorporated by reference herein. The securities to be issued pursuant to the Arrangement Agreement will be issued in reliance upon Section 3(a)(10) of the Securities Act, which exempts from the registration requirements under the Securities Act any securities that are issued in exchange for one or more bona fide outstanding securities where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and condition at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court expressly authorized by law to grant such approval.

 

Item 7.01. Regulation FD Disclosure.

 

On January 8, 2025, the Company issued a press release in connection with the Arrangement Agreement, a copy of which is filed herewith as Exhibit 99.1 and incorporated herein by reference. 

 

In connection with the announcement of the Arrangement Agreement, the Company and Yerbaé intend to provide supplemental information regarding the proposed transaction in presentations to analysts and investors. The slides that will be available in connection with the presentations are attached hereto as Exhibit 99.2 and are incorporated by reference herein.

 

The information provided under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, is being furnished and is not deemed to be “filed” with the SEC for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section and is not incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to this Current Report on Form 8-K in such a filing. The Company does not incorporate by reference to this Current Report on Form 8-K information presented at any website referenced in this report or in any of the Exhibits attached hereto.

 

Item 8.01 Other Events

 

In connection with the Arrangement and the transactions contemplated by the Arrangement Agreement, the Company is filing information for the purpose of supplementing and updating the risk factor disclosure contained under the heading “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, filed with the SEC on November 14, 2024. The updated disclosures are set forth under “Risk Factors -- Risks Related to the Arrangement” and “Risk Factors - Risks Related to the Business of Yerbaé” that are respectively filed herewith as Exhibit 99.3 and Exhibit 99.4 and are incorporated herein by reference.

 

 

The Company is also filing herewith (i) further information about Yerbaé’s standalone business, prospects, financial condition, results of operations and opportunities as described in “Yerbaé - Summary Description of Business” included as Exhibit 99.5 and “Yerbaé Management’s Discussion and Analysis” included as Exhibit 99.6; and (ii) the following financial statements: the Yerbaé Audited Financial Statements as of and for the years ended December 31, 2023 and December 31, 2022; and the Yerbaé Unaudited Financial Statements as of and for the nine months ended September 30, 2024 and September 30, 2023; which are respectively attached hereto as Exhibit 99.7 and Exhibit 99.8, respectively, and incorporated herein by reference.

 

Additional Information and Where to Find It

 

In connection with the proposed transaction, the Company and Yerbaé plan to file or cause to be filed relevant materials with the United States Securities and Exchange Commission (“SEC”), including a joint proxy statement and other relevant documents relating to the proposed transaction. This communication is not a substitute for the joint proxy statement or any other document that the Company or Yerbaé may file with the SEC or send to their security holders in connection with the transaction. The description of the Arrangement Agreement and Support Agreements above do not purport to be complete and are qualified in their entirety by reference to such agreements as filed with this Current Report on Form 8-K. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY AND YERBAÉ ARE URGED TO READ THESE MATERIALS, INCLUDING THE JOINT PROXY STATEMENT, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT YERBAÉ, THE COMPANY, THE PROPOSED TRANSACTION, AND RELATED MATTERS. The joint proxy statement and other relevant materials (when they become available), and any other documents filed by the Company with the SEC, may be obtained free of charge at the SEC website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by the Company by directing a written request to: Safety Shot, Inc., 1061 E. Indiantown Rd., Ste. 110, Jupiter, FL 33477. Investors and security holders are urged to read the joint proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction.

 

Participants in the Solicitation

 

The Company, Yerbaé and their respective directors and executive officers may be deemed participants in the solicitation of proxies in connection with the transaction. The Company’s stockholders and other interested persons may obtain, without charge, more detailed information (i) regarding the directors and executive officers of the Company in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024, its definitive proxy statement on Schedule 14A relating to its 2024 Annual Meeting of Stockholders filed with the SEC on June 24, 2024 and other relevant materials filed with the SEC when they become available; and (ii) regarding Yerbaé’s directors and executive officers in Yerbaé’s Form 10 filed with the SEC on July 19, 2024 and other relevant materials filed with the SEC when they become available. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of proxies in connection with the transaction will be set forth in the joint proxy statement for the transaction when available. Additional information regarding the interests of participants in the solicitation of proxies in connection with the transaction will be included in the joint proxy statement that the Company and Yerbaé intend to file with the SEC.

 

No Offer or Solicitation

 

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of any securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such other jurisdiction.

 

 

Forward-Looking Statements

 

This Current Report on Form 8-K and the exhibits filed herewith contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements other than statements of historical facts contained in this report or the exhibits filed herewith, including statements regarding the Arrangement and closing thereof, the Company’s or Yerbaé’s future results of operations and financial position, the Company’s and Yerbaé’s business strategy, prospective costs, timing and likelihood of success, plans and objectives of management for future operations, future results of current and anticipated operations of the Company and Yerbaé, and the expected value of the combined company after the transaction, are forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, but not limited to, the following risks relating to the proposed transaction: the risk that the transaction may not be completed in a timely manner or at all, which may adversely affect the price of the Company’s securities; the occurrence of any event, change or other circumstances that could give rise to the termination of the definitive Arrangement Agreement; the inability to complete the transactions contemplated by the Arrangement Agreement, including due to failure to obtain approval of the stockholders of the Company or Yerbaé or other conditions to closing in the Arrangement Agreement; the inability to obtain or maintain the listing of the Company’s common stock on Nasdaq following the transaction; the risk that the transaction disrupts current plans and operations of the Company as a result of the announcement and consummation of the transaction; the ability to recognize the anticipated benefits of the transaction, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth economically and hire and retain key employees; costs related to the transaction; changes in applicable laws or regulations; the possibility that Yerbaé or the Company may be adversely affected by other economic, business, and/or competitive factors; and other risks and uncertainties to be identified in the joint proxy statement (when available) relating to the transaction, including those under “Risk Factors” therein, and in other filings with the SEC made by the Company or Yerbaé. Moreover, Yerbaé and the Company operate in very competitive and rapidly changing environments. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond Yerbaé’s and the Company’s control, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements speak only as of the date they are made. None of Yerbaé or the Company gives any assurance that either Yerbaé or the Company will achieve its expectations. Readers are cautioned not to put undue reliance on forward-looking statements, and except as required by law, Yerbaé and the Company assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

Exhibits 9.01 Financial Statements and Exhibits 

 

Exhibit No.		Description
2.1*		Arrangement Agreement dated January 7, 2025
99.1		Press Release
99.2		Investor Presentation
99.3		Risk Factors -- Risks Related to the Arrangement
99.4		Risk Factors -- Risks Related to the Business of Yerbaé
99.5		Yerbaé - Summary Description of Business
99.6		Yerbaé Management’s Discussion and Analysis
99.7		Yerbaé Audited Financial Statements as of and for the years ended December 31, 2023 and December 31, 2022
99.8		Yerbaé Unaudited Financial Statements as of and for the nine months ended September 30, 2024 and September 30, 2023
104		Cover Page Interactive Data File (embedded with the Inline XBRL document)

 

*	Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.

 

 

SIGNATURE

 

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

 

Date: January 8, 2025

 

SAFETY SHOT, INC.
By:	/s/ Jarrett Boon
	Jarrett Boon
	Chief Executive Officer

 

 

 

Exhibit 2.1

 

ARRANGEMENT AGREEMENT

 

AMONG

 

SAFETY SHOT, INC.

 

AND

 

YERBAÉ BRANDS CORP.

 

DATED AS OF JANUARY 7, 2025

 

 

TABLE OF CONTENTS

 

ARTICLE 1 INTERPRETATION			1
	1.1	Definitions	1
	1.2	Interpretation Not Affected by Headings, etc.	17
	1.3	Number and Gender; Derivatives	17
	1.4	Date for Any Action	17
	1.5	Statute and Agreement References	17
	1.6	Currency	18
	1.7	Accounting Matters	18
	1.8	Interpretation Not Affected by Party Drafting	18
	1.9	Knowledge	18
	1.10	Disclosure in Writing	18
	1.11	Schedules	18
ARTICLE 2 THE ARRANGEMENT			18
	2.1	Arrangement	18
	2.2	Safety Shot Approval	19
	2.3	Yerbaé Approval	19
	2.4	Interim Order	19
	2.5	Safety Shot Stockholder Meeting	20
	2.6	Yerbaé Shareholder Meeting	21
	2.7	Safety Shot Circular	22
	2.8	Yerbaé Circular	24
	2.9	Final Order	25
	2.10	Court Proceedings	26
	2.11	U.S. Securities Law Matters	26
	2.12	Effective Date	27
	2.13	Closing	27
	2.14	Payment and Allocation of Consideration Shares	28
	2.15	Incentive Plan Matters	28
	2.16	Convertible Securities	28
	2.17	Indemnities and Directors’ and Officers’ Insurance	28
	2.18	Withholding Taxes	29
ARTICLE 3 COVENANTS			29
	3.1	Covenants of Yerbaé Regarding the Conduct of Business	29
	3.2	Covenants of Safety Shot Regarding the Conduct of Business	33
	3.3	Covenants of Safety Shot Regarding Blue-Sky Laws	34
	3.4	Mutual Covenants Regarding the Arrangement	35
	3.5	Covenants of Safety Shot	36
	3.6	Covenants of Yerbaé Regarding the Arrangement	39
	3.7	Mutual Covenants Regarding Regulatory Approvals	43
	3.8	Covenants Regarding Provision of Information; Access	44
	3.9	Privacy Matters	44
	3.10	De-Listing of Yerbaé Shares	45
	3.11	Control of Safety Shot’s or Yerbaé’s Operations.	45

 

 

ARTICLE 4 ADDITIONAL COVENANTS REGARDING NON-SOLICITATION			45
	4.1	Non-Solicitation	45
	4.2	Notification of Acquisition Proposals	47
	4.3	Responding to an Acquisition Proposal	47
	4.4	Right to Match	48
ARTICLE 5 REPRESENTATIONS AND WARRANTIES			50
	5.1	Representations and Warranties of Safety Shot	50
	5.2	Representations and Warranties of Yerbaé	57
	5.3	Survival of Representations and Warranties	74
ARTICLE 6 CONDITIONS PRECEDENT			75
	6.1	Mutual Conditions Precedent	75
	6.2	Additional Conditions to Obligations of Safety Shot	75
	6.3	Additional Conditions to Obligations of Yerbaé	76
	6.4	Notice and Effect of Failure to Comply with Conditions	77
	6.5	Satisfaction of Conditions	78
ARTICLE 7 AMENDMENT			78
	7.1	Amendment	78
	7.2	Amendment of Plan of Arrangement	79
ARTICLE 8 TERMINATION			79
	8.1	Termination	79
	8.2	Expenses and Termination Fee	81
ARTICLE 9 NOTICES			84
	9.1	Notices	84
ARTICLE 10 GENERAL			85
	10.1	Assignment, Binding Effect and Entire Agreement	85
	10.2	Public Communications	85
	10.3	Mandatory Reporting Rules	86
	10.4	No Liability	86
	10.5	Severability	86
	10.6	Further Assurances	86
	10.7	Time of Essence	87
	10.8	Applicable Law and Enforcement	87
	10.9	Injunctive Relief	87
	10.10	Waiver	87
	10.11	Third Party Beneficiaries	87
	10.12	Counterparts, Execution	87

 

 

ARRANGEMENT AGREEMENT

 

THIS ARRANGEMENT AGREEMENT is made as of January 7, 2025.

 

AMONG:

 

SAFETY SHOT, INC., a company existing under the laws of the State of Delaware (“Safety Shot”)

 

AND

 

YERBAÉ BRANDS CORP., a corporation existing under the laws of the Province of British Columbia (“Yerbaé”)

 

WHEREAS:

 

A.	Safety Shot proposes to acquire all of the issued and outstanding Yerbaé Shares;
B.	the Parties intend to carry out the transactions contemplated herein by way of an arrangement under the arrangement provisions of Part 9, Division 5 of the BCBCA; and
C.	the Parties have entered into this Agreement to provide for the matters referred to in the foregoing recitals and for other matters relating to such transaction.

 

NOW THEREFORE, in consideration of the covenants and agreements herein contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Parties do hereby covenant and agree as follows:

 

Article 1
INTERPRETATION

 

1.1	Definitions

 

In this Agreement, including the recitals hereto, the following defined terms have the meanings hereinafter set forth:

 

“Acquisition Proposal” means, other than the transactions contemplated by this Agreement and other than any transaction involving only Yerbaé and/or one or more of the Yerbaé Subsidiaries or between one or more of the Yerbaé Subsidiaries, any written offer or proposal from any Person or group of Persons other than Safety Shot (or any of its Affiliates or any Person acting in concert with Safety Shot or any of its Affiliates) relating to (i) any direct or indirect acquisition, purchase, sale or disposition (or any lease, joint venture, royalty, license or other arrangement having the same economic effect as a sale or disposition), in a single transaction or a series of transactions, of (A) assets of Yerbaé (including shares of the Yerbaé Subsidiaries) and/or one or more of the Yerbaé Subsidiaries that, individually or in the aggregate, constitute 20% or more of the consolidated assets of Yerbaé and the Yerbaé Subsidiaries, taken as a whole, determined based upon the most recent audited annual consolidated financial statements of Yerbaé filed as part of the Yerbaé Public Record, or contributing 20% or more of the consolidated revenue of Yerbaé and the Yerbaé Subsidiaries, taken as a whole, determined based upon the most recent audited annual consolidated financial statements of Yerbaé filed as part of the Yerbaé Public Record, or (B) 20% or more of any class of voting or equity securities of Yerbaé or 20% more of any class of voting or equity securities of any one or more of any of the Yerbaé Subsidiaries that, individually or in the aggregate, contribute 20% or more of the consolidated revenues, determined based upon the most recent annual audited consolidated financial statements of Yerbaé filed as part of the Yerbaé Public Record, or constitute 20% or more of the consolidated assets of Yerbaé and the Yerbaé Subsidiaries, taken as a whole, determined based upon the most recent audited annual consolidated financial statements of Yerbaé filed as part of the Yerbaé Public Record; (ii) any direct or indirect take-over bid, tender offer, exchange offer, sale or issuance of securities or other transaction that, if consummated, would result in such Person or group of Persons beneficially owning 20% or more of any class of voting or equity securities of Yerbaé (including securities convertible into or exercisable or exchangeable for voting or equity securities of Yerbaé) then outstanding; (iii) any plan of arrangement, merger, amalgamation, consolidation, share exchange, share reclassification, business combination, reorganization, recapitalization, liquidation, dissolution, winding up or exclusive license involving Yerbaé or of the surviving entity or the resulting direct or indirect parent of Yerbaé or the surviving entity; or (iv) any other similar transaction or series of transactions involving Yerbaé or any of the Yerbaé Subsidiaries;

 

 

“Affiliate” has the meaning ascribed thereto under the Securities Act;

 

“Agreement”, “herein”, “hereof”, “hereto”, “hereunder” and similar expressions mean and refer to this arrangement agreement (including the schedules hereto) as supplemented, modified or amended, and not to any particular Article, Section, Schedule or other portion hereof;

 

“Amended and Restated Equity Incentive Plan” the amended and restated equity incentive plan of Safety Shot which shall include an initial Safety Shot Share reserve equal to no less than 10% of the fully diluted Safety Shot Shares issued and outstanding immediately following the closing of the Arrangement;

 

“Applicable Law” (in the context that refers to one or more Persons) means any domestic or foreign, federal, state, provincial or local law (statutory, common or otherwise, and including Applicable Securities Laws), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity, and any terms and conditions of any grant of approval, permission, authority or license of any Governmental Entity, that is binding upon or applicable to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Person having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities, as the same may be amended from time to time prior to the Effective Date;

 

“Applicable Securities Laws” means, collectively, and as the context may require: (a) the applicable securities legislation of each of the provinces and territories of Canada, and the rules, regulations, instruments, orders and policies published and/or promulgated thereunder; (b) the polices and rules of the NASDAQ; (c) the polices and rules of the TSXV; and (d) U.S. Securities Laws, as the foregoing may be amended from time to time prior to the Effective Date;

 

“Arrangement” means an arrangement under the provisions of Part 9, Division 5 of the BCBCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations thereto made in accordance with Article 7 of this Agreement or the Plan of Arrangement or made at the direction of the Court in the Final Order with the consent of Yerbaé and Safety Shot, each acting reasonably;

 

 

“Arrangement Resolution” means the special resolution to approve the Arrangement to be considered at the Yerbaé Meeting by the Yerbaé Shareholders substantially in the form attached as Schedule “A” hereto;

 

“Authorization” means, with respect to any Person, any authorization, order, permit, approval, grant, licence, registration, consent, right, notification, condition, franchise, privilege, certificate, judgment, writ, injunction, award, determination, direction, decision, decree, by-law, rule or regulation, of, from or required by any Governmental Entity having jurisdiction over the Person;

 

“BCBCA” means the Business Corporations Act (British Columbia), as amended, including the regulations promulgated thereunder;

 

“Books and Records” means the books and records of a Party and its Subsidiaries, including books of account and Tax records, whether in written or electronic form;

 

“Business Day” means a day on which banks are generally open for the transaction of commercial business in Vancouver, British Columbia, or Scottsdale, Arizona but does not in any event include a Saturday or Sunday or statutory holiday in British Columbia or Arizona;

 

“Change in Recommendation” has the meaning ascribed thereto in Section 8.1(a)(vi)(A);

 

“Competition Act” means the Competition Act, R.S.C. 1985, c. C 34, as amended, including regulations passed under the Competition Act;

 

“Computer Systems” means all software, computer hardware (whether general or special purpose), electronic data processing, record keeping, or telecommunications systems, networks, interfaces, platforms, servers, peripherals, and other computer systems, including any outsourced systems and processes that are owned or used by or for a Party or its Subsidiaries in the conduct of their businesses;

 

“Confidentiality Agreement” means the mutual confidentiality agreement between Safety Shot and Yerbaé dated May 20, 2024;

 

“Consideration” means the Consideration Shares;

 

“Consideration Shares” means an aggregate number of Safety Shot Shares that is equal to the Yerbaé Shares outstanding immediately prior to the Effective Time, multiplied by the Exchange Ratio;

 

“Contract” means any contract, agreement, license, franchise, lease, arrangement, commitment, understanding or other right or obligation (written or oral) to which a Party is a party or by which a Party is bound or to which any of their respective assets are subject;

 

“Convertible Debentures” means the 6% unsecured convertible debentures in the aggregate principal amount of $3,277,000 maturing April 30, 2025, issued by Yerbaé and which are governed by the Debenture Indenture;

 

“Court” means the Supreme Court of British Columbia;

 

“Damages” means any and all claims, debts, obligations and other Liabilities (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due to become due or otherwise), diminution in value, monetary damages, fines, fees, penalties, interest obligations, deficiencies, losses and expenses (including amounts paid in settlement, interest, court costs, reasonable fees and expenses of attorneys, accountants, financial advisors, investigators, and other experts, and other reasonable expenses of litigation, arbitration or other dispute resolution procedures);

 

 

“Data Security Requirements” means, collectively, all of the following to the extent relating to the Processing of Protected Data or otherwise relating to privacy, security, or security breach notification requirements and applicable to a Party or its Subsidiaries, to the conduct of the business, or to any of the Computer Systems: (i) a Party’s or its Subsidiaries’ own rules, policies, and procedures (including all website privacy policies and internal information security procedures); (ii) all Applicable Law; (iii) industry standards applicable to the industry in which the business operates; and (iv) Contracts into which a Party or its Subsidiaries have entered or by which it is otherwise bound;

 

“Debenture Indenture” means the convertible debenture indenture dated April 13, 2023 between Yerbaé and Odyssey Trust Company;

 

“Depositary” means such Person as Safety Shot may appoint to act as depositary for the Yerbaé Shares in relation to the Arrangement, with the approval of Yerbaé, acting reasonably;

 

“Dissent Rights” means the rights of dissent granted in favour of registered Yerbaé Shareholders in respect of the Arrangement described in the Plan of Arrangement and the Interim Order;

 

“Economic Sanctions” has the meaning ascribed thereto in Section 5.1(u)(iii) and 5.2(gg)(iii);

 

“Effective Date” means the date the Arrangement becomes effective pursuant to the BCBCA;

 

“Effective Time” means the time at which the Arrangement becomes effective on the Effective Date pursuant to the BCBCA;

 

“Employee Plans” means all health, welfare, supplemental unemployment benefit, bonus, profit sharing, option, stock appreciation, savings, insurance, incentive, incentive compensation, deferred compensation, share purchase, share compensation, disability, pension or supplemental retirement plans and other similar or material employee or director compensation or benefit plans, policies, trusts, funds, agreements or arrangements for the benefit of directors or former directors of a Party or any of its Subsidiaries, or such Party or its Subsidiaries’ Employees or former Employees, which are maintained by, contributed to or binding upon a Party or any of its Subsidiaries or in respect of which a Party or any of its Subsidiaries has any actual or potential liability, but excluding any statutory benefit plans that any Party is required to participate in or comply with in accordance with all Applicable Law, including the Canada Pension Plan and plans administered pursuant to applicable health, Tax, workplace safety insurance and employment insurance legislation;

 

“Employees” means, as applicable, all of the employees of: (a) Yerbaé or any Yerbaé Subsidiary; and (b) Safety Shot or any Safety Shot Subsidiary, as at the Effective Date;

 

“Environmental Law” means all Applicable Law relating to pollution or the protection or quality of the environment or to the release of hazardous substances to the environment and all Authorizations issued pursuant to such laws;

 

“Exchange Ratio” means 0.2918;

 

“Expense Reimbursement” has the meaning ascribed thereto in Section 8.2(f);

 

 

“Final Order” means the final order of the Court approving the Arrangement pursuant to Section 291 of the BCBCA, in a form acceptable to both Yerbaé and Safety Shot, each acting reasonably, as such order may be amended by the Court (with the consent of both Yerbaé and Safety Shot, each acting reasonably) at any time prior to the Effective Time or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended (provided that any such amendment is acceptable to both Yerbaé and Safety Shot, each acting reasonably) on appeal;

 

“Governmental Entity” means any: (a) national, international, multinational, federal, provincial, state, regional, municipal, local or other government or any governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau ministry or agency, domestic or foreign, including the Securities Authorities; (b) any subdivision, agent, commission, board or authority of any of the foregoing; or (c) any quasi-governmental or private body exercising any regulatory, expropriation or Taxing Authority under or for the account of any of the foregoing (including any stock exchange or interdealer quotation system on which a Party’s shares are listed);

 

“Governmental Licenses” has the meaning specified in Section 5.2(rr);

 

“Incentive Plan” means the equity incentive plan of Yerbaé, in effect as at the date hereof;

 

“Indebtedness” means, with respect to any Person, without duplication: (a) indebtedness of such Person for borrowed money, secured or unsecured; (b) every obligation of such Person evidenced by bonds, debentures, notes, derived obligations or other similar instruments; (c) every obligation of such Person under purchase money mortgages, conditional sale agreements or other similar instruments relating to purchased property or assets; (d) every capitalized or non-consolidated lease obligation of such Person; (e) every obligation of such Person under swaps (valued at the termination value thereof); and (f) every obligation of the type referred to above of any other Person, the payment of which such Person has guaranteed or for which such Person is otherwise responsible or liable;

 

“Intellectual Property” means collectively, all rights in or affecting intellectual or industrial property or other proprietary rights existing in any jurisdiction, including with respect to the following: (a) patents and applications therefor, and patents issuing thereon, including continuations, divisionals, continuations-in-part, reissues, reexaminations, renewals and extensions, and the right to file other or further applications and claim priority thereto; (b) trademarks, service marks, trade names, service names, brand names and trade dress rights, and all applications, registrations and renewals thereof; (c) copyrights and registrations and applications therefor, works of authorship, “moral” rights and mask work rights, writings and other works, whether copyrightable or not in any jurisdiction, and any renewals or extensions thereof; (d) domain names, uniform resource locators and social media accounts or handles, including applications and registrations thereof; (e) telephone numbers; (f) trade secrets, formulae, confidential and proprietary know-how, research records, test information, market surveys, algorithms, procedures, methods, techniques, ideas, research and development, data, specifications, confidential information, processes, inventions (whether or not patentable) and discoveries and any improvements to any of the foregoing; (g) the right to file applications and obtain registrations for any of the foregoing, as applicable; and (h) the goodwill associated with any of the foregoing;

 

“Interim Order” means an interim order of the Court concerning the Arrangement pursuant to the BCBCA in a form acceptable to both Yerbaé and Safety Shot, each acting reasonably, containing declarations and directions with respect to the Arrangement and the holding of the Yerbaé Meeting, as such order may be affirmed, amended or modified by the Court;

 

 

“Investment Canada Act” means the Investment Canada Act, R.S.C. 1985, c.28 (1st Supp.), as amended, including regulations passed under the Investment Canada Act;

 

“Liabilities” means any and all debts, liabilities and obligations of any nature whatsoever, whether accrued or fixed, including those arising under any law, Contract, Permit, license or other undertaking and as a result of any act or omission;

 

“Lien” means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest but excluding any present or future lease that is or would have been characterized as an operating lease under US GAAP, as in effect on the date hereof);

 

“Matching Period” has the meaning specified in Section 4.4(a)(iv);

 

“MI 61-101” means Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions;

 

“Misrepresentation”, “material change” and “material fact” have the meanings ascribed thereto under Applicable Securities Laws of Canada;

 

“NASDAQ” means the National Association of Securities Dealers Automated Quotations exchange;

 

“OFAC” has the meaning specified in Section 5.1(u)(iii);

 

“Optionholders” means, collectively, the holders of Yerbaé Options;

 

“Order” means all judicial, arbitral, administrative, ministerial, departmental or regulatory judgments, injunctions, orders, decisions, rulings, determinations, awards, or decrees of any Governmental Entity (in each case, whether temporary, preliminary or permanent);

 

“Outside Date” means July 7, 2025 or such later date as may be agreed to in writing by Safety Shot and Yerbaé;

 

“Parties” means, collectively, the parties to this Agreement, and “Party” means any one of them;

 

“Permit” means any license, permit, certificate, franchise, consent, order, grant, easement, covenant, approval, classification, registration or other authorization of and from any Person, including any Governmental Entity;

 

“Permitted Liens” means:

 

(a)

Liens for taxes, assessments and governmental charges, the payment of which is not yet due and payable or which are being contested in good faith by, as applicable: (i) Yerbaé or a Yerbaé Subsidiary and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by US GAAP, shall have been made therefor in the books of account of the applicable Person; and (ii) Safety Shot or a Safety Shot Subsidiary and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by US GAAP, shall have been made therefor in the books of account of the applicable Person;

 

 

	(b)	Liens imposed by law, such as carrier’s, warehousemen’s, mechanic’s, materialmen’s and other similar Liens securing obligations (other than Indebtedness for borrowed money) that are not due or delinquent or that are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by US GAAP, shall have been made therefor in the books of account of the applicable Person;
	(c)	Liens securing purchase money Indebtedness or of purchase money mortgages and any other Lien on equipment acquired, leased or held with a fair market value less than or equal to $100,000, on an aggregate basis at any time (including equipment held as lessee under a capital lease) in the ordinary course of business to secure the purchase price of or rental payments with respect to such equipment or to secure Indebtedness incurred for the purpose of financing the acquisition (including acquisition as lessee under capital leases), construction or improvement of any such equipment to be subject to such Liens existing on any such equipment at the time of such acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that (x) no such Lien shall extend to or cover any equipment other than the equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and (y) the principal amount of the Indebtedness secured by any such Lien, or any extension, renewal or replacement thereof, shall not exceed the greater of the fair market value or the cost of the property so held or acquired;
	(d)	deposits and pledges of cash or securities securing (i) the performance of bids, tenders, leases, contracts (other than for the payment of money) or statutory obligations that arise in the ordinary course of business or (ii) obligations on surety or appeal or performance bonds, including those to support or secure reclamation in accordance with Applicable Law that are incurred or arise in the ordinary course of business or (iii) obligations incurred in the ordinary course of business that do not involve the incurrence of Indebtedness and, in each case, only to the extent such deposits or pledges secure obligations that are not past due or that are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by US GAAP, shall have been made therefor in the books of account of the applicable Person;
	(e)	pledges, deposits and Liens in connection with workers’ compensation, employment insurance and other similar legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements to the extent required by law;
	(f)	rights of set-off or bankers’ Liens upon deposits of cash or broker’s Liens upon securities in favour of financial institutions, banks or other depositary institutions;
	(g)	survey exceptions, title defects, easements, zoning restrictions and similar encumbrances on real property and minor irregularities in the title thereto that do not (i) secure obligations for the payment of money; or (ii) materially adversely impair the value of such property or its use by Yerbaé or any Yerbaé Subsidiary in the normal conduct of their business;

 

 

	(h)	Liens given in the ordinary course of business to a public utility or any municipality or governmental or other public authority when required by such utility or municipality or governmental or other authority in connection with the operations of Yerbaé or any Yerbaé Subsidiary;
	(i)	with respect to Liens set forth in subsection (c), replacement liens in respect of any refinancing or the replacement of the underlying Indebtedness provided such refinancing or replacement does not increase the then-outstanding principal balance of such Indebtedness being refinanced or replaced;
	(j)	Liens which could not be reasonably expected to cause a Yerbaé Material Adverse Effect or Safety Shot Material Adverse Effect, arising or potentially arising under statutory provisions (other than Environmental Laws) which have not at the time been filed or registered in accordance with Applicable Law or of which written notice has not been duly given in accordance with Applicable Law or which, although filed or registered, relate to obligations that are not due or delinquent or that are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by US GAAP, shall have been made therefor in the books of account of the applicable Person;
	(k)	the right reserved to or vested in any government or Governmental Entity by any statutory provision or by the terms of any lease, production sharing contract, licence, franchise, grant or permit of, to terminate any such lease, license, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof; and
	(l)	Liens arising from the right of distress enjoyed by landlords or Liens otherwise granted to landlords, in either case, to secure the payment of arrears of rent in respect of leased properties;

 

“Person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate group, body corporate, limited liability company, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status;

 

“Personal Information” means any data that identifies, relates to, describes, is reasonable capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular individual or household, including any data that constitutes personal information, personally-identifiable information, or personal data under any agreement, law or privacy policy applicable to a Party or its Subsidiaries;

 

“Plan of Arrangement” means the plan of arrangement set forth in Schedule “B” to this Agreement, as such plan of arrangement may be amended or supplemented from time to time in accordance with the terms thereof and hereof;

 

“Proceeding” means any suit, claim, action, charge, complaint, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, audit, examination or investigation commenced, brought, conducted or heard by or before, any court or other Governmental Entity;

 

 

“Process” means the access, creation, collection, use, storage, maintenance, processing, recording, sharing, distribution, transfer, transmission, receipt, import, export, protection, safeguarding, disposal or disclosure or other activity regarding data (whether electronically or in any other form or medium);

 

“Protected Data” means Personal Information, data subject to the Payment Card Industry Data Security Standard issued by the PCI Security Standards Council, as it may be amended from time to time, and all data and information for which a Party or its Subsidiaries are required by law, rules, regulation, agreement, or privacy policy to safeguard and/or keep confidential or private;

 

“Recipient” has the meaning ascribed thereto in Section 3.9(a);

 

“Registration Statement” has the meaning ascribed thereto in Section 2.11(j);

 

“Regulatory Approvals” means, collectively, the following: (a) acceptance of the NASDAQ; (b) the approval of the TSXV; (c) the Final Order; and (d) such other sanctions, rulings, consents, orders, exemptions, permits and other approvals (including the lapse, without objection, of a prescribed time under any Applicable Law that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) of Governmental Entities required in connection with the Plan of Arrangement except for those sanctions, rulings, consents, orders, exemptions, permits and other approvals, the failure of which to obtain individually or in the aggregate, would not reasonably be expected to have a Safety Shot Material Adverse Effect, taken as a whole, or a Yerbaé Material Adverse Effect, taken as a whole (either before or after giving effect to the Arrangement) or would not materially impede or delay the completion of the Arrangement;

 

“Representatives” means, with respect to any Person and its Subsidiaries, collectively, the officers, directors, employees, consultants, advisors (including financial advisors and legal counsel), representatives, agents or other parties acting on its behalf;

 

“Safety Shot” means Safety Shot, Inc., a company existing under the laws of the State of Delaware;

 

“Safety Shot Board” means the board of directors of Safety Shot as it may be comprised from time to time, including any duly constituted and acting committee thereof;

 

“Safety Shot Change in Recommendation” has the meaning set forth in Section 3.5(k).

 

“Safety Shot Circular” means the notice of the Safety Shot Meeting and accompanying Safety Shot Proxy Statement of Safety Shot, together with all appendices, schedules and exhibits thereto, to be sent by Safety Shot to the Safety Shot Stockholders in connection with the Safety Shot Meeting, as amended, supplemented or otherwise modified, which shall be a joint circular with the Yerbaé Circular unless the Parties otherwise agree;

 

“Safety Shot Circular Disclosure” means all information regarding Safety Shot provided by Safety Shot for inclusion in the Yerbaé Circular;

 

“Safety Shot Disclosure Letter” means the disclosure letter dated as of the date hereof from Safety Shot to Yerbaé;

 

“Safety Shot Fairness Opinion” means the opinion of Newbridge Securities Corporation to the effect that, as of the date of such opinion, the Consideration being offered by Safety Shot to the Yerbaé Shareholders pursuant to the Arrangement is fair from a financial point of view to the Safety Shot Stockholders;

 

 

“Safety Shot Financial Statements” has the meaning ascribed thereto in Section 5.1(l)(i);

 

“Safety Shot Information” means the information contained in the files, reports, data, documents, agreements and other information relating to Safety Shot and each Safety Shot Subsidiary, as provided by Safety Shot or its Representatives to Yerbaé or its Representatives in connection with the transactions contemplated hereby, in writing, including information contained in data rooms or provided in electronic form;

 

“Safety Shot Material Adverse Change” or “Safety Shot Material Adverse Effect” means any event, change, occurrence, effect or state of facts that, individually or in the aggregate with other events, changes, occurrences, effects or states of facts is, or would reasonably be expected to be, material and adverse to the business, operations, results of operations, capital, property, assets, Liabilities, obligations (whether absolute, accrued, conditional or otherwise) or condition (financial or otherwise) of Safety Shot and the Safety Shot Subsidiaries taken as a whole, except any such event, change, occurrence, effect or state of facts resulting from or arising in connection with:

 

	(a)	any change or development generally affecting the industries in which Safety Shot and the Safety Shot Subsidiaries operate;
	(b)	any change or development in global, national or regional political conditions (including any act of terrorism or any outbreak of hostilities or war or any escalation or worsening thereof) or any natural disaster;
	(c)	any change in general economic, business or regulatory conditions or in global financial, credit, currency or securities markets in Canada or the United States;
	(d)	any adoption, proposed implementation or change in Applicable Law or any interpretation thereof by any Governmental Entity;
	(e)	any change in U.S. GAAP or changes in applicable regulatory accounting requirements applicable to the industries in which it conducts business;
	(f)	changes or developments in or relating to currency exchange or interest rates;
	(g)	the negotiation, execution, announcement, performance or pendency of this Agreement or the consummation of the transactions contemplated herein;
	(h)	actions or inactions expressly required by this Agreement or that are taken with the prior written consent of Yerbaé;
	(i)	any change in the market price or trading volume of any securities of Safety Shot (it being understood, without limiting the applicability of subsections (a) through (h), that the causes underlying such changes in market price or trading volume may be taken into account in determining whether a Safety Shot Material Adverse Effect has occurred), or any suspension of trading in securities generally or on any securities exchange on which any securities of Safety Shot trade; or
	(j)	the failure, in and of itself, of Safety Shot to meet any internal or public projections, forecasts or estimates of revenues, earnings or other financial operating metrics before, on or after the date of this Agreement (it being understood, without limiting the applicability of subsections (a) through (h), that the causes underlying such failure may be taken into account in determining whether a Safety Shot Material Adverse Effect has occurred),

 

 

provided, however, that any such event, change, occurrence, effect or state of facts referred to in subsections (a) to and including (f) above does not primarily relate only to (or have the effect of primarily relating only to) Safety Shot and the Safety Shot Subsidiaries taken as a whole, or materially disproportionately affect Safety Shot and the Safety Shot Subsidiaries, taken as a whole, compared to other companies operating in the business or industries in which Safety Shot and the Safety Shot Subsidiaries operate; references in this Agreement to dollar amounts are not intended to be and shall not be deemed to be illustrative or interpretative for purposes of determining whether a Safety Shot Material Adverse Effect has occurred. Notwithstanding any other provision of this definition, no action of any kind taken by a Governmental Entity, nor the commencement by a Governmental Entity of any Proceeding seeking a law or Order which would have the effect of making the Arrangement illegal or otherwise preventing or prohibiting consummation of the Arrangement, will, in any such case, constitute a Safety Shot Material Adverse Effect;

 

“Safety Shot Meeting” means the special meeting of the Safety Shot Stockholders, including any adjournment or postponement thereof, to be called and held in accordance with this Agreement to consider, among other matters, the Safety Shot Stockholder Matters;

 

“Safety Shot Proxy Statement” shall mean the proxy or information statement of Safety Shot to be filed with the SEC pursuant to Section 14(a) of the U.S. Exchange Act, in connection with the submission of the Safety Shot Stockholder Matters to the Safety Shot Stockholders, which shall be a joint proxy statement with the Yerbaé Proxy Statement unless the Parties otherwise agree;

 

“Safety Shot Public Record” means all information filed by Safety Shot with the U.S. Securities and Exchange Commission and made available to the public on the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system;

 

“Safety Shot Recommendation” has the meaning set forth in Section 3.5(k);

 

“Safety Shot Shares” means the shares of common stock in the authorized share capital of Safety Shot;

 

“Safety Shot Stockholder Approval” shall mean the approval of the Safety Shot Stockholder Matters by the Safety Shot Stockholders;

 

“Safety Shot Stockholders” means the holders of Safety Shot Shares;

 

“Safety Shot Stockholder Matters” means the approval and adoption of the Amended and Restated Equity Incentive Plan and the issuance of the Consideration Shares, by the Safety Shot Stockholders and such other matters as are required for the completion of the Arrangement in accordance with Applicable Laws;

 

“Safety Shot Subsidiaries” means, collectively, Jupiter Wellness Investments, Inc. and Caring Brands, Inc., and “Safety Shot Subsidiary” means any one of them;

 

“Sanctioned Person” has the meaning specified in Section 5.1(u)(iii);

 

“SEC” means the United States Securities and Exchange Commission;

 

 

“Securities Act” means the Securities Act (British Columbia), as amended, and the rules, regulations and published policies made thereunder;

 

“Securities Authorities” means, collectively, the securities commissions or similar securities regulatory authorities in each of the provinces and territories of Canada and the U.S. Securities Authorities;

 

“Significant Shareholder” has the meaning ascribed thereto in Section 5.2(i);

 

“Subsidiary” has the meaning ascribed thereto in the Securities Act, which for certainty shall include any indirect subsidiaries and, for certainty, (a) with respect to Safety Shot, includes the Safety Shot Subsidiaries, and (b) with respect to Yerbaé, includes the Yerbaé Subsidiaries;

 

“Superior Proposal” means any unsolicited bona fide written Acquisition Proposal to acquire not less than all of the outstanding Yerbaé Shares (other than Yerbaé Shares held by the Persons or group of Persons making such Acquisition Proposal) or all or substantially all of the assets of Yerbaé on a consolidated basis that:

 

	(a)	was not initiated, solicited, knowingly encouraged or knowingly facilitated by Yerbaé or any of the Yerbaé Subsidiaries or any of their respective Representatives;
	(b)	did not result from or involve a breach of Article 4;
	(c)	is not subject to any financing contingency, and in respect of which it has been demonstrated to the satisfaction of the Yerbaé Board, acting in good faith after consultation with its financial advisor(s) and outside legal counsel, that adequate arrangements have been made in respect of any financing required to complete such Acquisition Proposal;
	(d)	is not subject to a due diligence or access to information condition; and
	(e)	in respect of which the Yerbaé Board (or any relevant committee thereof) determines, in its good faith judgment, after consulting with its outside legal counsel and financial advisors: (i) is reasonably capable of being completed, without undue delay, taking into account all financial, legal, regulatory and other aspects of such proposal and the Person or group of Persons making such proposal; and (ii) would, if consummated in accordance with its terms but without assuming away the risk of non-completion, result in a transaction which is more favorable, from a financial point of view, to the Yerbaé Shareholders than the Arrangement (including any amendments to the terms and conditions of the Arrangement proposed by Safety Shot pursuant to Section 4.4(b) hereof);

 

“Superior Proposal Notice” has the meaning specified in Section 4.4(a)(iii);

 

“Tax” or “Taxes” means any and all taxes, duties, fees, excises, premiums, assessments, imposts, levies and other charges or assessments of any kind whatsoever however denominated, including any interest, penalties or other additions that may become payable in respect thereof, imposed by any Taxing Authority, whether computed on a separate, consolidated, unitary, combined or other basis, which taxes will include, without limiting the generality of the foregoing, all income or profits taxes (including, but not limited to, federal income taxes and provincial income taxes), payroll and employee withholding taxes, employment insurance premiums, unemployment insurance, social insurance taxes, Canada Pension Plan contributions, sales and use taxes (including goods and services and provincial sales taxes), value added taxes, excise taxes, fuel taxes, franchise taxes, gross receipts taxes, carbon taxes, capital taxes, production taxes, recapture, withholding taxes, employee health taxes, surtaxes, customs, import and export taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers compensation and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing;

 

 

“Tax Act” means the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended, including the regulations promulgated thereunder;

 

“Tax Returns” means all reports, estimates, elections, notices, filings, designations, forms, declarations of estimated tax, information statements and returns relating to, or required to be supplied to any Taxing Authority in connection with, any Taxes (including any attached schedules, estimated tax returns, withholding tax returns, and information returns and reports);

 

“Taxing Authority” means any Governmental Entity responsible for the imposition of any Tax (domestic or foreign);

 

“Termination Fee” has the meaning ascribed thereto in Section 8.2(b);

 

“Termination Fee Event” has the meaning ascribed thereto in Section 8.2(b);

 

“Third Party Beneficiaries” has the meaning ascribed thereto in Section 10.11;

 

“Transaction Expenses” means all legal, advisory, accounting fees and expenses of Yerbaé arising as a result of the Arrangement that are incurred prior to, and remain unpaid as of, the Effective Time;

 

“Transaction Personal Information” has the meaning ascribed thereto in Section 3.9(a);

 

“Transferor” has the meaning ascribed thereto in Section 3.9(a);

 

“TSXV” means the TSX Venture Exchange;

 

“United States” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia;

 

“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

 

“U.S. GAAP” means generally accepted accounting principles in the United States of America in effect from time to time;

 

“U.S. Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder;

 

“U.S. Securities Authorities” means, collectively, the SEC and securities regulatory authorities in each of the states, territories and possessions of the United States and the District of Columbia;

 

“U.S. Securities Laws” means, collectively, the U.S. Securities Act, the U.S. Exchange Act and applicable state securities legislation of the United States and all rules, regulations and orders promulgated thereunder, as amended from time to time;

 

 

“Yerbaé” means Yerbaé Brands Corp., a corporation existing under the BCBCA, and where the context permits includes the Yerbaé Subsidiaries;

 

“Yerbaé Board” means the board of directors of Yerbaé as it may be comprised from time to time, including any duly constituted and acting committee thereof;

 

“Yerbaé Board Recommendation” has the meaning ascribed thereto in Section 2.8(c);

 

“Yerbaé Circular” means the notice of the Yerbaé Meeting and accompanying Yerbaé Proxy Statement, together with all appendices, schedules and exhibits thereto, to be sent by Yerbaé to the Yerbaé Shareholders in connection with the Yerbaé Meeting, as amended, supplemented or otherwise modified, which shall be a joint circular with the Safety Shot Circular unless the Parties otherwise agree;

 

“Yerbaé Circular Disclosure” means all information regarding Yerbaé provided by Yerbaé for inclusion in the Safety Shot Circular;

 

“Yerbaé Disclosure Letter” means the disclosure letter dated as of the date hereof from Yerbaé to Safety Shot;

 

“Yerbaé Fairness Opinion” means the opinion of Evans & Evans, Inc. to the effect that, as of the date of such opinion, the Consideration to be received by the Yerbaé Shareholders is fair, from a financial point of view, to such Yerbaé Shareholders;

 

“Yerbaé Financial Statements” means, collectively: (i) the audited consolidated financial statements of the Yerbaé as at and for the years ended December 31, 2023 and 2022, together with the related auditors’ report on and notes to such financial statements; and (ii) the unaudited condensed consolidated interim financial statements of Yerbaé for the three (3) and nine (9) month period ended September 30, 2024 and 2023, together with the notes to such financial statements;

 

“Yerbaé Information” means the information contained in the files, reports, data, documents, agreements and other information relating to Yerbaé and each Yerbaé Subsidiary, as provided by Yerbaé or its Representatives to Safety Shot or its Representatives in connection with the transactions contemplated hereby, in writing, including information contained in data rooms or provided in electronic form;

 

“Yerbaé Intellectual Property Rights” has the meaning ascribed thereto in Section 5.2(t)(iii);

 

“Yerbaé Interested Shareholders” means, collectively, the Yerbaé Shareholders whose votes are required to be excluded from the minority approval vote under Part 8 of MI 61-101 with respect to the Arrangement Resolution;

 

“Yerbaé Material Adverse Change” or “Yerbaé Material Adverse Effect” means any event, change, occurrence, effect or state of facts that, individually or in the aggregate with other events, changes, occurrences, effects or states of facts is, or would reasonably be expected to be, material and adverse to the business, operations, results of operations, capital, property, assets, Liabilities, obligations (whether absolute, accrued, conditional or otherwise) or condition (financial or otherwise) of Yerbaé and the Yerbaé Subsidiaries taken as a whole, except any such event, change, occurrence, effect or state of facts resulting from or arising in connection with:

 

(a)

any change or development generally affecting the industries in which Yerbaé and the Yerbaé Subsidiaries operate;

 

 

	(b)	any change or development in global, national or regional political conditions (including any act of terrorism or any outbreak of hostilities or war or any escalation or worsening thereof) or any natural disaster;
	(c)	any change in general economic, business or regulatory conditions or in global financial, credit, currency or securities markets in Canada or the United States;
	(d)	any adoption, proposed implementation or change in Applicable Law or any interpretation thereof by any Governmental Entity;
	(e)	any change in U.S. GAAP or changes in applicable regulatory accounting requirements applicable to the industries in which it conducts business;
	(f)	changes or developments in or relating to currency exchange or interest rates;
	(g)	the negotiation, execution, announcement, performance or pendency of this Agreement or the consummation of the transactions contemplated herein;
	(h)	actions or inactions expressly required by this Agreement or that are taken with the prior written consent of Safety Shot;
	(i)	any change in the market price or trading volume of any securities of Yerbaé (it being understood, without limiting the applicability of subsections (a) through (h), that the causes underlying such changes in market price or trading volume may be taken into account in determining whether a Yerbaé Material Adverse Effect has occurred), or any suspension of trading in securities generally or on any securities exchange on which any securities of Yerbaé trade; or
	(j)	the failure, in and of itself, of Yerbaé to meet any internal or public projections, forecasts or estimates of revenues, earnings or other financial operating metrics before, on or after the date of this Agreement (it being understood, without limiting the applicability of subsections (a) through (i), that the causes underlying such failure may be taken into account in determining whether a Yerbaé Material Adverse Effect has occurred),

 

provided, however, that any such event, change, occurrence, effect or state of facts referred to in subsections (a) to and including (f) above does not primarily relate only to (or have the effect of primarily relating only to) Yerbaé and the Yerbaé Subsidiaries taken as a whole, or materially disproportionately affect Yerbaé and the Yerbaé Subsidiaries, taken as a whole, compared to other companies operating in the business or industries in which Yerbaé and the Yerbaé Subsidiaries operate; references in this Agreement to dollar amounts are not intended to be and shall not be deemed to be illustrative or interpretative for purposes of determining whether a Yerbaé Material Adverse Effect has occurred. Notwithstanding any other provision of this definition, no action of any kind taken by a Governmental Entity, nor the commencement by a Governmental Entity of any Proceeding seeking a law or Order which would have the effect of making the Arrangement illegal or otherwise preventing or prohibiting consummation of the Arrangement, will, in any such case, constitute a Yerbaé Material Adverse Effect;

 

“Yerbaé Material Contract” means in respect of Yerbaé or any of the Yerbaé Subsidiaries, any Contract:

 

(a)

that if terminated or modified or if it ceased to be in effect, would reasonably be expected to have a Yerbaé Material Adverse Effect;

 

 

	(b)	under which Yerbaé or any of the Yerbaé Subsidiaries has directly or indirectly guaranteed any Liabilities or obligations of a third party in excess of $100,000 in the aggregate;
	(c)	that is a lease, sublease, license or right of way or occupancy agreement for real property which is material to the business of Yerbaé and the Yerbaé Subsidiaries, taken as a whole;
	(d)	that provides of the establishment of, investment in or formation of any partnership or joint venture with an arm’s length Person in which the interest of Yerbaé or any of the Yerbaé Subsidiaries exceeds book value of $100,000;
	(e)	relating to indebtedness for borrowed money, whether incurred, assumed, guaranteed or secured by any asset, with an outstanding principal amount in excess of $100,000;
	(f)	under which Yerbaé or any of the Yerbaé Subsidiaries is obligated to make or expects to receive payments in excess of $100,000 over the remaining term of the contract;
	(g)	that limits or restricts Yerbaé or any of its Affiliates from engaging in any line of business or in any geographic area; or
	(h)	that is a collective bargaining agreement, a labour union contract or any other memorandum of understanding or other agreement with a union;

 

“Yerbaé Meeting” means the special meeting of the Yerbaé Shareholders, including any adjournment or postponement thereof, to be called and held in accordance with this Agreement and the Interim Order to consider, among other matters, the Arrangement Resolution;

 

“Yerbaé Options” means the outstanding and unexpired stock options of Yerbaé, whether or not vested, to acquire Yerbaé Shares from treasury pursuant to the Incentive Plan;

 

“Yerbaé Owned Properties” has the meaning ascribed thereto in Section 5.2(r)(i);

 

“Yerbaé Proxy Statement” shall mean the proxy or information statement of Yerbaé to be filed with the SEC pursuant to Section 14(a) of the U.S. Exchange Act and, if applicable, the information circular to be filed on SEDAR+ pursuant Applicable Securities Laws, in connection with the Yerbaé Meeting, which shall be a joint proxy statement with the Safety Shot Proxy Statement unless the Parties otherwise agree.

 

“Yerbaé PSUs” means any outstanding performance share units of Yerbaé issued pursuant to the Incentive Plan or otherwise;

 

“Yerbaé Public Record” means all documents filed by or on behalf of Yerbaé on SEDAR+ under Yerbaé’s profile;

 

“Yerbaé Registered IP” has the meaning ascribed thereto in Section 5.2(t)(iii);

 

“Yerbaé RSUs” means any outstanding restricted share units of Yerbaé issued pursuant to the Incentive Plan or otherwise;

 

“Yerbaé Securities” means, collectively, the Yerbaé Shares, Yerbaé Options, Yerbaé RSUs, Yerbaé PSUs, Yerbaé Warrants and Convertible Debentures;

 

 

“Yerbaé Shareholder Approval” shall mean the approval of the Arrangement Resolution by the Yerbaé Shareholders;

 

“Yerbaé Shareholder Support Agreements” means the voting support agreements, in a form acceptable to Safety Shot (acting reasonably), to be entered into between Safety Shot and the Yerbaé Supporting Securityholders, in their capacity as holders of Yerbaé Securities;

 

“Yerbaé Shareholders” means the holders of Yerbaé Shares;

 

“Yerbaé Shares” means the common shares in the authorized capital of Yerbaé;

 

“Yerbaé Subsidiaries” means, together, Yerbaé Brands Co. and Yerbaé LLC and “Yerbaé Subsidiary” means either one of them;

 

“Yerbaé Supporting Securityholders” means certain directors, officers and Employees of Yerbaé, including, without limitation, Todd Gibson, Karrie Gibson and certain other holders of Yerbaé Shares representing not less than 40.1% of the issued and outstanding Yerbaé Shares, that enter into Yerbaé Shareholder Support Agreements; and

 

“Yerbaé Warrants” means all outstanding and unexpired warrants to acquire Yerbaé Shares.

 

1.2	Interpretation Not Affected by Headings, etc.

 

The division of this Agreement into Articles, Sections, subsections and other portions and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an “Article”, “Section” or “subsections” followed by a number and/or a letter refer to the specified Article, Section or subsections of this Agreement.

 

1.3	Number and Gender; Derivatives

 

Unless the context otherwise requires, in this Agreement, words importing the singular number include the plural and vice versa, and words importing the use of any gender include all genders. If a word is defined in this Agreement a grammatical derivative of that word will have a corresponding meaning. The words “include”, “includes” and “including” shall be deemed to be followed by the words “without limitation”.

 

1.4	Date for Any Action

 

If any date on which any action is required to be taken hereunder by any of the Parties is not a Business Day, such action is required to be taken on the next succeeding day which is a Business Day.

 

1.5	Statute and Agreement References

 

Any reference in this Agreement to any statute or any Section thereof will, unless otherwise expressly stated, be deemed to be a reference to such statute or Section as amended, restated or re-enacted from time to time. References to any agreement or document will be to such agreement or document (together with all appendices, schedules and exhibits thereto), as it may have been or may hereafter be amended, supplemented, replaced or restated from time to time.

 

 

1.6

Currency

 

All sums of money that are referred to in this Agreement are expressed in lawful money of the United States unless otherwise noted.

 

1.7	Accounting Matters

 

Unless otherwise stated, all accounting terms used in this Agreement shall have the meanings attributable thereto under U.S. GAAP and all determinations of an accounting nature required to be made shall be made in accordance with U.S. GAAP consistently applied.

 

1.8	Interpretation Not Affected by Party Drafting

 

The Parties acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement, and the Parties agree that any rule of construction to the effect that any ambiguity is to be resolved against the drafting Party will not be applicable in the interpretation of this Agreement.

 

1.9

Knowledge

 

Where any representation or warranty is expressly qualified by reference to the knowledge of a Party, it is deemed to refer to the actual knowledge of the Executive Officers of Safety Shot or Yerbaé, as the case may be, after reasonable inquiry. For purposes of this Section 1.9, “Executive Officers” (a) in the case of Safety Shot, means Jarrett Boon, Danielle De Rosa and David Sandler; and (b) in the case of Yerbaé, means Todd Gibson and Karrie Gibson.

 

1.10	Disclosure in Writing

 

References herein to disclosure in writing shall, (a) in the case of disclosure to Safety Shot be references exclusively to the Yerbaé Disclosure Letter or this Agreement, and (b) in the case of disclosure to Yerbaé be references exclusively to the Safety Shot Disclosure Letter or this Agreement.

 

1.11

Schedules

 

The following schedules attached hereto are incorporated into and form an integral part of this Agreement:

 

Schedule “A” – Arrangement Resolution

Schedule “B” – Plan of Arrangement

 

Article 2
THE ARRANGEMENT

 

2.1	Arrangement

 

Yerbaé and Safety Shot agree that the Arrangement will be implemented in accordance with the terms and subject to the conditions contained in this Agreement and the Plan of Arrangement. In the event of any conflict between the terms of this Agreement and the Plan of Arrangement, the Plan of Arrangement shall govern.

 

 

2.2	Safety Shot Approval

 

Safety Shot represents and warrants to Yerbaé that the Safety Shot Board has unanimously:

 

	(a)	determined that the Arrangement, the Plan of Arrangement, this Agreement and the other transactions contemplated by this Agreement, including the issuance of the Consideration Shares, are fair to and in the best interests of Safety Shot and the Safety Shot Stockholders;
	(b)	approved and declared advisable the Arrangement, the Plan of Arrangement, this Agreement and the other transactions contemplated by this Agreement, including the issuance of the Consideration Shares; and
	(c)	directed that the Arrangement be submitted to the Safety Shot Stockholders and recommended the approval of the issuance of the Consideration Shares, by the Safety Shot Stockholders.

 

2.3	Yerbaé Approval

 

Yerbaé represents and warrants to Safety Shot that the Yerbaé Board has unanimously determined that:

 

	(a)	the Arrangement is fair to the Yerbaé Shareholders from a financial point of view;
	(b)	the Arrangement and entry into this Agreement are, as of the date of this Agreement, in the best interests of Yerbaé; and
	(c)	subject to Section 4.4(a), it will unanimously recommend that the Yerbaé Shareholders vote in favour of the Arrangement Resolution.

 

2.4	Interim Order

 

As soon as reasonably practicable following the execution of this Agreement, but in any event no later than April 13, 2025, Yerbaé shall apply to the Court in a manner acceptable to Safety Shot, acting reasonably, pursuant to the BCBCA and prepare, file and diligently pursue an application to the Court of the Interim Order, which shall provide, among other things:

 

	(a)	for the class of Persons to whom notice is to be provided in respect of the Arrangement and the Yerbaé Meeting and for the manner in which such notice is to be provided;
	(b)	that the requisite approval for the Arrangement Resolution shall be (i) not less than 662/3% of the votes cast on the Arrangement Resolution by Yerbaé Shareholders entitled to vote and present in person or by proxy at the Yerbaé Meeting voting together as a single class; (ii) if required under Applicable Law, a majority of the votes cast on the Arrangement Resolution by Yerbaé Shareholders (other than Yerbaé Interested Shareholders for the purpose of such vote) entitled to vote and present in person or represented by proxy at the Yerbaé Meeting, voting in accordance with Part 8 of MI 61-101; and (iii) any other shareholder approvals required by the TSXV;
	(c)	that it is the intention of Safety Shot to rely upon Section 3(a)(10) of the U.S. Securities Act in connection with the offer and sale of Consideration Shares, in accordance with the Arrangement, based on the Court’s approval of the Arrangement, which approval through the issuance of the Final Order will constitute its determination of the fairness of the Arrangement;

 

 

	(d)	that the Yerbaé Meeting may be adjourned or postponed from time to time by the Yerbaé Board subject to the terms of this Agreement without the need for additional approval of the Court;
	(e)	that the record date for Yerbaé Shareholders entitled to notice of and to vote at the Yerbaé Meeting will not change in respect of any adjournment(s) or postponements of the Yerbaé Meeting;
	(f)	that, in all other respects, other than as ordered by the Court, the terms, conditions and restrictions of the constating documents of Yerbaé, including quorum requirements and other matters, shall apply in respect of the Yerbaé Meeting;
	(g)	for the grant of the Dissent Rights to registered holders of Yerbaé Shares as set forth in the Plan of Arrangement;
	(h)	for the notice requirements with respect to the presentation of the application to the Court for the Final Order; and
	(i)	for such other matters as Safety Shot may reasonably require, subject to obtaining the prior consent of Yerbaé, such consent not to be unreasonably withheld, conditioned or delayed.

 

2.5	Safety Shot Stockholder Meeting

 

Subject to the terms of this Agreement and receipt of the Interim Order, Safety Shot shall:

 

	(a)	convene and conduct the Safety Shot Meeting in accordance with its constating documents and Applicable Law, as soon as reasonably practicable, and in any event on or before May 20, 2025;
	(b)	in consultation with Yerbaé, fix and publish a record date for the purposes of determining Safety Shot Stockholders entitled to receive notice of and vote at the Safety Shot Meeting and give notice to Yerbaé of the Safety Shot Meeting;
	(c)	allow Yerbaé’s Representatives and counsel to attend the Safety Shot Meeting;
	(d)	not adjourn, postpone or cancel (or propose or permit the adjournment, postponement or cancellation of) the Safety Shot Meeting without Yerbaé’s prior written consent (such consent not be unreasonably withheld, conditioned or delayed), except:

 

	(i)	as required for quorum purposes (in which case the meeting shall be adjourned and not cancelled), by Applicable Law or by a Governmental Entity (including to comply with any comments made by the SEC with respect to the Safety Shot Proxy Statement) or by valid Safety Shot Stockholder action (which action is not solicited or proposed by Safety Shot or the Safety Shot Board); or
	(ii)	as otherwise expressly permitted under this Agreement;

 

 

	(e)	provide Yerbaé with copies of or access to information regarding the Safety Shot Meeting, as requested from time to time by Yerbaé, generated by any dealer or proxy solicitation firm engaged by Safety Shot;
	(f)	use commercially reasonable efforts to solicit proxies in favour of the Safety Shot Stockholder Matters;
	(g)	promptly advise Yerbaé, at such times as Yerbaé may reasonably request, as to the aggregate tally of the proxies received by Safety Shot in respect of the Safety Shot Stockholder Matters;
	(h)	unless otherwise agreed to in writing by Yerbaé or this Agreement is terminated in accordance with its terms or except as required by Applicable Law or by a Governmental Entity, Safety Shot shall continue to take all steps reasonably necessary to hold the Safety Shot Meeting and to cause the Safety Shot Stockholder Matters to be voted on at such meeting and shall not propose to adjourn or postpone the Yerbaé Meeting other than as contemplated by Section 2.5(d); and
	(i)	not change the record date for the Safety Shot Stockholder entitled to vote at the Safety Shot Meeting in connection with any adjournment or postponement of the Safety Shot Meeting unless required by Applicable Law or by a Governmental Entity (including to comply with any comments made by the Securities Authorities with respect to the Yerbaé Proxy Statement) or with the written consent of Yerbaé, such consent not to be unreasonably withheld, conditioned or delayed.

 

2.6	Yerbaé Shareholder Meeting

 

Subject to the terms of this Agreement and receipt of the Interim Order, Yerbaé shall:

 

	(a)	convene and conduct the Yerbaé Meeting in accordance with its constating documents, the Interim Order and Applicable Law, as soon as reasonably practicable, and in any event on or before May 20, 2025;
	(b)	in consultation with Safety Shot, fix and publish a record date for the purposes of determining Yerbaé Shareholders entitled to receive notice of and vote at the Yerbaé Meeting and give notice to Safety Shot of the Yerbaé Meeting;
	(c)	allow Safety Shot’s Representatives and counsel to attend the Yerbaé Meeting;
	(d)	not adjourn, postpone or cancel (or propose or permit the adjournment, postponement or cancellation of) the Yerbaé Meeting without Safety Shot’s prior written consent (such consent not be unreasonably withheld, conditioned or delayed), except:

 

	(i)	as required for quorum purposes (in which case the meeting shall be adjourned and not cancelled), by Applicable Law or by a Governmental Entity (including to comply with any comments made by the Securities Authorities or the TSXV with respect to the Yerbaé Proxy Statement) or by valid Yerbaé Shareholder action (which action is not solicited or proposed by Yerbaé or the Yerbaé Board); or
	(ii)	as otherwise expressly permitted under this Agreement;

 

 

	(e)	provide Safety Shot with copies of or access to information regarding the Yerbaé Meeting, as requested from time to time by Safety Shot, generated by any dealer or proxy solicitation firm engaged by Yerbaé;
	(f)	use commercially reasonable efforts to solicit proxies in favour of the Arrangement Resolution;
	(g)	promptly advise Safety Shot, at such times as Safety Shot may reasonably request, as to the aggregate tally of the proxies received by Yerbaé in respect of the Arrangement Resolution;
	(h)	promptly advise Safety Shot of any written communication from any Yerbaé Shareholder in opposition to the Arrangement, written notice of dissent, purported exercise or withdrawal of Dissent Rights, and written communications sent by or on behalf of Yerbaé to any Yerbaé Shareholder exercising or purporting to exercise Dissent Rights;
	(i)	not make any payment or settlement offer, or agree to any payment or settlement prior to the Effective Time with respect to Dissent Rights without the prior written consent of Safety Shot;
	(j)	notwithstanding the receipt of an Acquisition Proposal or a Change in Recommendation, unless otherwise agreed to in writing by Safety Shot or this Agreement is terminated in accordance with its terms or except as required by Applicable Law or by a Governmental Entity, Yerbaé shall continue to take all steps reasonably necessary to hold the Yerbaé Meeting and to cause the Arrangement Resolution to be voted on at such meeting and shall not propose to adjourn or postpone the Yerbaé Meeting other than as contemplated by Section 2.6(d); and
	(k)	not change the record date for the Yerbaé Shareholders entitled to vote at the Yerbaé Meeting in connection with any adjournment or postponement of the Yerbaé Meeting unless required by Applicable Law or by a Governmental Entity (including to comply with any comments made by the Securities Authorities with respect to the Yerbaé Proxy Statement) or with the written consent of Safety Shot, such consent not to be unreasonably withheld, conditioned or delayed.

 

2.7	Safety Shot Circular

 

(a)

Safety Shot shall as soon as reasonably practicable following the date of this Agreement (but taking into account the need for Yerbaé to provide the Yerbaé Circular Disclosure) prepare and complete, in consultation with Yerbaé, the Safety Shot Circular together with any other documents required by Applicable Law in connection with the Safety Shot Meeting and the Safety Shot Stockholder Matters, including obtaining the Safety Shot Fairness Opinion for inclusion in the Safety Shot Circular, and Safety Shot shall, after receipt of Yerbaé of the Interim Order, cause the Safety Shot Circular and such other documents to be sent to each Safety Shot Stockholder (if applicable) and any other Person as required by Applicable Law, in each case so as to permit the Safety Shot Meeting to be held by the date specified in Section 2.5(a).

 

 

	(b)	On the date of mailing or delivery thereof, Safety Shot shall ensure that the Safety Shot Circular complies in all material respects with all Applicable Laws and, without limiting the generality of the foregoing, shall ensure that the Safety Shot Circular will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading (except that Safety Shot shall not be responsible for the accuracy of any Yerbaé Circular Disclosure).
	(c)	The Safety Shot Circular shall contain (i) to the extent required by Applicable Law, a summary and copy of the Safety Shot Fairness Opinion and (ii) a statement that the Safety Shot Board has received the Safety Shot Fairness Opinion and has, after evaluation in consultation with Safety Shot’s management and legal and financial advisors and considering a number of factors, unanimously recommended to Safety Shot Stockholders that they vote in favour of the Safety Shot Stockholder Matters.
	(d)	Yerbaé shall provide to Safety Shot in writing the Yerbaé Circular Disclosure to be included by Safety Shot in the Safety Shot Circular not less than ten (10) Business Days before the mailing date of the Safety Shot Circular and shall ensure that at the time of the mailing, such information does not contain any misrepresentation and complies in all material respects with Applicable Law.
	(e)	Yerbaé hereby indemnifies and saves harmless Safety Shot, the Safety Shot Subsidiaries and their respective Representatives from and against any and all Liabilities, claims, demands, losses, costs, Damages and expenses to which Safety Shot, any Safety Shot Subsidiary or any of their respective Representatives may be subject or may suffer as a result of, or arising from, any misrepresentation or alleged misrepresentation contained in the Yerbaé Circular Disclosure included in the Safety Shot Circular that was provided by Yerbaé in writing for inclusion in the Safety Shot Circular pursuant to Section (d), including as a result of any order made, or any inquiry, investigation or proceeding instituted by any Securities Authority or other Governmental Entity based on such a misrepresentation or alleged misrepresentation.
	(f)	Yerbaé and its legal counsel shall be given a reasonable opportunity to review and comment on drafts of the Safety Shot Circular and related documents prior to the Safety Shot Circular being printed and mailed to the Safety Shot Stockholders, and reasonable consideration shall be given to any comments made by Yerbaé and its legal counsel, provided that all information relating solely to Yerbaé and its Affiliates included in the Safety Shot Circular shall be in form and content approved in writing by Yerbaé, acting reasonably. Safety Shot shall provide Yerbaé with final copies of the Safety Shot Circular prior to the mailing to Safety Shot Stockholders.
	(g)	Each Party shall promptly notify the other Party if it becomes aware that the Safety Shot Circular contains a misrepresentation or otherwise requires an amendment or supplement and the Parties shall co-operate in the preparation of any amendment or supplement to the Safety Shot Circular as required or appropriate and Safety Shot shall promptly mail or otherwise publicly disseminate (if required under Applicable Law) any amendment or supplement to the Safety Shot Circular to the Safety Shot Stockholders.

 

 

2.8	Yerbaé Circular

 

	(a)	Yerbaé shall as soon as reasonably practicable following the date of this Agreement (but taking into account the need for Safety Shot to provide the Safety Shot Circular Disclosure) prepare and complete, in consultation with Safety Shot, the Yerbaé Circular together with any other documents required by Applicable Law in connection with the Yerbaé Meeting and the Arrangement, including obtaining the Yerbaé Fairness Opinion for inclusion in the Yerbaé Circular, and Yerbaé shall, after obtaining the Interim Order, cause the Yerbaé Circular and such other documents to be sent to each Yerbaé Shareholder (if applicable) and any other Person as required by the Interim Order and Applicable Law, in each case so as to permit the Yerbaé Meeting to be held by the date specified in Section 2.6(a).
	(b)	On the date of mailing or delivery thereof, Yerbaé shall ensure that the Yerbaé Circular complies in all material respects with all Applicable Law and the Interim Order and shall contain sufficient detail to permit Yerbaé Shareholders to form a reasoned judgment concerning the matters to be placed before them at the Yerbaé Meeting, and, without limiting the generality of the foregoing, shall ensure that the Yerbaé Circular will not contain any misrepresentation (except that Yerbaé shall not be responsible for the accuracy of any Safety Shot Circular Disclosure). The Yerbaé Circular shall also contain such information as may be required to allow Safety Shot to rely upon the exemption from registration provided under Section 3(a)(10) of the U.S. Securities Act with respect to the offer and sale of the Consideration Shares, pursuant to the Arrangement.
	(c)	The Yerbaé Circular shall contain (i) to the extent required by Applicable Law, a summary and copy of the Yerbaé Fairness Opinion, (ii) a statement that the Yerbaé Board has received the Yerbaé Fairness Opinion and has, after receiving legal and financial advice, unanimously determined that the Arrangement is fair to the Yerbaé Shareholders and that the Arrangement and entry into this Agreement are in the best interests of Yerbaé; and (iii) subject to Section Article 4 and any Change in Recommendation, contain the unanimous recommendation of the Yerbaé Board to Yerbaé Shareholders that they vote in favour of the Arrangement Resolution (the “Yerbaé Board Recommendation”).
	(d)	Safety Shot shall provide to Yerbaé in writing the Safety Shot Circular Disclosure to be included by Yerbaé in the Yerbaé Circular not less than ten (10) Business Days before the mailing date of the Yerbaé Circular and shall ensure that at the time of the mailing, such information does not contain any misrepresentation and complies in all material respects with Applicable Law.
	(e)	Safety Shot hereby indemnifies and saves harmless Yerbaé, the Yerbaé Subsidiaries and their respective Representatives from and against any and all Liabilities, claims, demands, losses, costs, Damages and expenses to which Yerbaé, any Yerbaé Subsidiary or any of their respective Representatives may be subject or may suffer as a result of, or arising from, any misrepresentation or alleged misrepresentation contained in the Safety Shot Circular Disclosure included in the Yerbaé Circular that was provided by Safety Shot in writing for inclusion in the Yerbaé Circular pursuant to Section 2.8(d), including as a result of any order made, or any inquiry, investigation or proceeding instituted by any Securities Authority or other Governmental Entity based on such a misrepresentation or alleged misrepresentation.

 

 

	(f)	At the reasonable request of Safety Shot from time to time, Yerbaé shall, or shall direct its registrar and transfer agent to, provide Safety Shot with a list (in either written or electronic form or both) of: (i) the registered Yerbaé Shareholders, together with their addresses and respective holdings of Yerbaé Shares; (ii) the names and addresses and holdings of all Persons having rights issued by Yerbaé to acquire Yerbaé Shares; and (iii) participants and book-based nominee registrants such as CDS & Co., CEDE & Co. and DTC, and nonobjecting beneficial owners of securities in Yerbaé, together with their addresses and respective holdings of securities in Yerbaé. Yerbaé shall from time to time require that its registrar and transfer agent furnish Safety Shot with such additional information, including updated or additional lists of Yerbaé Shareholders and lists of holdings and other assistance as Safety Shot may reasonably request.
	(g)	Safety Shot and its legal counsel shall be given a reasonable opportunity to review and comment on drafts of the Yerbaé Circular and related documents prior to the Yerbaé Circular being printed and mailed to the Yerbaé Shareholders, and reasonable consideration shall be given to any comments made by Safety Shot and its legal counsel, provided that all information relating solely to Safety Shot and its Affiliates included in the Yerbaé Circular shall be in form and content approved in writing by Safety Shot, acting reasonably. Yerbaé shall provide Safety Shot with final copies of the Yerbaé Circular prior to the mailing to Yerbaé Shareholders.
	(h)	Each Party shall promptly notify the other Party if it becomes aware that the Yerbaé Circular contains a misrepresentation or otherwise requires an amendment or supplement and the Parties shall co-operate in the preparation of any amendment or supplement to the Yerbaé Circular as required or appropriate and Yerbaé shall promptly mail or otherwise publicly disseminate (if required under Applicable Law) any amendment or supplement to the Yerbaé Circular to the Yerbaé Shareholders.

 

2.9	Final Order

 

If: (a) the Interim Order is obtained; and (b) the Arrangement Resolution is passed at the Yerbaé Meeting by Yerbaé Shareholders as provided for in the Interim Order and as required by Applicable Law, subject to the terms of this Agreement, and the Arrangement is approved at the Safety Shot Meeting by Safety Shot Shareholders, Yerbaé shall take all steps necessary or desirable to submit the Arrangement to the Court and use commercially reasonable efforts to pursue an application for the Final Order pursuant to the BCBCA as soon as reasonably practicable, but in any event not later than ten (10) Business Days after the Yerbaé Shareholder Approval is obtained.

 

 

2.10	Court Proceedings

 

Subject to the terms of this Agreement, Safety Shot shall cooperate with and assist Yerbaé in seeking the Interim Order and the Final Order, including by providing to Yerbaé, on a timely basis, any information reasonably required to be supplied by Safety Shot in connection therewith. Yerbaé shall provide Safety Shot’s legal counsel with reasonable opportunity to review and comment upon drafts of all material to be filed with the Court in connection with the Arrangement, and will give reasonable consideration to all such comments. Subject to Applicable Law, Yerbaé shall not file any material with the Court in connection with the Arrangement or serve any such material, and shall not agree to modify or amend materials so filed or served, except as contemplated by this Section 2.10 or with Safety Shot’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed; provided that, nothing herein shall require Safety Shot to agree or consent to any increase in or variation in the form of Consideration or other modification or amendment to such filed or served materials that expands or increases Safety Shot’s obligations, or diminishes or limits Safety Shot’s rights, set forth in any such filed or served materials or under this Agreement or the Arrangement. Yerbaé shall also provide to Safety Shot’s legal counsel on a timely basis, copies of any notice of appearance, evidence or other Court documents served on Yerbaé in respect of the application for the Interim Order or the Final Order or any appeal therefrom and of any notice, whether written or oral, received by Yerbaé indicating any intention to oppose the granting of the Interim Order or the Final Order or to appeal the Interim Order or the Final Order. Yerbaé shall ensure that all materials filed with the Court in connection with the Arrangement are consistent with the terms of this Agreement and the Plan of Arrangement. In addition, Yerbaé shall not object to Safety Shot’s legal counsel making such submissions on the hearing of the motion for the Interim Order and the application for the Final Order as such counsel considers appropriate, provided that Yerbaé is advised of the nature of any submissions prior to the hearing and such submissions are consistent in all material respects with this Agreement and the Plan of Arrangement. Yerbaé shall also oppose any proposal from any party that the Final Order contain any provision inconsistent with this Agreement, and, if at any time after the issuance of the Final Order and prior to the Effective Date, Yerbaé is required by the terms of the Final Order or by Applicable Law to return to Court with respect to the Final Order, it shall do so after notice to, and in consultation and cooperation with, Safety Shot.

 

2.11	U.S. Securities Law Matters

 

The Parties agree that the Arrangement will be carried out with the intention that all Consideration Shares, issued under the Arrangement, will be offered and sold by Safety Shot in reliance on the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10) thereunder and exemptions under U.S. Securities Laws of applicable states, territories and possessions of the United States and the District of Columbia. In order to ensure the availability of the exemption under Section 3(a)(10) of the U.S. Securities Act and to facilitate Safety Shot’s compliance with other U.S. Securities Laws, the Parties agree that the Arrangement will be carried out on the following basis:

 

	(a)	the Court will be asked to approve the procedural and substantive fairness of the terms and conditions of the Arrangement;
	(b)	prior to the issuance of the Interim Order, the Court will be advised of the intention of Safety Shot to rely on the exemption provided by Section 3(a)(10) of the U.S. Securities Act with respect to the issuance of Consideration Shares, pursuant to the Arrangement, based on the Court’s approval of the Arrangement;
	(c)	prior to the issuance of the Interim Order, Yerbaé will file with the Court a draft copy of the proposed text of the Yerbaé Circular together with any other documents required by Applicable Law in connection with the Yerbaé Meeting;
	(d)	the Court will be advised that its approval of the Arrangement will be relied upon as a determination that the Court has satisfied itself as to the procedural and substantive fairness of the terms and conditions of the Arrangement to all Persons who are entitled to receive Consideration Shares pursuant to the Arrangement;
	(e)	Yerbaé will ensure that each Yerbaé Shareholder and any other Person entitled to receive Consideration Shares, pursuant to the Arrangement, will be given adequate and appropriate notice advising them of their right to attend the hearing of the Court to approve the procedural and substantive fairness of the terms and conditions of the Arrangement and providing them with sufficient information necessary for them to exercise that right;

 

 

	(f)	the Final Order will expressly state that (i) the terms and conditions of the issuance and exchange of the Consideration Shares is fair, both procedurally and substantively, to those to whom such shares will be issued, (ii) the terms and conditions of such issuance and exchange is approved by the Court, and (iii) the Arrangement is approved by the Court as being procedurally and substantively fair to all Persons entitled to receive Consideration Shares, pursuant to the Arrangement;
	(g)	the Interim Order will specify that each Person entitled to receive Consideration Shares, pursuant to the Arrangement, will have the right to appear before the Court at the hearing of the Court to give approval of the Arrangement;
	(h)	the Court will hold a hearing before approving the fairness of the terms and conditions of the Arrangement and issuing the Final Order;

 

(i)

all Consideration Shares, issued to Persons in the United States, will be registered or qualified under the securities laws of each state, territory or possession of the United States and the District of Columbia in which any Person receiving such securities is located, unless an exemption from such state securities law registration or qualification requirements is available. In addition, the issuer of any Consideration Shares, issued to a Person in any state, territory or possession of the United States and the District of Columbia, shall comply with any issuer broker-dealer registration requirement applicable in that state, territory or possession or the District of Columbia, unless an exemption from such issuer broker-dealer registration requirement is available; and

 

(j)

With respect to the resale of Consideration Shares issued to Yerbaé shareholders that are Affiliates of Safety Shot immediately following the Effective Date, Safety Shot shall file, as applicable, a registration statement on Form S-3 or such other appropriate form with the SEC within sixty (60) days following the Effective Date in order to register under the U.S. Securities Act the resale of such Consideration Shares. With respect to the Yerbaé Options being assumed and exchanged by Safety Shot and the Safety Shot Shares issuable upon exercise of the Yerbaé Options being assumed and exchanged by Safety Shot, Safety Shot shall use its commercially reasonable efforts to file with the SEC and cause a registration statement on Form S-8 or such other appropriate form to be declared effective as soon as practicable following the Effective Date.

 

2.12	Effective Date

 

The Arrangement shall become effective at the Effective Time on the Effective Date. The Parties shall use their commercially reasonable efforts to cause the Effective Date to occur on or about June 3, 2025 or as soon thereafter as reasonably practicable and, in any event, by the Outside Date.

 

2.13

Closing

 

The closing of the Arrangement will take place at the offices of legal counsel to Safety Shot, or at such other location as may be agreed upon by the Parties.

 

 

2.14	Payment and Allocation of Consideration Shares

 

Safety Shot will, following receipt by Yerbaé of the Final Order and prior to the Effective Time, deposit in escrow with the Depositary (the terms and conditions of such escrow to be satisfactory to the Parties, acting reasonably) the Consideration Shares evidencing Safety Shot’s obligations with respect to the Consideration. In no event shall Safety Shot be required to issue a fractional Consideration Share. Where the aggregate number of Consideration Shares under the Arrangement would result in a fraction of a Consideration Share being issuable, the number of Consideration Shares to be issued shall be rounded to the nearest whole Consideration Share.

 

2.15	Incentive Plan Matters

 

The Yerbaé Board shall exercise its discretion under the Incentive Plan (to the extent permitted thereunder) to accelerate the vesting of all Yerbaé Options, Yerbaé PSUs, and Yerbaé RSUs issued thereunder effective on or prior to the Effective Time. Yerbaé shall take all reasonable steps as may be necessary or desirable to facilitate the exchange of all outstanding Yerbaé Options in accordance with the terms of the Plan of Arrangement and the Incentive Plan, such that Safety Shot will assume the Yerbaé Options on the same terms granted to the Yerbaé Optionholders, as adjusted to account for the Exchange Ratio. The Parties acknowledge that the Yerbaé Options, Yerbaé PSUs and Yerbaé RSUs shall be dealt with in the manner set forth in the Plan of Arrangement.

 

2.16	Convertible Securities

 

The Parties acknowledge that Safety Shot will assume all obligations of Yerbaé in connection with all outstanding Yerbaé Warrants and the Convertible Debentures.

 

2.17	Indemnities and Directors’ and Officers’ Insurance

 

(a)

Safety Shot agrees that: (i) after the Effective Time, Safety Shot, Yerbaé and any successor to Yerbaé will not take any action to terminate or materially adversely affect indemnities provided or available to or in favour of past and present officers and directors of Yerbaé and the Yerbaé Subsidiaries pursuant to the provisions of the articles, by-laws or other constating documents of Yerbaé or any Yerbaé Subsidiary, applicable corporate legislation and any written indemnity agreements which have been entered into between Yerbaé and past and present officers and directors of Yerbaé and the Yerbaé Subsidiaries effective on or prior to the date hereof (the forms of which were provided in the Yerbaé Information); and (ii) immediately prior to the Effective Time, Safety Shot will make arrangements satisfactory to the Yerbaé Board, acting reasonably, to secure the obligations under such written indemnity agreements.

 

(b)

Prior to the Effective Date, Yerbaé will, at the sole expense of Safety Shot, secure “run-off” directors’ and officers’ liability insurance for the current and former directors and officers of Yerbaé and the Yerbaé Subsidiaries, covering claims made or reported within six (6) years after the Effective Date, which has a scope and coverage substantially similar in scope and coverage to that provided pursuant to Yerbaé’s current directors and officers insurance policy, including coverage for any claims arising from completion of the Arrangement and related transactions, and Safety Shot will not take any action, or cause Yerbaé to take any action, to adversely affect or terminate such directors’ and officers’ liability insurance; provided that the cost of such policies shall not exceed 300% of the current annual premium for the Yerbaé directors and officers insurance.

 

 

2.18	Withholding Taxes

 

Safety Shot, Yerbaé, and the Depositary, as applicable, shall be entitled to deduct and withhold, or direct Safety Shot, Yerbaé, or the Depositary to deduct and withhold on their behalf, from any consideration otherwise payable or otherwise deliverable to any Yerbaé Shareholders under the Plan of Arrangement such amounts as Safety Shot, Yerbaé, or the Depositary, as applicable, are required or reasonably believe to be required to deduct and withhold from such consideration under any provision of any Applicable Law in respect of Taxes. Any such amounts will be deducted, withheld and remitted from the consideration payable pursuant to the Plan of Arrangement and shall be treated for all purposes under this Agreement as having been paid to Yerbaé Shareholders in respect of which such deduction, withholding and remittance was made.

 

Article 3
COVENANTS

 

3.1	Covenants of Yerbaé Regarding the Conduct of Business

 

Yerbaé covenants and agrees that, during the period from the date of this Agreement until the earlier of the Effective Time and the time that this Agreement is terminated in accordance with its terms, except as required or permitted by this Agreement, as required by Applicable Law, Governmental Entity or existing Contract or unless Safety Shot otherwise agrees in writing (such agreement not to be unreasonably withheld, conditioned or delayed):

 

(a)

other than as set out in Schedule 3.1(a) of the Yerbaé Disclosure Letter, Yerbaé shall and shall cause each of the Yerbaé Subsidiaries to: (i) in all material respects conduct the business of Yerbaé and the Yerbaé Subsidiaries (taken as a whole) only in, and not take any action except in, the ordinary course of business consistent with past practice; and (ii) use commercially reasonable efforts to preserve intact the present business organization, goodwill, business relationships and assets of Yerbaé and the Yerbaé Subsidiaries (taken as a whole) and to keep available the services of their officers and Employees as a group;

 

(b)

without limiting the generality of Section 3.1(a), Yerbaé shall not, and shall cause each of the Yerbaé Subsidiaries not to, during the period from the date of this Agreement until the earlier of the Effective Time and the time that this Agreement is terminated in accordance with its terms, directly or indirectly:

 

(i)

amend or propose to amend its articles, notice of articles or other constating documents, including partnership agreements of the Yerbaé Subsidiaries;

 

(ii)

declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any Yerbaé Shares;

 

(iii)

other than as set out in Schedule 3.1(b) of the Yerbaé Disclosure Letter, issue, sell, grant, award, pledge, dispose of or otherwise encumber or agree to issue, sell, grant, award, pledge, dispose of or otherwise encumber any Yerbaé Shares or other equity or voting interests or any options, stock appreciation rights, warrants, calls, conversion or exchange privileges or rights of any kind to acquire (whether on exchange, exercise, conversion or otherwise) any Yerbaé Shares or other equity or voting interests or other securities or any shares of the Yerbaé Subsidiaries;

 

 

(iv)

split, combine or reclassify any outstanding Yerbaé Shares or the securities of any of the Yerbaé Subsidiaries;

 

(v)

redeem, purchase or otherwise acquire or offer to purchase or otherwise acquire Yerbaé Shares or other securities of Yerbaé or any securities of the Yerbaé Subsidiaries;

 

(vi)

amend the terms of any securities of Yerbaé or any of the Yerbaé Subsidiaries;

 

(vii)

adopt or propose a plan of liquidation or resolutions providing for the liquidation or dissolution of Yerbaé or any of the Yerbaé Subsidiaries;

 

(viii)

reorganize, amalgamate or merge Yerbaé or the Yerbaé Subsidiaries with any other Person;

 

(ix)

sell, pledge, assign, lease, dispose of, mortgage, licence, encumber or otherwise transfer or agree to sell, pledge, assign, lease, dispose of, mortgage, licence, encumber or otherwise transfer or suffer to exist any encumbrance, Lien, or other security agreement or similar arrangement in regards to any assets of Yerbaé or any of the Yerbaé Subsidiaries or any interest in any assets of Yerbaé or any of the Yerbaé Subsidiaries, except in the ordinary course of business consistent with past practice and subject to a maximum (in terms of value of such assets or interests therein) of $100,000 (whether individually or in the aggregate);

 

(x)

acquire (by merger, consolidation, acquisition of stock or assets or otherwise) or agree to acquire, directly or indirectly, in one transaction or in a series of related transactions, any Person, or make any investment or agree to make any investment, directly or indirectly, in one transaction or in a series of related transactions, either by purchase of shares or securities, contributions of capital (other than to wholly-owned Subsidiaries), property transfer or purchase of any property or assets of any other Person, other than pursuant to acquisitions in the ordinary course of business consistent with past practice that do not have a purchase or subscription price greater than $100,000 in the aggregate (including any assumed indebtedness);

 

(xi)

incur any capital expenditures or enter into any agreement obligating Yerbaé or the Yerbaé Subsidiaries to provide for future capital expenditures other than budgeted capital expenditures that (A) have been approved by the Yerbaé Board prior to the date of this Agreement; or (B) do not exceed $100,000 in the aggregate;

 

(xii)

make any changes in financial accounting methods, principles, policies or practices, except as required, in each case, by U.S. GAAP or by Applicable Law;

 

(xiii)

reduce the stated capital of the shares of Yerbaé or any of the Yerbaé Subsidiaries;

 

 

(xiv)

other than in respect of pre-existing indebtedness of any Person acquired by Yerbaé in acquisitions permitted by Section 3.1(b)(x) or capital expenditures permitted by Section 3.1(b)(xi), incur, create, assume or otherwise become liable for any indebtedness for borrowed money or any other material liability or obligation or issue any debt securities, or guarantee, endorse or otherwise become responsible for, the obligations of any other Person or make any loans or advances;

 

(xv)

pay, discharge, settle, satisfy, compromise, waive, assign or release any claims, rights, Liabilities or obligations (including any litigation, proceeding or investigation by any Governmental Entity) other than:

 

(A)

the payment, discharge or satisfaction, in the ordinary course of business, of Liabilities reflected or reserved against in Yerbaé’s financial statements (or in those of any of the Yerbaé Subsidiaries) or incurred in the ordinary course of business; or

 

(B)

payment of any fees related to the Arrangement;

 

(xvi)

amend or modify in any material respect or terminate or waive any material right under any Yerbaé Material Contract or enter into any contract or agreement that would be an Yerbaé Material Contract if in effect on the date hereof;

 

(xvii)

enter into or terminate any interest rate, currency, equity or commodity swaps, hedges, derivatives, forward sales contracts or other financial instruments or like transaction, other than in the ordinary course of business consistent with past practice;

 

(xviii)

materially change the business carried on by Yerbaé and the Yerbaé Subsidiaries, as a whole;

 

(xix)

other than as set out in Schedule 3.1(b) of the Yerbaé Disclosure Letter, (A) grant, accelerate, or increase any severance, change of control or termination pay to (or amend any existing arrangement relating to the foregoing with) any director, officer or Employee of Yerbaé or any of the Yerbaé Subsidiaries; (B) grant, accelerate, or increase any payment, award (equity or otherwise) or other benefits payable to, or for the benefit of, any director, officer or Employee of Yerbaé or any of the Yerbaé Subsidiaries; (C) increase the coverage, contributions, funding requirements or benefits available under any Employee Plan or create any new plan which would be considered to be an Employee Plan once created; (D) increase compensation (in any form), bonus levels or other benefits payable to any director, officer, Employee or consultant of Yerbaé or any of the Yerbaé Subsidiaries or grant any general increase in the rate of wages, salaries, bonuses or other remuneration, except in the ordinary course of business consistent with past practice; (E) make any material determination under any Employee Plan that is not in the ordinary course of business consistent with past practice; or (F) take or propose any action to effect any of the foregoing;

 

 

(xx)

other than as set out in Schedule 3.1(b) of the Yerbaé Disclosure Letter, make any bonus or profit sharing distribution or similar payment of any kind;

 

(xxi)

terminate the employment of any officer or senior executive holding a title of Vice President or above, except for cause;

 

(xxii)

take any action or fail to take any action which action or failure to act would reasonably be expected to cause any Governmental Entities to institute proceedings for the suspension of, or the revocation or limitation of rights under, any material authorizations necessary to conduct its businesses as now conducted, and use its commercially reasonable efforts to maintain such authorizations; or

 

(xxiii)

other than as contemplated by this Agreement, take any action or series of actions that cause or would reasonably be expected to cause the Yerbaé Shares to cease being traded on the TSXV;

 

(c)

Yerbaé shall use all commercially reasonable efforts to cause its current insurance (or re-insurance) policies maintained by Yerbaé or any of the Yerbaé Subsidiaries not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance and reinsurance companies of nationally recognized standing providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect; provided that neither Yerbaé nor any of the Yerbaé Subsidiaries shall obtain or renew any insurance (or re-insurance) policy for a term exceeding 12 months;

 

(d)

Yerbaé and each of the Yerbaé Subsidiaries shall:

 

(i)

not take any action inconsistent with past practice relating to the filing of any Tax Return or the withholding, collecting, remitting and payment of any Tax, except as may be required by Applicable Law;

 

(ii)

not amend any Tax Return or change any of its methods of reporting income, deductions or accounting for income Tax purposes from those employed in the preparation of its income tax return for the taxation year ended December 31, 2023, except as may be required by Applicable Law;

 

(iii)

not make or revoke any material election relating to Taxes, other than any election that has yet to be made in respect of any event or circumstance occurring prior to the date of the Agreement;

 

(iv)

not enter into any Tax sharing, Tax allocation, Tax related waiver or Tax indemnification agreement;

 

(v)

not settle (or offer to settle) any Tax claim, audit, proceeding or re-assessment that would reasonably be expected to be material to Yerbaé;

 

(vi)

keep Safety Shot reasonably informed, on a current basis, of any events, discussions, notices or changes with respect to any Tax investigation (other than ordinary course communications which could not reasonably be expected to be material to Yerbaé and the Yerbaé Subsidiaries, taken as a whole);

 

 

(vii)

not, and will cause the Yerbaé Subsidiaries not to, make any “investments” (as defined for purposes of Section 212.3 of the Tax Act) in any corporation that is a “foreign affiliate” (as defined in the Tax Act) of Yerbaé and/or any of the Yerbaé Subsidiaries; and

 

(viii)

not undertake or participate in any transaction or series of transactions (other than the implementation and fulfillment of the transactions contemplated in this Agreement and the Plan of Arrangement) that could have the effect of materially reducing or eliminating the amount of the tax cost “bump” pursuant to paragraphs 88(1)(c) and (d) of the Tax Act otherwise available to Safety Shot or its successors or assigns in respect of non-depreciable capital property owned by Yerbaé or any Yerbaé Subsidiary on the Effective Date; and

 

(e)

Yerbaé shall not authorize, agree to, propose, enter into or modify any contract, agreement, commitment or arrangement, to do any of the matters prohibited by the other subsections of this Section 3.1 or resolve to do so.

 

3.2	Covenants of Safety Shot Regarding the Conduct of Business

 

Safety Shot covenants and agrees that during the period from the date of this Agreement until the earlier of the Effective Time and the time that this Agreement is terminated in accordance with its terms, except as required or permitted by this Agreement, as required by Applicable Law, Governmental Entity or existing Contract or unless Yerbaé shall otherwise agree in writing (such agreement not to be unreasonably withheld, conditioned or delayed):

 

(a)

other than as set out in Schedule 3.2(a) of the Safety Shot Disclosure Letter, Safety Shot shall and shall cause each of the Safety Shot Subsidiaries to: (i) in all material respects conduct the business of Safety Shot and the Safety Shot Subsidiaries (taken as a whole) only in, and not take any action except in, the ordinary course of business consistent with past practice; and (ii) use commercially reasonable efforts to preserve intact the present business organization, goodwill, business relationships and assets of Safety Shot and the Safety Shot Subsidiaries (taken as a whole) and to keep available the services of their officers and Employees as a group;

 

(b)

without limiting the generality of Section 3.2(a), Safety Shot shall not, directly or indirectly:

 

(i)

amend or propose to amend its articles, by-laws or other constating documents, other than to effect a split or consolidation of the issued and outstanding Safety Shot Shares;

 

(ii)

other than as set out in Schedule 3.2(b)(ii) of the Safety Shot Disclosure Letter, declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any Safety Shot Shares;

 

(iii)

other than as set out in Schedule 3.2(b)(iii) of the Safety Shot Disclosure Letter, issue, sell, grant, award or pledge or agree to issue, sell, grant, award or pledge any Safety Shot Shares or securities convertible into or exchangeable for Safety Shot Shares, other than in connection with the Arrangement, Safety Shot Shares issuable pursuant to the terms of outstanding options and other convertible securities of Safety Shot, securities granted or issued pursuant to Safety Shot’s equity compensation plans in the ordinary course of business and consistent with past practice and Safety Shot Shares issued as part of the purchase price in connection with the acquisition of shares or assets of another business by Safety Shot, directly or indirectly, by merger or otherwise;

 

 

(iv)

redeem, purchase or otherwise acquire or offer to purchase or otherwise acquire Safety Shot Shares or other securities of Safety Shot, other than ordinary course purchases of Safety Shot Shares made in the public markets and at then prevailing market price;

 

(v)

adopt or propose a plan of liquidation or resolutions providing for the liquidation or dissolution of Safety Shot;

 

(vi)

merge Safety Shot with any other Person that is not a wholly-owned Subsidiary of Safety Shot;

 

(vii)

sell, pledge, lease, dispose of, mortgage, licence, encumber or otherwise transfer or agree to sell, pledge, lease, dispose of, mortgage, licence, encumber or otherwise transfer all or substantially all of the assets of Safety Shot and the Safety Shot Subsidiaries (on a consolidated basis);

 

(viii)

reduce the stated capital of the shares of Safety Shot;

 

(ix)

materially change the business carried on by Safety Shot and the Safety Shot Subsidiaries, taken as a whole;

 

(x)

take any action or fail to take any action which action or failure to act would reasonably be expected to cause any Governmental Entities to institute proceedings for the suspension of, or the revocation or limitation of rights under, any material authorizations necessary to conduct its businesses as now conducted, and use its commercially reasonable efforts to maintain such authorizations; or

 

(xi)

take any action or series of actions that cause or would reasonably be expected to cause the Safety Shot Shares to cease being traded on the NASDAQ; and

 

(c)

Safety Shot shall not authorize, agree to, propose, enter into or modify any contract, agreement, commitment or arrangement, to do any of the matters prohibited by the other subsections of this Section 3.2 or resolve to do so.

 

3.3	Covenants of Safety Shot Regarding Blue-Sky Laws

 

Safety Shot shall use its commercially reasonable efforts to ensure that the Consideration Shares to be issued pursuant to the Arrangement shall, at the Effective Time, either be registered or qualified under all applicable U.S. Securities Laws, or exempt from such registration and qualification requirements.

 

 

3.4	Mutual Covenants Regarding the Arrangement

 

Each of the Parties covenants and agrees that, subject to the terms and conditions of this Agreement, during that period from the date of this Agreement until the earlier of the Effective Time and the time that this Agreement is terminated in accordance with its terms:

 

(a)

it shall use its commercially reasonable efforts to, and shall cause its Subsidiaries to use all commercially reasonable efforts to, satisfy (or cause the satisfaction of) the conditions precedent to its obligations hereunder as set forth in Article 6 to the extent the same is within its control and to take, or cause to be taken, all other action and to do, or cause to be done, all other things necessary, proper or advisable under all Applicable Law to complete the Arrangement, including using its commercially reasonable efforts to promptly: (i) obtain all necessary and material waivers, consents and approvals required to be obtained by it from parties to any Contracts; (ii) obtain all necessary and material Authorizations as are required to be obtained by it or any of its Subsidiaries under Applicable Law; (iii) fulfill all conditions and satisfy all provisions of this Agreement and the Arrangement; and (iv) co-operate with the other Party in connection with the performance by it and its Subsidiaries of their obligations hereunder;

 

(b)

it shall not take any action, shall refrain from taking any action, and shall not permit any action to be taken or not taken, which is inconsistent with this Agreement or which would reasonably be expected to, individually or in the aggregate, materially impede or materially delay the consummation of the Arrangement or the other transactions contemplated herein;

 

(c)

it shall use commercially reasonable efforts to: (i) defend all lawsuits or other legal, regulatory or other proceedings against itself or any of its Subsidiaries challenging or affecting this Agreement or the consummation of the transactions contemplated hereby; (ii) appeal, overturn or have lifted or rescinded any injunction or restraining order or other order, including orders, relating to itself or any of its Subsidiaries which may materially adversely affect the ability of the Parties to consummate the Arrangement; and (iii) appeal or overturn or otherwise have lifted or rendered non-applicable in respect of the Arrangement, any Applicable Law that makes consummation of the Arrangement illegal or otherwise prohibits or enjoins Yerbaé or Safety Shot from consummating the Arrangement; and

 

(d)

it shall carry out the terms of the Interim Order and Final Order applicable to it and use commercially reasonable efforts to comply promptly with all requirements which Applicable Law may impose on it or its Subsidiaries or Affiliates with respect to the transactions contemplated hereby.

 

Each Party will use its commercially reasonable efforts to cooperate with the other in connection with the performance by the other of their obligations under this Section 3.4 and this Agreement including continuing to provide reasonable access to information and to maintain ongoing communications as between officers of each Party, subject in all cases to the Confidentiality Agreement.

 

 

3.5	Covenants of Safety Shot

 

Subject to the other provisions of this Agreement, Safety Shot covenants and agrees that, from the date of this Agreement until the Effective Date or termination of this Agreement, except with the prior written consent of Yerbaé (such consent not to be unreasonably withheld, conditioned or delayed), and except as otherwise expressly permitted or specifically contemplated by this Agreement (including the Plan of Arrangement) or required by Applicable Law, it will:

 

(a)

provide Yerbaé and its legal counsel with reasonable opportunity to review and comment upon drafts of all of the Safety Shot Circular Disclosure and will give reasonable consideration to the comments of Yerbaé and its counsel with respect to any information to be included in such material and any other matters contained therein and ensure that the Safety Shot Circular Disclosure provided by it expressly for inclusion in the Yerbaé Circular does not, at the time of the mailing of the Yerbaé Circular, contain any misrepresentation;

 

(b)

use its commercially reasonable efforts to take all such steps as are necessary to set the record date for the Safety Shot Meeting as a date not later than April 20, 2025;

 

(c)

subject to the terms of this Agreement, use their commercially reasonable efforts to take all such steps as are necessary to convene and hold the Safety Shot Meeting in accordance with Applicable Law not later than May 20, 2025 for the purpose of considering the Safety Shot Stockholder Matters and, unless this Agreement will have been terminated in accordance with Section 8.1(a), Safety Shot will not cancel the Safety Shot Meeting or fail to put the Safety Shot Stockholder Matters before the Safety Shot Stockholders for their consideration without Yerbaé’s prior written consent, other than as may be required under Applicable Law; and Safety Shot will not propose to adjourn or postpone the Safety Shot Meeting without the prior consent of Yerbaé except as required by Applicable Law or by a Governmental Entity and except as permitted under Sections 2.5(d) or 6.4(b); and Safety Shot shall, if requested by Yerbaé (acting reasonably), adjourn the Safety Shot Meeting one or more times for the purposes of obtaining any required quorum or attempting to obtain the requisite approval of the Safety Shot Stockholder Matters;

 

(d)

subject to compliance by Yerbaé with its obligations set forth in Section 3.6(i), as soon as practicable after the execution and delivery of this Agreement, prepare the Safety Shot Circular together with any other documents required by Applicable Law in connection with the Safety Shot Meeting required to be filed or prepared by Safety Shot and, subject to Section 3.6(i), as soon as practicable after the execution and delivery of this Agreement, Safety Shot shall, unless otherwise agreed by Yerbaé, cause the Safety Shot Circular and other documentation required in connection with the Safety Shot Meeting to be sent to the Safety Shot Stockholders and be filed as required by Applicable Law;

 

(e)

provide Yerbaé and its legal counsel a reasonable opportunity to review and comment on drafts of the Safety Shot Circular and other documents to be sent to the Safety Shot Stockholders in connection with the Safety Shot Meeting, and will give reasonable consideration to any comments made by Yerbaé and their counsel, provided that all information included in the Safety Shot Circular and any other documents to be sent to the Safety Shot Stockholders in connection with the Safety Shot Meeting relating to Yerbaé will be in form and content satisfactory to Yerbaé, acting reasonably;

 

 

(f)

ensure that the Safety Shot Circular (other than any Yerbaé Circular Disclosure included in the Safety Shot Circular that was provided to Safety Shot by, or approved by, Yerbaé expressly for inclusion in the Safety Shot Circular) complies with Applicable Law and, without limiting the generality of the foregoing, that the Safety Shot Circular will not contain a misrepresentation and provides the Safety Shot Stockholders with information in sufficient detail to permit them to form a reasoned judgment concerning the Safety Shot Stockholder Matters and will include: (i) to the extent required by Applicable Law, a summary and copy of the Safety Shot Fairness Opinion; (ii) a statement that the Safety Shot Board has received the Safety Shot Fairness Opinion and has, after receiving legal and financial advice, unanimously recommended to Safety Shot Stockholders that they vote in favour of the Safety Shot Stockholder Matters; (iii) a statement that each director and officer of Safety Shot intends to vote all of such Person’s Safety Shot Shares (including any Safety Shot Shares issued upon exercise or exchange of any securities convertible or exercisable into Safety Shot Shares) in favour of the Safety Shot Stockholder Matters; and (iv) any other disclosure required under Applicable Securities Laws that is required to be included in the Safety Shot Circular;

 

(g)

ensure that all Safety Shot Circular Disclosure included in the Yerbaé Circular that was provided to Yerbaé by or approved by Safety Shot or Safety Shot complies with Applicable Law;

 

(h)

indemnify and save harmless Yerbaé and its directors and officers from and against any and all Liabilities, claims, demands, losses, costs, Damages and expenses (excluding any loss of profits or consequential Damages) to which Yerbaé or its directors and officers may be subject or which Yerbaé or its directors or officers may suffer, whether under the provisions of any statute or otherwise, in any way caused by, or arising, directly or indirectly, from or in consequence of:

 

(i)

any misrepresentation or alleged misrepresentation contained in: (A) the Safety Shot Circular (other than in respect of Yerbaé Circular Disclosure); (B) in any Safety Shot Circular Disclosure included in the Yerbaé Circular that was provided to Yerbaé by, or approved by, Safety Shot expressly for inclusion in the Yerbaé Circular; or (C) any material filed by Safety Shot in connection with the transactions contemplated by this Agreement in compliance or intended compliance with any Applicable Law;

 

(ii)

any order made or any inquiry, investigation or proceeding by any securities commission or other competent authority based upon any Misrepresentation or alleged Misrepresentation contained in: (A) the Safety Shot Circular (other than in respect of Yerbaé Circular Disclosure); (B) the Safety Shot Circular Disclosure included in the Yerbaé Circular that was provided to Yerbaé by, or approved by, Safety Shot expressly for inclusion in the Yerbaé Circular; or (C) in any material filed by or on behalf of Safety Shot in compliance or intended compliance with Applicable Securities Laws; and

 

(iii)

Safety Shot not complying with any requirement of Applicable Law in connection with the transactions contemplated in this Agreement,

 

except that Safety Shot will not be liable in any such case to the extent that any such Liabilities, claims, demands, losses, costs, Damages and expenses arise out of:

 

 

(iv)

any information contained in the Yerbaé Circular other than the Safety Shot Circular Disclosure included in the Yerbaé Circular that was provided to Yerbaé by, or approved by, Safety Shot expressly for inclusion in the Yerbaé Circular;

 

(v)

any Yerbaé Circular Disclosure included in the Safety Shot Circular that was provided to Safety Shot by, or approved by, Yerbaé expressly for inclusion in the Safety Shot Circular; or

 

(vi)

the negligence of Yerbaé or the non-compliance by Yerbaé with any requirement of Applicable Law in connection with the transactions contemplated by this Agreement;

 

(i)

provide notice to Yerbaé of the Safety Shot Meeting and allow Yerbaé’s Representatives to attend the Safety Shot Meeting;

 

(j)

except for proxies and other non-substantive communications with Safety Shot Stockholders and communications that Safety Shot is required to keep confidential pursuant to Applicable Law, furnish promptly to Yerbaé or their counsel: (i) a copy of each notice, report, schedule or other document delivered, filed or received by Safety Shot from securityholders or Governmental Entities in connection with the Arrangement or the Safety Shot Meeting; (ii) any filings under Applicable Law in connection with the transactions contemplated hereby; and (iii) any dealings with stock exchanges, regulatory agencies or other Governmental Entities in connection with the transactions contemplated hereby;

 

(k)

solicit proxies to be voted at the Safety Shot Meeting in favour of the Safety Shot Stockholder Matters (the “Safety Shot Recommendation”); provided, that, notwithstanding anything to the contrary set forth in this Agreement, prior to the time, but not after, the Safety Shot Stockholder Approval is obtained (i) the Safety Shot Board may withhold, withdraw, qualify or modify the Safety Shot Recommendation if (A) a development or change in circumstances regarding Yerbaé or its business occurs or arises after the date of this Agreement that was not known by nor was reasonably foreseeable to the Safety Shot Board as of the date of this Agreement and (B) the Safety Shot Board determines in good faith, after consultation with outside counsel and a financial advisor of nationally recognized reputation, that the failure to take such action would be inconsistent with its fiduciary duties under Applicable Law (a “Safety Shot Change in Recommendation”, it being understood that a customary “stop, look and listen” disclosure in compliance with Rule 14d-9(f) of the U.S. Exchange Act shall not, in and of itself, constitute a Safety Shot Change in Recommendation); provided, that no Safety Shot Change in Recommendation may be made until after at least five (5) Business Days following Yerbaé’s receipt of written notice from Safety Shot advising that the Safety Shot Board intends to take such action and the basis therefor. After providing such notice and prior to effecting such Safety Shot Change in Recommendation (x) Safety Shot shall, during such five (5) Business Day period, negotiate in good faith with Yerbaé and its Representatives, to the extent Yerbaé wishes to negotiate, with respect to any revisions to the terms of the transaction contemplated by this Agreement proposed by Yerbaé, and (y) in determining whether it may still under the terms of this Agreement make a Change in Recommendation, the Safety Shot Board shall take into account any changes to the terms of this Agreement proposed by Yerbaé and any other information provided by Yerbaé in response to such notice during such five (5) Business Day period;

 

 

(l)

promptly advise Yerbaé of the number or amount of Safety Shot Shares for which Safety Shot receives notices of dissent or written objections to the Safety Shot Stockholder Matters and provide Yerbaé with copies of such notices and written objections and subject to Applicable Law;

 

(m)

promptly inform Yerbaé of any requests or comments made by Securities Authorities in connection with the Safety Shot Circular and any other required filings under Applicable Law; and each of the Parties will cooperate with the other and will diligently do all such acts and things as may be necessary in the manner contemplated in the context of the preparation of the Safety Shot Circular and any other required filings under Applicable Law and use its commercially reasonable efforts to resolve all requests or comments made by Securities Authorities with respect to the Safety Shot Circular and any other required filings under Applicable Law as promptly as practicable after receipt thereof;

 

(n)

advise Yerbaé, as Yerbaé may request, and on a daily basis on each of the last five (5) Business Days prior to the proxy cut-off date for the Safety Shot Meeting, as to the aggregate tally of the proxies received by Safety Shot in respect of the Safety Shot Stockholder Matters and any other matters to be considered at the Safety Shot Meeting, and provide Yerbaé with copies of any materials, or grant access to information regarding the Safety Shot Meeting, generated by any proxy solicitation firm;

 

(o)

to the extent permitted by Applicable Law and confidentiality obligations, keep Yerbaé reasonably informed as to discussions between Safety Shot and any Person holding not less than 10% of the voting rights attached to all of the Safety Shot Shares with respect to the Safety Shot Stockholder Matters;

 

(p)

take or cause to be taken all corporate action to allot and reserve for issuance the Consideration Shares to be issued in exchange for Yerbaé Shares;

 

(q)

take or cause to be taken all corporate action to maintain the listing of the Safety Shot Shares on the NASDAQ as and when contemplated hereunder;

 

(r)

take or cause to be taken all corporate action, as reasonably requested by Yerbaé or its counsel, to assist Yerbaé in diligently pursuing the application to the Court for the Final Order; and

 

(s)

make all necessary filings and applications under Applicable Law, including Applicable Securities Laws, required to be made on the part of Safety Shot in connection with the transactions contemplated herein, including, without limitation, for all Regulatory Approvals, and shall take all commercially reasonable action necessary to be in compliance with such Applicable Law.

 

3.6	Covenants of Yerbaé Regarding the Arrangement

 

Subject to the other provisions of this Agreement, Yerbaé covenants and agrees that, from the date of this Agreement until the Effective Date or termination of this Agreement, except with the prior written consent of Safety Shot (such consent not to be unreasonably withheld, conditioned or delayed), and except as otherwise expressly permitted or specifically contemplated by this Agreement (including the Plan of Arrangement) or required by Applicable Law, it will:

 

(a)

provide Safety Shot and its legal counsel with reasonable opportunity to review and comment upon drafts of all materials to be filed with the Court in connection with the Arrangement, including by providing on a timely basis a description of any information required to be supplied by Safety Shot for inclusion in such material, prior to the service and filing of such material, and will give reasonable consideration to the comments of Safety Shot and its counsel with respect to any information to be included in such material and any other matters contained therein;

 

 

(b)

ensure that all material filed with the Court in connection with the Arrangement is consistent in all material respects with the terms of this Agreement and the Plan of Arrangement;

 

(c)

not object to legal counsel to Safety Shot making such submissions on the application for the Interim Order and the application for the Final Order as such counsel considers appropriate (acting reasonably), provided such submissions are in all material respects consistent with this Agreement and the Plan of Arrangement;

 

(d)

use its commercially reasonable efforts to take all such steps as are necessary to set the record date for the Yerbaé Meeting as a date not later than April 20, 2025;

 

(e)

subject to the terms of this Agreement and in accordance and compliance with the Interim Order, use its commercially reasonable efforts to take all such steps as are necessary to convene and hold the Yerbaé Meeting in accordance with the Interim Order and Applicable Law not later than May 20, 2025 for the purpose of considering the Arrangement Resolution and, unless this Agreement will have been terminated in accordance with Section 8.1(a), Yerbaé will not cancel the Yerbaé Meeting or fail to put the Arrangement Resolution before the Yerbaé Shareholders for their consideration without Safety Shot’s prior written consent, other than as may be required under the Interim Order or Applicable Law and Yerbaé will not propose to adjourn or postpone the Yerbaé Meeting without the prior consent of Safety Shot except as required by Applicable Law or by a Governmental Entity and except as required under Sections 2.6(d) or 6.4(b); and Yerbaé shall, if requested by Safety Shot (acting reasonably), adjourn the Yerbaé Meeting one or more times for the purposes of obtaining any required quorum or attempting to obtain the requisite approval of the Arrangement Resolution;

 

(f)

subject to compliance by Safety Shot with its obligations set forth in Section 3.5(g) as soon as practicable after the execution and delivery of this Agreement, prepare the Yerbaé Circular together with any other documents required by Applicable Law in connection with the Yerbaé Meeting required to be filed or prepared by Yerbaé and, subject to Section 3.5(g), as soon as practicable after the execution and delivery of this Agreement, Yerbaé shall, unless otherwise agreed by Safety Shot, cause the Yerbaé Circular and other documentation required in connection with the Yerbaé Meeting to be sent to the Yerbaé Shareholders and be filed as required by the Interim Order and Applicable Law;

 

(g)

provide Safety Shot and its legal counsel a reasonable opportunity to review and comment on drafts of the Yerbaé Circular and other documents to be sent to the Yerbaé Shareholders in connection with the Yerbaé Meeting or the Arrangement, and will give reasonable consideration to any comments made by Safety Shot and its counsel, provided that all information included in the Yerbaé Circular and any other documents to be sent to the Yerbaé Shareholders in connection with the Yerbaé Meeting or the Arrangement relating to Safety Shot will be in form and content satisfactory to Safety Shot, acting reasonably;

 

 

(h)

ensure that the Yerbaé Circular (other than any Safety Shot Circular Disclosure included in the Yerbaé Circular that was provided to Yerbaé by, or approved by, Safety Shot expressly for inclusion in the Yerbaé Circular) complies with Applicable Law and, without limiting the generality of the foregoing, that the Yerbaé Circular will not contain a misrepresentation and provides the Yerbaé Shareholders with information in sufficient detail to permit them to form a reasoned judgment concerning the matters before them and will include: (i) to the extent required by Applicable Law, a summary and copy of the Yerbaé Fairness Opinion, (ii) a statement that the Yerbaé Board has received the Yerbaé Fairness Opinion and has, after receiving legal and financial advice, unanimously determined that the Arrangement is in the best interests of Yerbaé, is fair to the Yerbaé Shareholders, and the unanimous recommendation that the Yerbaé Shareholders vote in favour of the Arrangement Resolution; (iii) a statement that each director and officer of Yerbaé intends to vote all of such Person’s Yerbaé Shares (including any Yerbaé Shares issued upon exercise or exchange of any Yerbaé Options, Yerbaé PSUs, Yerbaé RSUs or Yerbaé Warrants) in favour of the Arrangement Resolution; and (iv) any other disclosure required under Applicable Securities Laws that is required to be included in the Yerbaé Circular;

 

(i)

ensure that all Yerbaé Circular Disclosure included in the Safety Shot Circular that was provided to Safety Shot by or approved by Yerbaé complies with Applicable Law;

 

(j)

indemnify and save harmless Safety Shot and its directors and officers from and against any and all Liabilities, claims, demands, losses, costs, Damages and expenses (excluding any loss of profits or consequential Damages) to which Safety Shot or its directors and officers may be subject or which Safety Shot or its directors or officers may suffer, whether under the provisions of any statute or otherwise, in any way caused by, or arising, directly or indirectly, from or in consequence of:

 

(i)

any misrepresentation or alleged misrepresentation contained in: (A) the Yerbaé Circular (other than in respect of the Safety Shot Circular Disclosure); (B) in any Yerbaé Circular Disclosure included in the Safety Shot Circular that was provided to Safety Shot by, or approved by, Yerbaé expressly for inclusion in the Safety Shot Circular; or (C) any material filed by Yerbaé in connection with the transactions contemplated by this Agreement in compliance or intended compliance with any Applicable Law;

 

(ii)

any order made or any inquiry, investigation or proceeding by any securities commission or other competent authority based upon any Misrepresentation or alleged Misrepresentation contained in: (A) the Yerbaé Circular (other than in respect of the Safety Shot Circular Disclosure); (B) the Yerbaé Circular Disclosure included in the Safety Shot Circular that was provided to Safety Shot by, or approved by, Yerbaé expressly for inclusion in the Safety Shot Circular; or (C) in any material filed by or on behalf of Yerbaé in compliance or intended compliance with Applicable Securities Laws; and

 

(iii)

Yerbaé not complying with any requirement of Applicable Law in connection with the transactions contemplated in this Agreement,

 

 

except that Yerbaé will not be liable in any such case to the extent that any such Liabilities, claims, demands, losses, costs, Damages and expenses arise out of:

 

(iv)

any information contained in the Safety Shot Circular other than Yerbaé Circular Disclosure included in the Safety Shot Circular that was provided to Safety Shot by, or approved by, Yerbaé expressly for inclusion in the Safety Shot Circular;

 

(v)

any Safety Shot Circular Disclosure included in the Yerbaé Circular that was provided to Yerbaé by, or approved by, Safety Shot expressly for inclusion in the Yerbaé Circular; or

 

(vi)

the negligence of Safety Shot or the non-compliance by Safety Shot with any requirement of Applicable Law in connection with the transactions contemplated by this Agreement;

 

(k)

provide notice to Safety Shot of the Yerbaé Meeting and allow Safety Shot’s Representatives to attend the Yerbaé Meeting;

 

(l)

except for proxies and other non-substantive communications with the holders of Yerbaé Shares and communications that Yerbaé is required to keep confidential pursuant to Applicable Law, furnish promptly to Safety Shot or its counsel: (i) a copy of each notice, report, schedule or other document delivered, filed or received by Yerbaé from securityholders or Governmental Entities in connection with the Arrangement or the Yerbaé Meeting; (ii) any filings under Applicable Law in connection with the transactions contemplated hereby; and (iii) any dealings with stock exchanges, regulatory agencies or other Governmental Entities in connection with the transactions contemplated hereby;

 

(m)

solicit proxies to be voted at the Yerbaé Meeting in favour of matters to be considered at the Yerbaé Meeting, including the Arrangement Resolution;

 

(n)

promptly advise Safety Shot of the number or amount of Yerbaé Shares for which Yerbaé receives notices of dissent or written objections to the Arrangement and provide Safety Shot with copies of such notices and written objections and subject to Applicable Law, will provide Safety Shot with an opportunity to review and comment upon any written communications proposed to be sent by or on behalf of Yerbaé to any Yerbaé Shareholder exercising or purporting to exercise Dissent Rights in relation to the Arrangement Resolution and reasonable consideration will be given to any comments made by Safety Shot and its counsel prior to sending any such written communications; provided that, Yerbaé will not settle any claims with respect to Dissent Rights without the prior written consent of Safety Shot (such consent not to be unreasonably withheld, conditioned or delayed);

 

(o)

promptly inform Safety Shot of any requests or comments made by Securities Authorities in connection with the Yerbaé Circular and any other required filings under Applicable Law; and each of the Parties will cooperate with the other and will diligently do all such acts and things as may be necessary in the manner contemplated in the context of the preparation of the Yerbaé Circular and any other required filings under Applicable Law and use its commercially reasonable efforts to resolve all requests or comments made by Securities Authorities with respect to the Yerbaé Circular and any other required filings under Applicable Law as promptly as practicable after receipt thereof;

 

 

(p)

advise Safety Shot, as Safety Shot may request, and on a daily basis on each of the last five (5) Business Days prior to the proxy cut-off date for the Yerbaé Meeting, as to the aggregate tally of the proxies received by Yerbaé in respect of the Arrangement Resolution and any other matters to be considered at the Yerbaé Meeting, and provide Safety Shot with copies of any materials, or grant access to information regarding the Yerbaé Meeting, generated by any proxy solicitation firm;

 

(q)

subject to obtaining such approvals as are required by the Interim Order, proceed with and diligently pursue the application to the Court for the Final Order;

 

(r)

provide Safety Shot’s legal counsel, on a timely basis, with copies of any notice and evidence served on Yerbaé or its legal counsel in respect of the application for the Final Order or any appeal therefrom;

 

(s)

keep Safety Shot informed as to discussions with all Significant Shareholders;

 

(t)

make all necessary filings and applications under Applicable Law, including Applicable Securities Laws, required to be made on the part of Yerbaé in connection with the transactions contemplated herein, including, without limitation, for all Regulatory Approvals, and will take all actions necessary to be in compliance with such Applicable Law; and

 

(u)

use its commercially reasonable efforts to obtain resignations and mutual releases (in a form satisfactory to Safety Shot), to be effective at the Effective Time, from all directors of Yerbaé on or prior to the Effective Time.

 

3.7	Mutual Covenants Regarding Regulatory Approvals

 

(a)

Each Party, as applicable to that Party, covenants and agrees with respect to obtaining all Regulatory Approvals that, subject to the terms and conditions of this Agreement, until the earlier of the Effective Time and the date on which this Agreement is terminated in accordance with its terms:

 

(i)

each Party shall use its commercially reasonable efforts to obtain all Regulatory Approvals and co-operate with the other Party in connection with all Regulatory Approvals sought by the other Party and shall use its commercially reasonable efforts to effect all necessary registrations, filings and submissions of information required by Governmental Entities relating to the Arrangement or this Agreement;

 

(ii)

each Party shall use commercially reasonable efforts to respond promptly to any request or notice from any Governmental Entity requiring that Party to supply additional information that is relevant to the review of the transactions contemplated by this Agreement in respect of obtaining or concluding the Regulatory Approvals sought by either Party and each Party shall co-operate with the other Party and shall furnish to the other Party such information and assistance as a Party may reasonably request in connection with preparing any submission or responding to such notice from a Governmental Entity;

 

 

(iii)

subject to compliance with Applicable Law, each Party shall permit the other Party an opportunity to review in advance any proposed substantive applications, notices, filings, submissions, undertakings, correspondence and communications (including responses to requests for information and inquiries from any Governmental Entity) in respect of obtaining or concluding the Regulatory Approvals and shall provide the other Party with a reasonable opportunity to comment thereon and agree to consider those comments in good faith and each Party shall provide the other Party with any substantive applications, notices, filings, submissions, undertakings or other substantive correspondence provided to a Governmental Entity or any substantive communications received from a Governmental Entity, in respect of obtaining or concluding the Regulatory Approvals; and

 

(iv)

subject to compliance with Applicable Law, each Party shall keep the other Party reasonably informed on a timely basis of the status of discussions relating to obtaining or concluding the Regulatory Approvals sought by each such Party and, for certainty, no Party shall participate in any substantive meeting (whether in person, by telephone or otherwise) with a Governmental Entity in respect of obtaining or concluding the required Regulatory Approvals unless it advises the other Party in advance and gives such other Party an opportunity to attend.

 

3.8	Covenants Regarding Provision of Information; Access

 

From and after the date hereof, until the Effective Time or termination of this Agreement, each of Yerbaé and Safety Shot, to the extent it is not restricted from doing so pursuant to confidentiality or other restrictions (in which circumstances it will use its commercially reasonable efforts to obtain a waiver thereof) shall provide the other Party and its Representatives access, upon reasonable notice, during normal business hours and at such other time or times as such Party may reasonably request, to its and each of its Subsidiary’s premises, books, contracts, records, Computer Systems, properties, Employees and management personnel and shall furnish promptly to such Party all information concerning its and each of its Subsidiary’s business, properties and personnel as the requesting Party may reasonably request, which information shall remain subject to the Confidentiality Agreement, including for the purposes to permit Safety Shot and Yerbaé to be in a position to expeditiously and efficiently integrate the operations of Yerbaé and Safety Shot and to provide an orderly transition of control immediately upon but not prior to the Effective Time. The Parties shall use all commercially reasonable efforts to ensure that they take no actions, through the exchange of confidential information or otherwise, in breach of the Competition Act or any other applicable competition laws, and notwithstanding anything contained in this Agreement, Safety Shot shall not control or materially influence Yerbaé until following the Effective Time. The Parties hereby acknowledge and agree that no investigations pursuant to this Section 3.8 shall affect or be deemed to modify any representation or warranty made by any Party herein.

 

3.9	Privacy Matters

 

(a)

For the purposes of this Section 3.9, “Transaction Personal Information” means the Personal Information transferred, disclosed or conveyed to one Party or any of its Representatives or agents (a “Recipient”) by or on behalf of another Party (a “Transferor”) as a result of or in conjunction with the Arrangement, and includes all such Personal Information transferred, disclosed or conveyed to the Recipient prior to the execution of this Agreement.

 

 

(b)

Each Transferor acknowledges and confirms that the transfer, disclosure, communication or conveyance of Transaction Personal Information is necessary for the purposes of determining if the Parties shall proceed with the Arrangement and, if the determination is made to proceed with the Arrangement, to carry on the business and complete the Arrangement.

 

(c)

In addition to its other obligations hereunder, the Recipient covenants and agrees to, prior to the completion of the Arrangement:

 

(i)

collect, use and disclose the Transaction Personal Information solely for the purpose of reviewing, determining whether to proceed with and completing the Arrangement;

 

(ii)

where required by Applicable Law or Data Security Requirements, not communicate Transaction Personal Information without the consent of the individual concerned, unless authorized to do so by Applicable Law; and

 

(iii)

protect and safeguard the confidentiality of the Transaction Personal Information using security safeguards appropriate to the sensitivity of the Transaction Personal Information and in accordance with Applicable Law or Data Security Requirements.

 

3.10	De-Listing of Yerbaé Shares

 

Subject to Applicable Law, Safety Shot and Yerbaé shall and shall cause their respective Affiliates, as applicable, to cooperate with one another in taking, or causing to be taken, all actions necessary to de-list the Yerbaé Shares from the TSXV as promptly as practicable following the Effective Time (including, if requested by Safety Shot, such items as may be necessary to de-list the Yerbaé Shares on the Effective Date).

 

3.11	Control of Safety Shot’s or Yerbaé’s Operations.

 

Nothing contained in this Agreement shall give Safety Shot or Yerbaé, directly or indirectly, rights to control or direct the operations of the other prior to the Effective Time and each of Safety Shot and Yerbaé shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its operations.

 

Article 4
ADDITIONAL COVENANTS REGARDING NON-SOLICITATION

 

4.1	Non-Solicitation

 

(a)

Except as expressly provided in this Article 4, or to the extent Safety Shot has otherwise consented in writing (which consent shall be in Safety Shot’s sole discretion), Yerbaé shall not, and shall cause the Yerbaé Subsidiaries not to, directly or indirectly, through any of its Representatives (and in so doing shall instruct its and the Yerbaé Subsidiaries’ Representatives not to, directly or indirectly):

 

(i)

solicit, assist, initiate, knowingly encourage or otherwise knowingly facilitate (including by way of furnishing or providing copies of, access to, or disclosure of, any confidential information, properties, facilities, Books and Records or entering into any form of agreement, arrangement or understanding) any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal;

 

 

(ii)

enter into or otherwise engage or participate in any discussions or negotiations with, or disclose any non-public information or data relating to Yerbaé or the Yerbaé Subsidiaries to, any Person (other than Safety Shot and its Affiliates) regarding any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal, provided that Yerbaé may (i) advise any Person of the restrictions of this Agreement, and (ii) advise any Person making an Acquisition Proposal that the Yerbaé Board (or the relevant committee thereof) has determined that their Acquisition Proposal does not constitute a Superior Proposal;

 

(iii)

make a Change in Recommendation; or

 

(iv)

accept or enter into or publicly propose to accept or enter into any agreement, understanding, letter of intent, memorandum of understanding, joint venture agreement, or arrangement with any Person (other than Safety Shot or any of its Affiliates) (i) in respect of an Acquisition Proposal or (ii) requiring, intending to cause, or which could reasonably be expected to cause Yerbaé to abandon, terminate or fail to consummate the Arrangement or any other transactions contemplated by this Agreement.

 

(b)

Except as expressly provided in this Article 4, Yerbaé shall, and shall cause the Yerbaé Subsidiaries and their respective Representatives to, immediately cease and terminate, and cause to be terminated, any solicitation, encouragement, discussion, negotiations, or other activities with any Person (other than Safety Shot and its Affiliates) with respect to any inquiry, proposal or offer that constitutes, or may reasonably be expected to constitute or lead to, an Acquisition Proposal, and in connection with such termination shall:

 

(i)

discontinue access to and disclosure of all information regarding Yerbaé or any of the Yerbaé Subsidiaries, including any data room, any confidential information, properties, facilities and Books and Records; and

 

(ii)

promptly (and in any event within two (2) Business Days) request (i) the return or destruction of all copies of any confidential information regarding Yerbaé or any of the Yerbaé Subsidiaries provided to any Person other than Safety Shot and its Representatives, and (ii) the destruction of all material including or incorporating or otherwise reflecting such confidential information regarding Yerbaé or any of the Yerbaé Subsidiaries, to the extent that such information has not previously been returned or destroyed, using its commercially reasonable efforts to ensure that such requests are complied with in accordance with the terms of such rights.

 

(c)

Any violation of the foregoing Sections 4.1(a) or 4.1(b) by any Yerbaé Subsidiary or by any Representatives of Yerbaé or any Yerbaé Subsidiary, whether or not such Representative is so authorized and whether or not such Representative is purporting to act on behalf of Yerbaé or any of the Yerbaé Subsidiaries or otherwise, shall be deemed to be a breach of this Agreement by Yerbaé.

 

 

(d)

Yerbaé represents and warrants that it has not waived any confidentiality, standstill or similar agreement, restriction or covenant in effect as of the date of this Agreement to which Yerbaé or any of the Yerbaé Subsidiaries is a party, and Yerbaé covenants and agrees that (a) Yerbaé shall enforce each confidentiality, standstill or similar agreement, restriction or covenant to which Yerbaé or any of the Yerbaé Subsidiaries is a party or may hereafter become a party in accordance with Section 4.3, and (b) neither Yerbaé nor any of the Yerbaé Subsidiaries have released or will, without the prior written consent of Safety Shot (which may be withheld or delayed in Safety Shot’s sole and absolute discretion), release any Person from, or waive, amend, suspend or otherwise modify such Person’s obligations respecting Yerbaé, or any of the Yerbaé Subsidiaries, under any confidentiality, standstill or similar agreement or restriction to which Yerbaé or any of the Yerbaé Subsidiaries is a party or may hereafter become a party in accordance with Section 4.3.

 

4.2	Notification of Acquisition Proposals

 

(a)

If Yerbaé or any of the Yerbaé Subsidiaries or, to the knowledge of Yerbaé, any of their respective Representatives, receives or otherwise becomes aware of either: (a) any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to an Acquisition Proposal, or (b) any request for copies of, access to, or disclosure of, confidential information relating to Yerbaé or any of the Yerbaé Subsidiaries, Yerbaé shall promptly notify Safety Shot, at first orally, and then promptly, and in any event within 24 hours, in writing, of such Acquisition Proposal, inquiry, proposal, offer or request, the identity of all Persons making the Acquisition Proposal, inquiry, proposal, offer or request, and copies of material documents, correspondence or other material received in respect of, from or on behalf of any such Person if in writing or electronic form, and if not in writing or electronic form, a description of the material terms of such communication to Yerbaé by or on behalf of any such Person. Yerbaé agrees that it shall simultaneously provide to Safety Shot any non-public information concerning itself or the Yerbaé Subsidiaries provided to any other Person or group in connection with any Acquisition Proposal that was not previously provided to Safety Shot.

 

(b)

Yerbaé shall keep Safety Shot fully informed of the status of developments and negotiations with respect to such Acquisition Proposal, inquiry, proposal, offer or request, including the identity of the parties and the price involved and any material changes, modifications or other amendments to any such Acquisition Proposal, inquiry, proposal, offer or request and shall provide to Safety Shot copies of all material correspondence if in writing or electronic form, and if not in writing or electronic form, a description of the material terms of such correspondence or communication to Yerbaé by or on behalf of any Person making such Acquisition Proposal, inquiry, proposal, offer or request.

 

4.3	Responding to an Acquisition Proposal

 

(a)

Notwithstanding Section 4.1 and any other provision of this Agreement, if at any time prior to obtaining the Yerbaé Shareholder Approval, Yerbaé receives a request for non-public information, or to enter into discussions, from a Person or group of Persons that proposes to Yerbaé an unsolicited Acquisition Proposal then Yerbaé may (i) provide copies of, access to or disclosure of confidential information, properties, facilities, or Books and Records to such Person or group of Persons and their respective Representatives and/or (ii) enter into, participate, facilitate and maintain discussions or negotiations with, and otherwise cooperate with or assist, the Person or group of Persons making such request, provided that, if and only if:

 

(i)

the Yerbaé Board first determines in good faith, after consultation with its financial advisors and its outside legal counsel, that such Acquisition Proposal constitutes, or is reasonably likely to constitute or lead to, a Superior Proposal and has promptly provided Safety Shot with written confirmation thereof;

 

 

(ii)

such Person was not restricted from making such Acquisition Proposal pursuant to an existing confidentiality, standstill, non-solicitation or similar agreement with Yerbaé;

 

(iii)

Yerbaé has been, and continues to be, in compliance with its obligations under this Article 4 in all respects and such Acquisition Proposal was not initiated, solicited, knowingly encouraged or knowingly facilitated by Yerbaé or any of the Yerbaé Subsidiaries or any of their respective Representatives;

 

(iv)

prior to providing any such copies, access, or disclosure, Yerbaé enters into a confidentiality and standstill agreement with such Person on terms no less favourable than the Confidentiality Agreement and that does not prohibit compliance by Safety Shot with any of the provisions of this Agreement, a copy of which shall be provided for informational purposes only to Safety Shot; and

 

(v)

the Yerbaé Board first determines in good faith, after consultation with its financial advisors and its outside legal counsel, that the failure to provide such non-public information or enter into such discussions would be inconsistent with its fiduciary duties under Applicable Law.

 

4.4	Right to Match

 

(a)

If Yerbaé receives an Acquisition Proposal that the Yerbaé Board determines, in good faith after consultation with its outside financial and legal advisors, constitutes a Superior Proposal prior to obtaining the Yerbaé Shareholder Approval, the Yerbaé Board may, subject to compliance with Section 8.2, enter into a definitive agreement or make a Change in Recommendation with respect to such Superior Proposal, if and only if:

 

(i)

Yerbaé has been, and continues to be, in compliance with its obligations under this Article 4 in all respects and such Acquisition Proposal was not initiated, solicited, knowingly encouraged or knowingly facilitated by Yerbaé or any of the Yerbaé Subsidiaries or any of their respective Representatives;

 

(ii)

the Person making the Acquisition Proposal was not restricted from making such Acquisition Proposal pursuant to an existing confidentiality, standstill, non-solicitation or similar agreement with Yerbaé;

 

(iii)

Yerbaé has delivered to Safety Shot a written notice of the determination of the Yerbaé Board that such Acquisition Proposal constitutes a Superior Proposal and of the intention of the Yerbaé Board to enter into such definitive agreement with respect to such Superior Proposal and/or withdraw or modify the Yerbaé Board Recommendation, which written notice specifies the material terms and conditions of such Superior Proposal and provides the most current version of the proposed agreement under which such Superior Proposal is proposed to be consummated (the “Superior Proposal Notice”);

 

 

(iv)

at least ten (10) full Business Days (the “Matching Period”) have elapsed from the date on which Safety Shot received the Superior Proposal Notice;

 

(v)

during any Matching Period, Safety Shot has had the opportunity (but not the obligation), in accordance with Section 4.4(b), to offer to amend this Agreement and the Arrangement in order for such Acquisition Proposal to cease to be a Superior Proposal and Yerbaé has negotiated, and caused its Representatives to negotiate, in good faith with Safety Shot to the extent Safety Shot wishes to negotiate any revisions to the terms of this Agreement that Safety Shot proposes pursuant to Section 4.4(b);

 

(vi)

after the Matching Period, the Yerbaé Board has determined in good faith, after consultation with its outside legal counsel and financial advisors, that such Acquisition Proposal continues to constitute a Superior Proposal (if applicable, compared to the terms of the Arrangement as proposed to be amended by Safety Shot under Section 4.4(b)); and

 

(vii)

prior to or concurrently with entering into such definitive agreement or withdrawing or modifying the Yerbaé Board Recommendation, Yerbaé terminates this Agreement pursuant to Section 8.1(a)(vii)(B) and pays Safety Shot the Termination Fee.

 

(b)

Yerbaé acknowledges and agrees that, during the Matching Period, Safety Shot shall have the opportunity, but not the obligation, to propose to amend the terms of this Agreement, including an increase in, or modification of, the Consideration. During the Matching Period: (a) the Yerbaé Board shall review any offer made by Safety Shot under this Section 4.4(b) to amend the terms of this Agreement and the Arrangement in good faith in order to determine whether such proposal would, upon acceptance, result in the Acquisition Proposal previously constituting a Superior Proposal ceasing to be a Superior Proposal; and (b) Yerbaé shall negotiate in good faith with Safety Shot to make such amendments to the terms of this Agreement or the Plan of Arrangement as would enable Safety Shot to proceed with the transactions contemplated by this Agreement on such amended terms. If the Yerbaé Board determines that such Acquisition Proposal would cease to be a Superior Proposal, Yerbaé shall promptly so advise Safety Shot and Yerbaé and Safety Shot shall amend this Agreement to reflect such offer made by Safety Shot, and shall take and cause to be taken all such actions as are necessary to give effect to the foregoing.

 

(c)

Each successive amendment or modification to any Acquisition Proposal that results in an increase in, or modification of, the Consideration (or value of such Consideration) to be received by Yerbaé Shareholders or other material terms or conditions thereof shall constitute a new Acquisition Proposal for the purposes of this Section 4.4, and Safety Shot shall be afforded a new Matching Period from the later of the date on which Safety Shot received the Superior Proposal Notice with respect to the new Superior Proposal from Yerbaé.

 

 

(d)

At the written request of Safety Shot, the Yerbaé Board shall promptly reaffirm the Yerbaé Board Recommendation by press release after any Acquisition Proposal which the Yerbaé Board has determined not to be a Superior Proposal is publicly announced or publicly disclosed or the Yerbaé Board determines that a proposed amendment to the terms of this Agreement or the Plan of Arrangement as contemplated under Section 4.4(b) would result in an Acquisition Proposal no longer being a Superior Proposal. Yerbaé shall provide Safety Shot and its outside legal counsel with a reasonable opportunity to review and comment on the form and content of any such press release and shall make all reasonable amendments to such press release as requested by Safety Shot and its counsel.

 

(e)

Nothing in this Agreement shall prohibit the Yerbaé Board from responding through a directors’ circular or otherwise as required by Applicable Securities Laws to an Acquisition Proposal provided that Yerbaé shall provide Safety Shot and its counsel with a reasonable opportunity to review the form and content of such disclosure and shall give reasonable consideration to any comments made by Safety Shot and its counsel. Further, nothing in this Agreement shall prevent the Yerbaé Board from making any disclosure to the Yerbaé Shareholders if the Yerbaé Board, acting in good faith and upon the advice of its outside legal and financial advisors, shall have determined that the failure to make such disclosure would be inconsistent with the fiduciary duties of the Yerbaé Board or such disclosure is otherwise required under Applicable Law; provided, however, that, notwithstanding the Yerbaé Board shall be permitted to make such disclosure, the Yerbaé Board shall not be permitted to make a Change in Recommendation, other than as permitted by Section 4.4(a) and provided that Yerbaé shall provide Safety Shot and its counsel with a reasonable opportunity to review the form and content of such disclosure and shall give reasonable consideration to any comments made by Safety Shot and its counsel.

 

(f)

Any violation of the restrictions set forth in this Section 4.4 by the Yerbaé Subsidiaries or Yerbaé’s or the Yerbaé Subsidiaries’ respective Representatives shall be deemed to be a breach of this Section 4.4 by Yerbaé. Furthermore, Yerbaé shall be responsible for any breach of this Section 4.4 by the Yerbaé Subsidiaries and its and their respective Representatives.

 

Article 5
REPRESENTATIONS AND WARRANTIES

 

5.1	Representations and Warranties of Safety Shot

 

Safety Shot hereby represents and warrants to and in favour of Yerbaé and acknowledges that Yerbaé is relying upon such representations and warranties in connection with the matters contemplated by this Agreement and the consummation of the Arrangement:

 

(a)

Organization, Status and Qualification. Safety Shot is duly formed and is validly subsisting, under the laws of its jurisdiction of formation and has the requisite power and authority to own, lease and operate its properties and assets and to conduct its business as now owned and conducted. Safety Shot is duly qualified to carry on business in each jurisdiction in which its assets and properties, owned, leased, licensed or otherwise held, or the nature of its activities makes such qualification necessary, except where the failure to be so qualified will not, individually or in the aggregate, have a Safety Shot Material Adverse Effect.

 

 

(b)

Authorization. Safety Shot has all necessary corporate power and authority and has taken all necessary corporate action to authorize the execution and delivery of this Agreement and the Contracts, agreements and instruments required by this Agreement to be delivered by it and the performance of its obligations hereunder and thereunder (subject to approval of the Safety Shot Board of the Safety Shot Circular and matters relating to and to be approved at the Safety Shot Meeting).

 

(c)

Enforceability. This Agreement has been duly executed and delivered by Safety Shot and (assuming due execution and delivery by Yerbaé) is a legal, valid and binding obligation of Safety Shot enforceable against Safety Shot in accordance with its terms, except that enforcement may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Law of general application relating to or affecting the rights of creditors generally and that equitable remedies, including specific performance, may be granted only in the discretion of a court of competent jurisdiction. Each of the Contracts, agreements and instruments required by this Agreement to be delivered by Safety Shot will, at the Effective Time, have been duly executed and delivered by Safety Shot and (assuming due execution and delivery by Yerbaé) will at the Effective Time be enforceable against Safety Shot in accordance with its terms, except that enforcement may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization moratorium and other Applicable Law of general application relating or affecting the rights of creditors generally and that equitable remedies, including specific performance, may be granted only in the discretion of a court of competent jurisdiction.

 

(d)

No Violations. Other than as permitted or contemplated under this Agreement, none of the execution and delivery of this Agreement by Safety Shot, the consummation by Safety Shot of the Arrangement or any of the transactions contemplated by this Agreement or compliance by Safety Shot with any of the provisions hereof will:

 

(i)

violate, conflict with, or result in a breach of any provision of, require any consent, approval or notice under, or constitute a default (or an event which with or without notice or lapse of time or both, would constitute a default) under any of the terms, conditions or provisions of its constating or governing documents;

 

(ii)

other than as set out in Schedule 5.1(d)(ii) of the Safety Shot Disclosure Letter, allow any Person to exercise any rights, require any consent or notice under or other action by any Person, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Safety Shot is entitled (including by triggering any rights of first refusal or first offer or other restrictions or limitations) under any Contract to which it is a party, except as would not reasonably be expected to have, individually or in the aggregate, a Safety Shot Material Adverse Effect or impede the consummation of the Arrangement;

 

(iii)

subject to obtaining the Regulatory Approvals and Safety Shot Stockholder Approval, violate any Applicable Law; or

 

 

(iv)

result in any restriction on Safety Shot from engaging in its business, as now conducted, or from competing with any Person or in any geographical area and does not and will not trigger or cause to arise any rights of any Person under any contract or arrangement to restrict Safety Shot from engaging in its business, as now conducted.

 

Other than in connection with obtaining any required Regulatory Approvals, compliance with any Applicable Law, stock exchange rules and policies, the Interim Order and the Final Order, no Authorization of, or other action by or in respect of, or filing, recording, registering or publication with, or notification to, any Governmental Entity is necessary on the part of Safety Shot for the consummation by Safety Shot of its obligations in connection with the Arrangement under this Agreement or for the completion of the Arrangement, except for such Authorizations and filings as to which the failure to obtain or make would not materially impede or delay the ability of Safety Shot to consummate the Arrangement.

 

(e)

Compliance with Applicable Law; No Orders. Safety Shot and each Safety Shot Subsidiary has complied with all Applicable Law in all material respects and is not in violation of any Applicable Law in any material respect except where the failure to so comply would not reasonably be expected to have a Safety Shot Material Adverse Effect.

 

(f)

Regulatory Approvals. As at the date of this Agreement, there are no Regulatory Approvals required to be obtained by Safety Shot or any Safety Shot Subsidiary in connection with this Agreement or the Arrangement other than the acceptance of the NASDAQ.

 

(g)

Capitalization.

 

(i)

Safety Shot is authorized to issue 100,000 shares of preferred stock and 100,000,000 Safety Shot Shares, of which nil shares of preferred stock and 62,790,314 Safety Shot Shares are outstanding as at the date hereof.

 

(ii)

The total aggregate number of Consideration Shares issuable hereunder will at the Effective Time have been duly authorized and reserved for issuance and will, on issuance, be validly issued, fully paid and non-assessable.

 

(h)

Bankruptcy. Neither Safety Shot nor any Safety Shot Subsidiary is an insolvent Person within the meaning of the Bankruptcy and Insolvency Act (Canada) or any other Applicable Law regarding bankruptcy, insolvency or creditor’s rights generally and nor has any such entity made an assignment in favour of its creditors or a proposal in bankruptcy to its creditors or any class thereof, and no petition for a receiving order has been presented in respect of it. Neither Safety Shot nor any Safety Shot Subsidiary has initiated proceedings with respect to a compromise or arrangement with its creditors or for its winding up, liquidation or dissolution. No receiver or interim receiver has been appointed in respect of Safety Shot or any Safety Shot Subsidiary or any of the assets of Safety Shot and no execution or distress has been levied on any of the assets of Safety Shot, nor have proceedings been commenced in connection with any of the foregoing.

 

 

(i)

Registrant Status and Stock Exchange Compliance. Safety Shot is an SEC registrant. There is no Order delisting, suspending or cease trading any securities of Safety Shot. The Safety Shot Shares are listed and posted for trading on the NASDAQ, and are not listed or quoted on any market other than the NASDAQ, and Safety Shot is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of the NASDAQ. No Securities Authority, other competent authority or stock exchange in Canada or the United States has issued any order which is currently outstanding preventing or suspending trading in any securities of Safety Shot, no such proceeding is, to the knowledge of Safety Shot, pending, contemplated or threatened and neither Safety Shot or any Safety Shot Subsidiary is in material default of any requirement of any Applicable Law.

 

(j)

U.S. Securities Law Matters.

 

(i)

The Safety Shot Shares are registered pursuant to Section 12(b) of the U.S. Exchange Act and Safety Shot is in compliance with its reporting obligations pursuant to Section 13 of the U.S. Exchange Act.

 

(ii)

Other than the Safety Shot Shares, Safety Shot does not have, nor is it required to have, any class of securities registered under the U.S. Exchange Act, nor is Safety Shot subject to any reporting obligations (whether active or suspended) pursuant to Section 15(d) of the U.S. Exchange Act.

 

(iii)

Safety Shot is not an investment company registered or required to be registered under the Investment Company Act of 1940, as amended.

 

(k)

Reports. Safety Shot has timely filed true and correct copies of documents that Safety Shot is required to file under U.S. Securities Laws, other than such documents that the failure to file would, individually or in the aggregate, not have a Safety Shot Material Adverse Effect.

 

(l)

Financial Statements.

 

(i)

The audited consolidated financial statements for Safety Shot as of and for each of the fiscal years ended on December 31, 2023 and 2022 including the notes thereto and the interim consolidated financial statements for the nine (9) month period ended September 30, 2024 including the notes thereto (collectively, the “Safety Shot Financial Statements”) have been, and all financial statements of Safety Shot which are publicly disseminated by Safety Shot in respect of any subsequent periods prior to the Effective Date will be, prepared in accordance with U.S. GAAP applied on a basis consistent with prior periods and all Applicable Law and present fairly, in all material respects, the assets, Liabilities (whether accrued, absolute, contingent or otherwise), consolidated financial position and results of operations of Safety Shot and the Safety Shot Subsidiaries as of the respective dates thereof and its results of operations and cash flows for the respective periods covered thereby (except as may be indicated expressly in the notes thereto).

 

(ii)

As of the date of this Agreement, none of Safety Shot, any of the Safety Shot Subsidiaries or, to Safety Shot’s knowledge, any director, officer, auditor, accountant or representative of Safety Shot or any of the Safety Shot Subsidiaries has received or otherwise obtained knowledge of any complaint, allegation, assertion or claim that Safety Shot or any of the Safety Shot Subsidiaries has engaged in questionable accounting or auditing practices or any expression of concern from its Employees regarding questionable accounting or auditing matters.

 

 

(m)

Litigation. To the knowledge of Safety Shot, other than as set out in Schedule 5.1(m) of the Safety Shot Disclosure Letter, there are no investigations by Governmental Entities, actions, suits or proceedings in progress, pending or threatened against Safety Shot or any of the Safety Shot Subsidiaries, which if successful, would reasonably be expected to have a Safety Shot Material Adverse Effect or would significantly impede the ability of Safety Shot to consummate the Arrangement.

 

(n)

Undisclosed Liabilities. There are no Liabilities or obligations of Safety Shot of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than Liabilities or obligations: (i) disclosed in the Safety Shot Financial Statements; (ii) incurred in the ordinary course of business since September 30, 2024; (iii) incurred in connection with this Agreement; or (iv) that would not be reasonably expected to have, individually or in the aggregate, a Safety Shot Material Adverse Effect.

 

(o)

No Restrictions on Business. Safety Shot is not a party to or bound or affected by any commitment, agreement, judgment, injunction, order, decree or document binding upon Safety Shot that has or could reasonably be expected to have the effect of prohibiting, restricting or impairing its business, or individually or in the aggregate, having a Safety Shot Material Adverse Effect or containing any covenant expressly prohibiting, restricting or limiting its freedom or ability to: (i) compete in any line of business or geographic region; (ii) transfer or move any of the assets or operations; (iii) conduct any business practice of Safety Shot as now conducted; or (iv) effect any acquisition of property by Safety Shot (including following the transactions contemplated by this Agreement).

 

(p)

Intellectual Property. Except as would not be reasonably expected to have, individually or in the aggregate, a Safety Shot Material Adverse Effect: (i) Safety Shot and the Safety Shot Subsidiaries, as applicable, own or possess, or have a licence to or otherwise have the right to use, all Intellectual Property which is material and necessary for the conduct of its business as presently conducted; and (ii) to the knowledge of Safety Shot, neither Safety Shot nor any of the Safety Shot Subsidiaries is infringing on any intellectual property right of any third party.

 

(q)

Public Disclosure. The information and statements set forth in the Safety Shot Public Record were true, correct and complete, and did not contain any misrepresentation, as of the date of such information or statement.

 

(r)

No Material Change. Since September 30, 2024, other than as disclosed in the Safety Shot Public Record:

 

(i)

there has not been any Safety Shot Material Adverse Change (on a consolidated basis) and as of the date of this Agreement, there have been no material facts, transactions, events or occurrences which, to the knowledge of Safety Shot, would reasonably be expected to have a Safety Shot Material Adverse Effect (on a consolidated basis);

 

 

(ii)

Safety Shot and the Safety Shot Subsidiaries have not issued, sold, transferred, disposed of, acquired, redeemed, granted options or rights to purchase, rights of first refusal or subscription rights, or sold any securities of Safety Shot or the Safety Shot Subsidiaries (or securities convertible into or exchangeable for Safety Shot Shares) or permitted any reclassifications of any securities of Safety Shot or any of the Safety Shot Subsidiaries;

 

(iii)

Safety Shot and the Safety Shot Subsidiaries have not amended or modified their constating documents;

 

(iv)

Safety Shot and the Safety Shot Subsidiaries have not declared, paid or otherwise set aside for payment any non-cash dividend or other non-cash distribution with respect to the Safety Shot Shares or any other equity securities;

 

(v)

Safety Shot and the Safety Shot Subsidiaries have not merged or consolidated with, or acquired all or substantially all the assets of, or otherwise acquired, any business, business organization or division thereof, or any other Person;

 

(vi)

no liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) which has had, or is reasonably likely to have, individually or in the aggregate, a Safety Shot Material Adverse Effect has been incurred;

 

(vii)

there has not been any material change to the accounting practices used by Safety Shot and the Safety Shot Subsidiaries;

 

(viii)

no liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) which has had, or is reasonably likely to have, individually or in the aggregate, a Safety Shot Material Adverse Effect has been incurred;

 

(ix)

there has not been any satisfaction or settlement of any material claims or material Liabilities, other than the settlement of claims or Liabilities in the ordinary course of business; and

 

(x)

Safety Shot and the Safety Shot Subsidiaries have conducted their business only in the ordinary and normal course consistent with past practice, except for the transactions contemplated by this Agreement.

 

(s)

Taxes. Other than as set out in Schedule 5.1(s) of the Safety Shot Disclosure Letter, Safety Shot and the Safety Shot Subsidiaries have timely filed all material Tax Returns required to be filed in all applicable jurisdictions and such Tax Returns are, in all material respects, true, complete and correct, and have been prepared and filed in all material respects in accordance with Applicable Law. Safety Shot and the Safety Shot Subsidiaries have made and remitted all material amounts of required deductions or withholdings of Taxes, and have paid all Taxes payable by Safety Shot and any of the Safety Shot Subsidiaries as and when due and payable.

 

(t)

Corporate Records. The corporate records and minute books, books of account and other records of Safety Shot and each Safety Shot Subsidiary have (whether of a financial or accounting nature or otherwise) been maintained in accordance with, in all material respects, all Applicable Law and prudent business practice and are complete and accurate in all material respects. Copies of the constating documents of Safety Shot and each Safety Shot Subsidiary, together with all amendments to date, which are included in the Safety Shot Information, are accurate and complete in all material respects and have not been amended or superseded.

 

 

(u)

Anti-Corruption.

 

(i)

Safety Shot has not, directly or indirectly: (A) made, offered or authorized any contribution, payment, promise, advantage or gift of funds or property to any official, employee or agent of any Governmental Entity of any jurisdiction or any official of any public international organization; or (B) made any contribution to any candidate for public office, in either case where either the payment or the purpose of such contribution, payment, promise, advantage or gift would violate, or was or would be prohibited under, Applicable Law, including the principles described in the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the Convention’s Commentaries, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the Corruption of Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) or the rules and regulations promulgated thereunder.

 

(ii)

No action, suit or proceeding by or before any court or Governmental Entity or any arbitrator involving Safety Shot is pending or threatened under any applicable financial recordkeeping and reporting requirements and under all applicable money laundering laws and statutes and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity, whether in Canada, the United States or other jurisdictions.

 

(iii)

None of Safety Shot nor any director, officer, agent, Employee or any other Person acting on behalf of Safety Shot, has been or is the subject of any sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) (including but not limited to the designation as a “specially designated national or blocked person” thereunder), the Government of Canada, Her Majesty’s Treasury, the European Union or any other relevant sanctions authority; and Safety Shot is not in violation of any of the economic sanctions of the United States administered by OFAC or economic sanctions of any other relevant sanctions authority or any law or executive order relating thereto (the “Economic Sanctions”) or is conducting business with any Person subject to any Economic Sanctions (a “Sanctioned Person”); and neither Safety Shot nor any of its Affiliates are owned by or affiliated with a Sanctioned Person.

 

(v)

Safety Shot Fairness Opinion. The Safety Shot Board has received the Safety Shot Fairness Opinion, the conclusion of which has been communicated to Yerbaé and a true and complete copy of which, when executed and delivered in writing, will be made available to Yerbaé, and the Safety Shot Fairness Opinion has not been withdrawn or modified.

 

(w)

Freely Tradeable Shares. The Consideration Shares to be issued pursuant to the Arrangement, shall be registered or qualified for distribution, or exempt from or not subject to any requirement for registration or qualification for distribution, under Applicable Securities Laws. Such securities shall not be “restricted securities” within the meaning of Rule 144 under the U.S. Securities Act or under any other U.S. federal or state securities laws.

 

 

(x)

Non-Reliance. Yerbaé acknowledges that none of Safety Shot, any Safety Shot Subsidiary, nor any Safety Shot Stockholder makes any representation or warranty with respect to Safety Shot, any Safety Shot Subsidiary or the Arrangement other than those expressly set forth in this Section 5.1 or any other agreement or instrument entered into by Safety Shot pursuant to this Agreement, and Yerbaé has not relied on any statement of any Person in entering into this Agreement other than such express representations and warranties.

 

5.2	Representations and Warranties of Yerbaé

 

Yerbaé hereby represents and warrants to and in favour of Safety Shot as follows and acknowledges that Safety Shot is relying on these representations and warranties in connection with the matters contemplated by this Agreement and the consummation of the Arrangement:

 

(a)

Organization, Status and Qualification. Each of Yerbaé and each Yerbaé Subsidiary is a corporation duly incorporated, amalgamated or continued, or organized, as the case may be, and is validly subsisting, under the laws of the jurisdiction of its formation and has the requisite power and authority to own, lease and operate its respective properties and assets and to conduct its business as now owned and conducted. Each of Yerbaé and each Yerbaé Subsidiary is duly qualified to carry on business in each jurisdiction in which its assets and properties, owned, leased, licensed or otherwise held, or the nature of its activities makes such qualification necessary, except where the failure to be so qualified will not, individually or in the aggregate, have a Yerbaé Material Adverse Effect.

 

(b)

Authorization. Yerbaé has all necessary corporate power and authority and has taken all necessary corporate action to authorize the execution and delivery of this Agreement and the Contracts, agreements and instruments required by this Agreement to be delivered by it and the performance of its obligations hereunder and thereunder (subject to approval of the Yerbaé Board of the Yerbaé Circular and matters relating to and to be approved at the Yerbaé Meeting).

 

(c)

Enforceability. This Agreement has been duly executed and delivered by Yerbaé and (assuming due execution and delivery by Safety Shot) is a legal, valid and binding obligation of Yerbaé enforceable against it in accordance with its terms, except that enforcement may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Law of general application relating to or affecting the rights of creditors generally and that equitable remedies, including specific performance, may be granted only in the discretion of a court of competent jurisdiction. Each of the Contracts, agreements and instruments required by this Agreement to be delivered by it will, at the Effective Time, have been duly executed and delivered by it and (assuming due execution and delivery by the other parties thereto) will at the Effective Time be enforceable against it in accordance with its terms, except that enforcement may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization moratorium and other Applicable Law of general application relating or affecting the rights of creditors generally and that equitable remedies, including specific performance, may be granted only in the discretion of a court of competent jurisdiction.

 

 

(d)

No Violations. Other than as permitted or contemplated under this Agreement and subject to obtaining the consents and delivery of the notices set forth in Schedule 4.2(d) of the Yerbaé Disclosure Letter, none of the execution and delivery of this Agreement by Yerbaé, the consummation by Yerbaé of the Arrangement or any of the transactions contemplated by this Agreement or compliance by Yerbaé with any of the provisions hereof will:

 

(i)

violate, conflict with, or result in a breach of any provision of, require any consent, approval or notice under, or constitute a default (or an event which with or without notice or lapse of time or both, would constitute a default) under any of the terms, conditions or provisions of its constating or governing documents;

 

(ii)

allow any Person to exercise any rights, or constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Yerbaé is entitled (including by triggering any rights of first refusal or first offer or other restrictions or limitations) under any Yerbaé Material Contract;

 

(iii)

subject to obtaining the Regulatory Approvals and the Yerbaé Shareholder Approval in respect of the Arrangement, violate any Applicable Law; or

 

(iv)

result in any restriction on Yerbaé or any Yerbaé Subsidiary from engaging in its business, as now conduced, or from competing with any Person or in any geographical area and does not and will not trigger or cause to arise any rights of any Person under any contract or arrangement to restrict Yerbaé or any Yerbaé Subsidiary from engaging in its business, as now conducted.

 

Other than in connection with obtaining any required Regulatory Approvals, compliance with any Applicable Law, stock exchange rules and policies, the Interim Order and the Final Order, no Authorization of, or other action by or in respect of, or filing, recording, registering or publication with, or notification to, any Governmental Entity is necessary on the part of Yerbaé for the consummation by Yerbaé of its obligations in connection with the Arrangement under this Agreement or for the completion of the Arrangement, except for such Authorizations and filings as to which the failure to obtain or make would not materially impede or delay the ability of Yerbaé to consummate the Arrangement.

 

(e)

Subsidiaries. Other than the Yerbaé Subsidiaries, Yerbaé does not have any material Subsidiaries or own, directly or indirectly, any shares, partnership interest, limited liability company interest or joint venture interest in, or any security issued by, any other Person. All of the issued and outstanding equity interests of the Yerbaé Subsidiaries are owned beneficially and of record by Yerbaé and are fully paid and non-assessable.

 

(f)

Compliance with Applicable Law; No Orders. Yerbaé and each Yerbaé Subsidiary has complied with all Applicable Law in all material respects and is not in violation of any Applicable Law in any material respect except where the failure to so comply would not reasonably be expected to have a Yerbaé Material Adverse Effect.

 

 

(g)

Regulatory Approvals. As at the date of this Agreement, there are no Regulatory Approvals required to be obtained by Yerbaé or the Yerbaé Subsidiaries in connection with this Agreement or the Arrangement other than the Interim Order, the Final Order and the approval of the TSXV.

 

(h)

Authorized and Issued Capital. The authorized capital of Yerbaé consists of an unlimited number of Yerbaé Shares and 100,000,000 preferred shares. As of the date of this Agreement, there are issued and outstanding 63,085,228 Yerbaé Shares and nil Yerbaé preferred shares and no other shares are issued and outstanding. Other than: (i) Yerbaé Options to acquire up to 2,163,634 Yerbaé Shares; (ii) Yerbaé Warrants to acquire up to 12,925,405 Yerbaé Shares; (iii) $3,277,000 principal amount Convertible Debentures; (iv) Yerbaé RSUs to acquire up to 2,602,774 Yerbaé Shares; and (v) Yerbaé PSUs to acquire up to 1,480,865 Yerbaé Shares, there are no options, warrants or other rights, plans, agreements or commitments of any nature whatsoever requiring the issuance, sale or transfer by Yerbaé of any securities of Yerbaé (including Yerbaé Shares) or any securities convertible into, or exchangeable or exercisable for, or otherwise evidencing a right to acquire, any securities of Yerbaé (including Yerbaé Shares). All outstanding Yerbaé Shares have been duly authorized and validly issued, are fully paid and non-assessable and are not subject to, nor were they issued in violation of, any pre-emptive rights. Other than the Yerbaé Shares, there are no securities of Yerbaé outstanding which have the right to vote generally with the Yerbaé Shareholders on any matter.

 

(i)

Significant Shareholders. To the knowledge of Yerbaé and other than as disclosed to Safety Shot, no Person beneficially owns, directly or indirectly, or exercises control or direction over, Yerbaé Shares representing more than 10% of the issued and outstanding Yerbaé Shares (each, a “Significant Shareholder”).

 

(j)

Bankruptcy. Neither Yerbaé nor any Yerbaé Subsidiary is an insolvent Person within the meaning of the Bankruptcy and Insolvency Act (Canada) or any other Applicable Law regarding bankruptcy, insolvency or creditor’s rights generally and nor has any such entity made an assignment in favour of its creditors or a proposal in bankruptcy to its creditors or any class thereof, and no petition for a receiving order has been presented in respect of it. Neither Yerbaé nor any Yerbaé Subsidiary has initiated proceedings with respect to a compromise or arrangement with its creditors or for its winding up, liquidation or dissolution. No receiver or interim receiver has been appointed in respect of Yerbaé or any Yerbaé Subsidiary or any of the assets of Yerbaé and no execution or distress has been levied on any of the assets of Yerbaé, nor have proceedings been commenced in connection with any of the foregoing.

 

(k)

Securities Laws Matters.

 

(i)

Yerbaé is a reporting issuer under the Applicable Securities Laws in the provinces of British Columbia, and Alberta. The Yerbaé Shares are listed and posted for trading on the TSXV and no Order prohibiting the sale or issuance of the Yerbaé Shares has been issued and no (formal or informal) proceedings for such purpose are pending or, to the knowledge of Yerbaé, have been threatened. Yerbaé is not in default under the Applicable Securities Laws or the rules and policies of the TSXV.

 

 

(ii)

Yerbaé has not taken any action to cease to be a reporting issuer in the provinces of British Columbia or Alberta, nor has Yerbaé received notification from any Governmental Entities seeking to revoke the reporting issuer status of Yerbaé. No delisting, suspension of trading or cease trade or other Order or restriction with respect to any securities of Yerbaé or any Yerbaé Subsidiary is pending, in effect, has been threatened, or is expected to be implemented or undertaken, and Yerbaé is not subject to any formal or informal review, enquiry, investigation or other proceeding relating to Applicable Securities Laws.

 

(iii)

Yerbaé has timely filed or furnished all of the Yerbaé Public Record required to be filed or furnished by Yerbaé with any Governmental Entity, except as disclosed to Safety Shot. Each of the filings comprising the Yerbaé Public Record, as filed, complied with Applicable Law and did not, as of the date filed (or, if amended or superseded by a subsequent filing prior to the date of this Agreement, on the date of such filing), contain any misrepresentation.

 

(iv)

Yerbaé has not filed any confidential material change report (which at the date of this Agreement remains confidential) or any other confidential filings (including redacted filings) filed with or furnished to any Governmental Entity. There are no outstanding or unresolved comments in comment letters from any Governmental Entity with respect to any of the Yerbaé Public Record and, to the knowledge of Yerbaé, neither Yerbaé nor anything contained in Yerbaé Public Record is the subject of an ongoing audit, review, comment or investigation by any Governmental Entity.

 

(l)

No Collateral Benefit. Except for the persons disclosed in Section 5.2(l) of the Yerbaé Disclosure Letter, no related party of Yerbaé (within the meaning of MI 61-101), together with its associated entities, beneficially owns or exercises control or direction over 1% or more of the outstanding Yerbaé Shares, except for related parties who will not receive a “collateral benefit” (within the meaning of MI 61-101) as a consequence of the transactions contemplated by this Agreement. The Yerbaé Disclosure Letter sets forth all Yerbaé Shares that are required by MI 61-101 to be excluded from voting on the Arrangement Resolution.

 

(m)

U.S. Securities Law Matters.

 

(i)

The Yerbaé Shares are registered pursuant to Section 12(g) of the U.S. Exchange Act and Yerbaé is in compliance with its reporting obligations pursuant to Section 13 of the U.S. Exchange Act.

 

(ii)

Other than the Yerbaé Shares, Yerbaé does not have, nor is it required to have, any class of securities registered under the U.S. Exchange Act, nor is Yerbaé subject to any reporting obligations (whether active or suspended) pursuant to Section 15(d) of the U.S. Exchange Act.

 

(iii)

Yerbaé is not an investment company registered or required to be registered under the U.S. Investment Company Act of 1940.

 

 

(iv)

Yerbaé is not, and on the Effective Date will not be a “shell company” (as defined in Rule 405 under the U.S. Securities Act).

 

(n)

Financial Statements.

 

(i)

The Yerbaé Financial Statements fairly present, in accordance with U.S. GAAP, consistently applied, the financial position and condition of Yerbaé at the dates thereof and the results of the operations of Yerbaé for the periods then ended and reflect, in accordance with U.S. GAAP, consistently applied, all material assets, Liabilities or obligations (absolute, accrued, contingent or otherwise) of Yerbaé, as at the dates thereof.

 

(ii)

Neither Yerbaé nor, to Yerbaé’s knowledge, any director, officer, Employee, auditor, accountant or representative of Yerbaé, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion, expression of concern or claim from any source, whether written or oral, regarding the accounting, internal accounting controls or auditing practices, procedures, methodologies or methods of Yerbaé or the Yerbaé Subsidiaries, including any material complaint, allegation, assertion, expression of concern or claim from any source that Yerbaé has engaged in questionable accounting or auditing practices, which has not been resolved to the satisfaction of the Yerbaé Board.

 

(o)

Litigation. To the knowledge of Yerbaé, there are no investigations by Governmental Entities, actions, suits or proceedings in progress, pending or threatened against Yerbaé or any of the Yerbaé Subsidiaries, which if successful, would reasonably be expected to have a Yerbaé Material Adverse Effect or would significantly impede the ability of Yerbaé to consummate the Arrangement.

 

(p)

Undisclosed Liabilities. There are no Liabilities or obligations of Yerbaé of any kind whatsoever whether accrued, contingent, absolute, determined, determinable or otherwise, other than Liabilities or obligations: (i) disclosed in the Yerbaé Financial Statements; (ii) incurred in the ordinary course of business since September 30, 2024; (iii) incurred in connection with this Agreement; or (iv) that would not be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect.

 

(q)

No Restrictions on Business. Neither Yerbaé nor any Yerbaé Subsidiary is a party to or bound or affected by any commitment, agreement, judgment, injunction, order, decree or document binding upon Yerbaé or such Yerbaé Subsidiary that has or could reasonably be expected to have the effect of prohibiting, restricting or impairing its business, or individually or in the aggregate, having a Yerbaé Material Adverse Effect or containing any covenant expressly prohibiting, restricting or limiting its freedom or ability to: (i) compete in any line of business or geographic region; (ii) transfer or move any of the assets or operations; (iii) conduct any business practice of Yerbaé or such Yerbaé Subsidiary as now conducted; or (iv) effect any acquisition of property by Yerbaé or such Yerbaé Subsidiary (including following the transactions contemplated by this Agreement).

 

(r)

Real Property.

 

(i)

Except as would not be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect: (A) Yerbaé and the Yerbaé Subsidiaries, as applicable, have valid, good and marketable title to all of the real or immovable property owned by them (collectively, the “Yerbaé Owned Properties”) free and clear of any Liens, except for Permitted Liens; and (B) there are no outstanding options or rights of first refusal to purchase the Yerbaé Owned Properties or any portion thereof or interest therein.

 

 

(ii)

Except as would not be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect: (A) each lease or sublease for real and immovable property leased or subleased by Yerbaé or any Yerbaé Subsidiaries creates a good and valid leasehold estate in the premises thereby demised and is in full force and effect; (B) none of Yerbaé or any Yerbaé Subsidiaries is in breach of, or default under, such lease or sublease and no event has occurred which, with notice, lapse of time or both, would constitute such a breach or default by Yerbaé or any Yerbaé Subsidiaries or permit termination, modification or acceleration by any third party thereunder; and (C) to the knowledge of Yerbaé, no third party has repudiated or has the right to terminate or repudiate any such lease or sublease (except for the normal exercise of remedies in connection with a default thereunder or any termination rights set forth in the lease or sublease) or any provision thereof.

 

(s)

Personal Property. Yerbaé and the Yerbaé Subsidiaries have valid, good and marketable title to all personal property owned by them, except as would not, individually or in the aggregate, be reasonably expected to have a Yerbaé Material Adverse Effect.

 

(t)

Intellectual Property.

 

(i)

Schedule 5.2(t)(i) of the Yerbaé Disclosure Letter contains a complete and correct list of all registrations and applications for patents, trademarks, trade names, service marks, service names, brand names, copyrights, know-how and software, and any other material Intellectual Property used or held for use in the operation of Yerbaé’s business, together with a complete list of all licenses granted by or to Yerbaé with respect to any of the foregoing (other than licenses and shrink wrap licenses for commercial off-the-shelf software products with annual fees of less than $50,000). Schedule 5.2(t)(i) of the Yerbaé Disclosure Letter also lists for each such item, where applicable, (A) the name of the record owner; (B) the applicable application, registration or serial or other similar identification number; (C) the jurisdiction in which such item has been registered or filed; (D) the date of filing or issuance; and (E) a list of any approvals required with respect to any content incorporated into any item set forth on Schedule 5.2(t)(ii) of the Yerbaé Disclosure Letter and, if any such approval is required, the name and contact information associated therewith.

 

(ii)

Schedule 5.2(t)(ii) of the Yerbaé Disclosure Letter contains the following information: (A) a list of any and all domain names associated with Yerbaé; (B) contact information for the domain owner responsible for authorizing transfer, unlocking the domain and providing Safety Shot with the domain key; (C) a list of any existing websites social media pages (e.g., Facebook, Twitter, LinkedIn, etc.) and a description of any intranet for Yerbaé (if any exist); (D) contact information for the owner of each item included in subsection (C) above and administrative access to the accounts relating thereto (login information); and (E) a list of any approvals required with respect to any content incorporated into any item set forth on Schedule 5.2(t)(ii) of the Yerbaé Disclosure Letter and, if any such approval is required, the name and contact information associated therewith.

 

 

(iii)

(A) Yerbaé and the Yerbaé Subsidiaries, as applicable, own or possess, or have an exclusive licence to or otherwise have the exclusive right to use, all Intellectual Property which is material to and necessary for the conduct of its business as presently conducted (collectively, the “Yerbaé Intellectual Property Rights”) in each case without payment obligations to any third party, free and clear of any Liens as of the Effective Date, and not subject to termination by any third party; (B) all such Yerbaé Intellectual Property Rights that are registrations and applications for patents, trademarks, trade names, service marks, service names, brand names, copyrights, know-how and software (collectively, the “Yerbaé Registered IP”) are owned by Yerbaé or the Yerbaé Subsidiaries and are valid and enforceable; (C) no third party is infringing upon the Yerbaé Intellectual Property Rights; (D) there is no pending or threatened, action, suit, proceeding or claim by others challenging Yerbaé’s or any of the Yerbaé Subsidiaries’ rights in or to any Yerbaé Intellectual Property Rights, and Yerbaé and the Yerbaé Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; (E) the Yerbaé Intellectual Property Rights have not been adjudged invalid or unenforceable, in whole or in part, and there is no pending or, threatened action, suit, proceeding or claim by others challenging the validity or scope of any Yerbaé Intellectual Property Rights, and Yerbaé and the Yerbaé Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; (F) there is no pending or threatened action, suit, proceeding or claim by others that Yerbaé or any of the Yerbaé Subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property or other proprietary rights of others, neither Yerbaé nor any of the Yerbaé Subsidiaries has received any written notice of such claim and Yerbaé the Yerbaé Subsidiaries are unaware of any other facts which would form a reasonable basis for any such claim; and (G) no current or former Employee or contractor of Yerbaé or any of the Yerbaé Subsidiaries is in or has been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such Employee or contractor’s employment with Yerbaé or any of the Yerbaé Subsidiaries or actions undertaken by the Employee or contractor while employed with Yerbaé or any of the Yerbaé Subsidiaries.

 

(iv)

Yerbaé and the Yerbaé Subsidiaries have taken commercially reasonable steps in accordance with normal industry practice to maintain, protect and enforce their rights in any trade secrets in Yerbaé’s Intellectual Property, and there has been no unauthorized disclosure to any third party of the same.

 

(v)

All Persons who have participated in or contributed to the creation, authorship, conception, or development for or on behalf of Yerbaé or any of the Yerbaé Subsidiaries of any Yerbaé Intellectual Property, in whole or in part, have executed and delivered to Yerbaé or the applicable Yerbaé Subsidiary a Contract (A) restricting the disclosure and use by such Person of any trade secrets in the Yerbaé Intellectual Property and (B) providing for the irrevocable and unconditional assignment, using present tense assignment language, by such Person to Yerbaé or the applicable Yerbaé Subsidiary of all right, title, and interest in and to all Yerbaé Intellectual Property Rights arising out of such Person’s employment by, engagement by, or contract with Yerbaé or any Yerbaé Subsidiary, or where such rights, including moral rights, are incapable of assignment, they have been waived. No funding, facilities or personnel of any Governmental Entities were used by Yerbaé to develop any Yerbaé Intellectual Property Rights. Yerbaé or any of the Yerbaé Subsidiaries is not now nor has ever been a member or promoter of, or a contributor to, any industry standards body or any similar organization that would reasonably be expected to require or obligate Yerbaé or any of the Yerbaé Subsidiaries to grant or offer to any other Person any license or right to any Yerbaé Intellectual Property Rights owned by Yerbaé or any of the Yerbaé Subsidiaries.

 

 

(vi)

The consummation of the transactions contemplated by the Arrangement Agreement will not cause a modification, cancellation, termination, suspension or acceleration of any right, obligation or payment with respect to any Yerbaé Intellectual Property Rights.

 

(u)

Employment Matters.

 

(i)

Section 5.2(u)(i) of the Yerbaé Disclosure Letter sets forth a complete and accurate list of all current Yerbaé employees and each such Employee’s (a) classification as exempt or non-exempt from the US Fair Labor Standards Act and applicable state law and, if exempt, the basis for such exemption; (b) rate of hourly pay or annual salary compensation; (c) terms of incentive compensation (including actual or potential bonus payments and the terms of any commission payments or programs); (d) title(s); (e) location of employment; (f) date of hire; (g) annual vacation, sick and other paid time off allowance; (h) amount of accrued vacation, sick and other paid time off and the economic value thereof; (i) description of other fringe benefits; (j) terms of severance benefits; (k) participation in any Employee Plan; and (l) whether the Employee is on a leave of absence, and if the Employee is on a leave, the classification of such leave and the expected date of the Employee’s return.

 

(ii)

Other than as disclosed in the Yerbaé Disclosure Letter, all Employees of Yerbaé are employed at will. No Employee of Yerbaé has any agreement as to length of notice or severance payment required to terminate his or her employment other than such as results from Applicable Law from the employment of an employee without an agreement as to notice or severance.

 

(iii)

Each Yerbaé Employee that has been classified as exempt from the Fair Labor Standards Act or any analogous Applicable Law during the three (3) years prior to the date of this Agreement has been properly classified as exempt and has been paid solely as a salaried employee. Yerbaé and the Yerbaé Subsidiaries have kept and retained accurate time records for the number of hours worked by each Yerbaé Employee who is classified as non-exempt from the Fair Labor Standards Act or any analogous Applicable Laws during the three (3) years prior to the date of this Agreement.

 

 

(iv)

Other than as disclosed in the Yerbaé Disclosure Letter, there are no change of control payments, golden parachutes, severance payments, retention payments, Contracts or other agreements with current or former Yerbaé Employees providing for cash or other compensation or benefits upon the consummation of, or relating to, the Arrangement, including a change of control of Yerbaé or any of the Yerbaé Subsidiaries, including the transaction contemplated by this Agreement.

 

(v)

Yerbaé and the Yerbaé Subsidiaries have paid in full, in compliance with their payroll practices and Applicable Law, all amounts due to the Yerbaé Employees, including but not limited to any wages, benefits, encashment of leaves, severance and notice pay, and there are no outstanding Liabilities whatsoever, with respect thereto, or any claims with respect thereof. All amounts that Yerbaé and the Yerbaé Subsidiaries are legally or contractually required to either (a) deduct from the Yerbaé Employees’ salaries and any other compensation or benefit or to transfer to such employees pursuant to an Employee Plan or (b) withhold from the Yerbaé Employees’ salaries and any other compensation or benefits and to pay to any Governmental Entity as required by any Applicable Law, have been duly deducted, transferred, withheld and paid, and Yerbaé and the Yerbaé Subsidiaries do not have any outstanding obligation to make any such deduction, transfer, withholding or payment (other than routine payments, deductions or withholdings to be timely made in the ordinary course of business and consistent with Applicable Law).

 

(vi)

Yerbaé and the Yerbaé Subsidiaries are in material compliance with all terms and conditions of employment and all Applicable Laws respecting employment, including hiring practices, pay equity, wages, hours of work, overtime, vacation, parental and family leave and pay, harassment, discrimination or retaliation, whistleblowing, disability rights or benefits, equal opportunity, employee trainings and notices, workers’ compensation, affirmative action, unemployment insurance and workers compensation.

 

(vii)

For the three (3) years prior to the date of this Agreement, there have been no charges and no charge is currently pending under applicable occupational health and safety legislation. Yerbaé has complied in all material respects with any orders issued under applicable occupational health and safety legislation and there are no appeals of any orders under applicable occupational health and safety legislation currently outstanding.

 

(viii)

For the three (3) years prior to the date of this Agreement, there have been no Yerbaé Employee related claims, complaints, investigations or orders under any Applicable Laws respecting employment and no claim, complaint, investigation or order is now pending or, to the knowledge of Yerbaé, threatened against Yerbaé and the Yerbaé Subsidiaries by or before any Governmental Entity as of the date of this Agreement and, as of the date of this Agreement, no such claims, complaints, investigations or orders could reasonably be expected to have a Yerbaé Material Adverse Effect. For the three (3) years prior to the date of this Agreement, Yerbaé and the Yerbaé Subsidiaries have addressed in all material respects all employment discrimination and sexual harassment allegations by, or against, any Yerbaé Employee of which Yerbaé has knowledge as required in accordance with applicable policies and procedures and Applicable Law. With respect to each such allegation with potential merit, Yerbaé and the Yerbaé Subsidiaries have taken prompt corrective actions intended to stop and/or redress the discriminatory or harassing conduct as required in accordance with applicable policies and procedures and Applicable Law.

 

 

(ix)

None of Yerbaé or the Yerbaé Subsidiaries is: (A) a party to any collective bargaining agreement with respect to any Yerbaé Employees or any contract with any employee association; or (B) is subject to any application for certification or, to the knowledge of Yerbaé, threatened or apparent union-organizing campaigns for employees not covered under a collective bargaining agreement and no trade union, council of trade unions, employee bargaining agency or affiliated bargaining agent holds bargaining rights with respect to any employees of Yerbaé by way of certification, voluntary recognition or succession rights. There is no labour strike, dispute, work slowdown or stoppage pending or involving, or to the knowledge of Yerbaé threatened against Yerbaé or any of the Yerbaé Subsidiaries. For the three (3) years prior to the date of this Agreement, there have not been and to the knowledge of Yerbaé there are no threatened charges or complaints before the National Labor Relations Board or analogous state or foreign Governmental Entity.

 

(x)

Each current Yerbaé Employee, consultant or independent contractor who is located in the United States and is not a United States citizen has all approvals necessary to work in the United States in accordance with Applicable Law. Yerbaé and the Yerbaé Subsidiaries have in their files a Form I-9 that is validly and properly completed in accordance with Applicable Law for each Yerbaé Employee, consultant or independent contractor with respect to whom such form is required by Applicable Law. Yerbaé and the Yerbaé Subsidiaries have verified the eligibility of all individuals employed by any of them within the three (3) years prior to the date of this Agreement through the U.S. Department of Homeland Security’s e-Verify system.

 

(xi)

Yerbaé has provided a complete and accurate list of all current consultants or independent contractors of Yerbaé and the Yerbaé Subsidiaries, which consultant or independent contractor is a natural person or is providing services through a personal services company, and provided each such individual’s (a) rate of pay; (b) incentive compensation (including actual or potential bonus payments and the terms of any commission payments or programs); (c) title(s) (if any); (d) location of engagement; (e) date of engagement; and (f) terms under which such individual’s services are terminable. Each person who is or has been classified as an independent contractor, or as any other non-employee category, by Yerbaé or the Yerbaé Subsidiaries is or has been correctly so classified, is not a common law Employee of Yerbaé or the Yerbaé Subsidiaries, is not entitled to any compensation or benefits to which regular Employees are or were at the relevant time entitled, and is and has been engaged in accordance with all Applicable Laws.

 

 

(v)

Material Contracts and Other Contracts. True and correct copies of all Yerbaé Material Contracts entered into by Yerbaé and the Yerbaé Subsidiaries have been included in the Yerbaé Information and:

 

(i)

such Yerbaé Material Contracts are valid and binding obligations of Yerbaé or the applicable Yerbaé Subsidiary, and Yerbaé has no reason to believe that such Yerbaé Material Contracts are not, valid and binding obligations of each other party thereto;

 

(ii)

neither Yerbaé nor, to the knowledge of Yerbaé, any of the other parties thereto (including any Yerbaé Subsidiary), is in breach or violation of, or default under (in each case, with or without notice or lapse of time or both) any such Yerbaé Material Contract and Yerbaé has not received or given any notice of a default under any such Yerbaé Material Contract which remains uncured; and

 

(iii)

to the knowledge of Yerbaé, there exists no state of facts which after notice or lapse of time or both would constitute a default or breach of any Yerbaé Material Contract or entitle any party to terminate, accelerate, modify or cause a default under, or trigger any pre-emptive rights or rights of first refusal under, any such Yerbaé Material Contracts.

 

(w)

Public Disclosure. The information and statements set forth in the Yerbaé Public Record were true, correct and complete, and did not contain any misrepresentation, as of the date of such information or statement.

 

(x)

No Material Change. Since the date of the latest Yerbaé Financial Statements:

 

(i)

there has not been any Yerbaé Material Adverse Change (on a consolidated basis) and as of the date of this Agreement, there have been no material facts, transactions, events or occurrences which, to the knowledge of Yerbaé, would reasonably be expected to have a Yerbaé Material Adverse Effect (on a consolidated basis);

 

(ii)

Yerbaé and the Yerbaé Subsidiaries have not issued, sold, transferred, disposed of, acquired, redeemed, granted options or rights to purchase, rights of first refusal or subscription rights, or sold any securities of Yerbaé or the Yerbaé Subsidiaries (or securities convertible into or exchangeable for Yerbaé Shares) or permitted any reclassifications of any securities of Yerbaé or any of the Yerbaé Subsidiaries;

 

(iii)

Yerbaé and the Yerbaé Subsidiaries have not amended or modified their constating documents;

 

(iv)

Yerbaé and the Yerbaé Subsidiaries have not declared, paid or otherwise set aside for payment any non-cash dividend or other non-cash distribution with respect to the Yerbaé Shares or any other equity securities;

 

(v)

Yerbaé and the Yerbaé Subsidiaries have not merged or consolidated with, or acquired all or substantially all the assets of, or otherwise acquired, any business, business organization or division thereof, or any other Person;

 

 

(vi)

other than as disclosed in the Yerbaé Disclosure Letter, there has not been any material increase in the salary, bonus or other remuneration payable by Yerbaé or any of the Yerbaé Subsidiaries to any of their respective directors, officers, Employees or consultants, and there has not been any amendment or modification to the vesting or exercisability schedule or criteria, including any acceleration, right to accelerate or acceleration event or other entitlement under any stock option, deferred compensation or other compensation award or any grant to such director, officer, Employee or consultant of any increase in severance or termination pay or any increase or modification of any bonus, pension, insurance or benefit arrangement made to, for or with any of such directors, officers, Employees or consultants;

 

(vii)

no liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) which has had, or is reasonably likely to have, individually or in the aggregate, a Yerbaé Material Adverse Effect has been incurred;

 

(viii)

there has not been any material change to the accounting practices used by Yerbaé and the Yerbaé Subsidiaries;

 

(ix)

there has not been any entering into, or any amendment of, any Yerbaé Material Contract other than in the ordinary course of business consistent with past practice;

 

(x)

there has not been any satisfaction or settlement of any material claims or material Liabilities, other than the settlement of claims or Liabilities in the ordinary course of business; and

 

(xi)

Yerbaé and the Yerbaé Subsidiaries have conducted their business only in the ordinary and normal course consistent with past practice, except for the transactions contemplated by this Agreement.

 

(y)

Taxes.

 

(i)

Yerbaé and the Yerbaé Subsidiaries have timely filed, all material Tax Returns prior to the date hereof, other than those which have been administratively waived, and all such Tax Returns are true, complete and correct and are in accordance with Applicable Law in all material respects;

 

(ii)

Yerbaé and the Yerbaé Subsidiaries have paid on a timely basis all Taxes and all assessments and reassessments of Taxes due on or before the date hereof, other than Taxes which are being or have been contested in good faith and for which adequate accruals have been provided in the Yerbaé Financial Statements. Yerbaé and the Yerbaé Subsidiaries have provided adequate accruals in accordance with U.S. GAAP in the most recent Yerbaé Financial Statements for any Taxes of Yerbaé and each of the Yerbaé Subsidiaries for the period covered by such financial statements that have not been paid whether or not shown as being due in any Tax Returns. Since the date of the most recent Yerbaé Financial Statements, no material liability in respect of Taxes not reflected in such financial statements or otherwise provided for has been assessed, proposed to be assessed, incurred or accrued, other than in the ordinary course of business;

 

 

(iii)

Yerbaé and the Yerbaé Subsidiaries have duly and timely withheld, or caused to be withheld, all material amounts of Taxes required by Applicable Law to be withheld by it (including Taxes and other amounts required to be withheld by it in respect of any amount paid or credited or deemed to be paid or credited by it to or for the account of any Person, including any present or former Employees, officers or directors and any Persons who are non-residents of Canada for the purpose of the Tax Act) and duly and timely remitted, or caused to be remitted, to the appropriate Taxing Authority such Taxes required by Applicable Law to be remitted by it;

 

(iv)

Yerbaé and the Yerbaé Subsidiaries have duly and timely collected, or caused to be collected, all material amounts of sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by Applicable Law to be collected by it and duly and timely remitted to the appropriate Taxing Authority any such amounts required by Applicable Law to be remitted by it;

 

(v)

there are no audits or investigations in progress, or to the knowledge of Yerbaé, pending or threatened by any Governmental Entity with respect to Taxes against Yerbaé or any Yerbaé Subsidiary or any of the assets of Yerbaé or any Yerbaé Subsidiary; and to the knowledge of Yerbaé, no deficiencies, litigation, proposed adjustments or matters in controversy with respect to any amount of Taxes of Yerbaé or any Yerbaé Subsidiary have been asserted or have been raised by any Governmental Entity which remain unresolved at the date hereof, except, in each case, as are being contested in good faith and for which adequate accruals have been provided in the Yerbaé Financial Statements;

 

(vi)

there are no currently effective elections, agreements or waivers extending the statutory period or providing for an extension of time with respect to the assessment or reassessment of any amount of Taxes of, or the filing of any Tax Return or any payment of any amount of Taxes by, Yerbaé or any Yerbaé Subsidiary;

 

(vii)

Yerbaé is, and has been since incorporation, a “taxable Canadian corporation” as defined in the Tax Act;

 

(viii)

there are no circumstances existing which could result in additional Taxes owing as a result of the application of Section 17, Section 18(4), Section 78, Section 79, Sections 80 to 80.04 or Section 245 of the Tax Act to each of Yerbaé and the Yerbaé Subsidiaries;

 

(ix)

there are no Liens for Taxes upon any of the assets of Yerbaé or any of the Yerbaé Subsidiaries;

 

(x)

none of Yerbaé or any Yerbaé Subsidiaries have engaged in any “reportable transaction” as defined in Section 237.3(1) of the Tax Act (or any comparable provision of any other applicable Law, including U.S. Treasury Regulations Section 1.6011-4(b)(1)) or any “notifiable transaction” as defined in Section 237.4(1) of the Tax Act (or any comparable provision of any other Applicable Law);

 

 

(xi)

Yerbaé and each of the Yerbaé Subsidiaries have complied in all material respects with relevant transfer pricing laws (including, Section 247 of the Tax Act), including any documentation and record keeping requirements thereunder; and

 

(xii)

Yerbaé has not either directly or indirectly transferred any property to or supplied any services to or acquired any property or services from a Person with whom it was not dealing at arm’s length (for the purposes of the Tax Act) for consideration other than consideration equal to the fair market value of the property or services at the time of the transfer, supply or acquisition of the property or services.

 

(z)

Corporate Records. The corporate records and minute books, books of account and other records of Yerbaé and each Yerbaé Subsidiary have (whether of a financial or accounting nature or otherwise) been maintained in accordance with, in all material respects, all Applicable Law and prudent business practice and are complete and accurate in all material respects. Copies of the constating documents of Yerbaé and each Yerbaé Subsidiary, together with all amendments to date, which are included in the Yerbaé Information, are accurate and complete in all material respects and have not been amended or superseded.

 

(aa)

Insurance. Policies of insurance are in force naming Yerbaé as an insured that adequately cover all risks as are customarily covered by businesses in the industry in which Yerbaé operates and Yerbaé and the Yerbaé Subsidiaries are in compliance in all material respects with all requirements with respect to such policies. All such policies shall remain in force and effect (subject to taking into account insurance market conditions and offerings and industry practices) and shall not be cancelled or otherwise terminated as a result of the Arrangement. To the knowledge of Yerbaé, each material insurance policy currently in effect that insures the physical properties, business, operations and assets of Yerbaé and the Yerbaé Subsidiaries is valid and binding and in full force and effect and there is no material claim pending under any such policies as to which coverage has been questioned, denied or disputed. There is no material claim pending under any insurance policy of Yerbaé or any Subsidiary that has been denied, rejected, questioned, or disputed by any insurer or as to which any insurer has made any reservation of rights or refused to cover all or any material portion of such claims.

 

(bb)

Employee Plans.

 

(i)

Except as would not be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect, all of the Employee Plans are and have been established, registered, qualified and administered in accordance with all Applicable Law and in accordance with their terms, the terms of the material documents that support such Employee Plans and the terms of agreements between Yerbaé and the Yerbaé Subsidiaries and Yerbaé Employees (present and former) who are members of, or beneficiaries under, the Employee Plans. To the knowledge of Yerbaé, no fact or circumstance exists which could adversely affect the registered status of any such Employee Plan. Neither Yerbaé nor, to the knowledge of Yerbaé, any of its agents or delegates, has breached any fiduciary obligation with respect to the administration or investment of any Employee Plan.

 

 

(ii)

Except as would not be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect: (A) all current obligations of Yerbaé regarding the Employee Plans have been satisfied; and (B) all contributions, premiums or Taxes required to be made or paid by Yerbaé by Applicable Law or under the terms of each Employee Plan have been made in a timely fashion in accordance with Applicable Law and the terms of the applicable Employee Plan.

 

(iii)

There are no material pension or retirement income plans of Yerbaé.

 

(iv)

To the knowledge of Yerbaé, no Employee Plan is subject to any pending investigation, examination, action, claim (including claims for Taxes, interest, penalties or fines) or any other proceeding initiated by any Person (other than routine claims for benefits) which, if adversely determined, would be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect and, to the knowledge of Yerbaé, there exists no state of facts which could reasonably be expected to give rise to any such investigation, examination, action, claim or other proceeding.

 

(v)

Except as provided in this Agreement, the execution, delivery and performance of this Agreement and the consummation of the Arrangement will not: (A) result in any material payment (including bonus, golden parachutes, retirement, severance, unemployment compensation or other benefit or enhanced benefit) becoming due or payable to any of the Yerbaé Employees (present or former); (B) materially increase the compensation or benefits otherwise payable to any Yerbaé Employee (present or former); or (C) result in the acceleration of the time of payment or vesting of any material benefits or entitlements otherwise available pursuant to any Employee Plan.

 

(vi)

None of the Employee Plans provide for retiree or post-termination benefits or for benefits to retired or terminated Employees or to the beneficiaries or dependants of retired or terminated Employees.

 

(vii)

All current obligations of Yerbaé regarding the Employee Plans have been satisfied, and all contributions, premiums or Taxes required to be made or paid by Yerbaé by Applicable Law or under the terms of each Employee Plan have been made in a timely fashion in accordance with Applicable Law and the terms of the applicable Employee Plan.

 

(cc)

Environmental Matters. Except as would not be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect: (i) no written notice, order, complaint or penalty has been received by Yerbaé or any of the Yerbaé Subsidiaries alleging that Yerbaé or any of the Yerbaé Subsidiaries is in violation of, or has any liability or potential liability under, any Environmental Laws and there are no judicial, administrative or other actions, suits or proceedings pending or, to the knowledge of Yerbaé, threatened against Yerbaé or any of the Yerbaé Subsidiaries which alleges a violation of, or any liability or potential liability under, any Environmental Laws; (ii) Yerbaé and each of the Yerbaé Subsidiaries has all environmental permits necessary for the operation of their respective businesses and to comply with all Environmental Laws; and (iii) the operations of Yerbaé and each of the Yerbaé Subsidiaries are in compliance with Environmental Laws.

 

 

(dd)

No Dividends. Since December 31, 2023, Yerbaé has not declared, paid or resolved to declare or pay any dividends or distributions.

 

(ee)

Related Party Transactions. Other than as disclosed in the Yerbaé Disclosure Letter, no officer, director or Employee of Yerbaé, or any Affiliate of such officer, director or Employee: (i) is a party to any contract or transaction with Yerbaé (other than services as Employees, officers or directors); (ii) has any ownership interest in any property, real or personal or mixed, tangible or intangible, used by Yerbaé or any Yerbaé Subsidiary in its business; or (iii) is indebted to Yerbaé or any Yerbaé Subsidiary.

 

(ff)

Brokers. Other than as set out in Schedule 4.2(dd) of the Yerbaé Disclosure Letter, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission from, or to the reimbursement of any of its expenses by, Yerbaé in connection with this Agreement or the Arrangement.

 

(gg)

Anti-Corruption.

 

(i)

Neither Yerbaé nor any Yerbaé Subsidiary has, directly or indirectly: (A) made, offered or authorized any contribution, payment, promise, advantage or gift of funds or property to any official, employee or agent of any Governmental Entity of any jurisdiction or any official of any public international organization; or (B) made any contribution to any candidate for public office, in either case where either the payment or the purpose of such contribution, payment, promise, advantage or gift would violate, or was or would be prohibited under, Applicable Law, including the principles described in the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the Convention’s Commentaries, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the Corruption of Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) or the rules and regulations promulgated thereunder.

 

(ii)

No action, suit or proceeding by or before any court or Governmental Entity or any arbitrator involving Yerbaé or any Yerbaé Subsidiary is pending or threatened under any applicable financial recordkeeping and reporting requirements and under all applicable money laundering laws and statutes and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity, whether in Canada or other jurisdictions.

 

(iii)

None of Yerbaé, any Yerbaé Subsidiary, nor any director, officer, agent, Employee or any other Person acting on behalf of Yerbaé, or any Yerbaé Subsidiary has been or is the subject of any sanctions administered by the OFAC (including but not limited to the designation as a “specially designated national or blocked person” thereunder), the Government of Canada, Her Majesty’s Treasury, the European Union or any other relevant sanctions authority; and none of Yerbaé or any Yerbaé Subsidiary is in violation of any of the economic sanctions of the United States administered by OFAC or Economic Sanctions or is conducting business with any Person subject to any Economic Sanctions.

 

 

(hh)

Equity Monetization Plans. Other than as disclosed in the Yerbaé Disclosure Letter, there are no outstanding stock appreciation rights, phantom equity, profit sharing plan or similar rights, agreements, arrangements or commitments payable to any Employee and which are based upon the revenue, value, income or any other attribute of Yerbaé or any Yerbaé Subsidiary.

 

(ii)

Rights Plans. Yerbaé does not have any similar type of shareholder rights plan. Yerbaé will not adopt any shareholder rights plan or any other similar form of plan, agreement, Contract or instrument that will trigger any rights to acquire Yerbaé Shares or other securities of Yerbaé or any Yerbaé Subsidiary upon the entering into of this Agreement or in connection with the Arrangement.

 

(jj)

Investment Company. None of Yerbaé or any Yerbaé Subsidiary is registered or required to be registered as an “investment company” pursuant to the United States Investment Company Act of 1940, as amended.

 

(kk)

Yerbaé Fairness Opinion. The Yerbaé Board has received the Yerbaé Fairness Opinion, the conclusion of which has been communicated to Safety Shot and a true and complete copy of which, when executed and delivered in writing, will be made available to Safety Shot, and the Yerbaé Fairness Opinion has not been withdrawn or modified.

 

(ll)

Shareholder Agreements. There are no shareholders agreements, registration rights agreements, voting trusts, proxies or similar agreements, arrangements, or commitments to which Yerbaé is a party or, to the knowledge of Yerbaé, with respect to any shares or other equity interests of Yerbaé or any other Contract relating to disposition, voting or dividends with respect of any equity securities of Yerbaé.

 

(mm)

Competition Act. Yerbaé, together with its Affiliates, as such term is defined under the Competition Act, neither have assets in Canada with an aggregate value in excess of CAD$93,000,000 nor aggregate gross revenues from sales in, from or into Canada in excess of CAD$93,000,000, as determined in accordance with the Competition Act.

 

(nn)

Long-term Debt. Other than as set out in Section 5.2(nn) of the Yerbaé Disclosure Letter, as of the Effective Date, Yerbaé shall have no long-term Indebtedness outstanding.

 

(oo)

Transaction Expenses. As of the Effective Date, the outstanding and unpaid Transaction Expenses of Yerbaé shall be equal to or less than $500,000.

 

 

(pp)

Research Studies. The research studies conducted by or on behalf of, or sponsored by, Yerbaé or any Yerbaé Subsidiary, or in which Yerbaé or any Yerbaé Subsidiary have participated, as applicable, were and, if still pending, are being, conducted in all material respects in accordance with applicable experimental protocols, procedures and controls pursuant to, where applicable, accepted professional and scientific standards for products or product candidates comparable to those being developed by Yerbaé or any Yerbaé Subsidiary and all applicable statutes, rules and regulations to which they are subject, and none of Yerbaé or any Yerbaé Subsidiary has received any written notices or correspondence from any federal, provincial, state, local or foreign governmental body exercising authority or any institutional review board or comparable authority requiring or threatening the premature termination, suspension, material modification or clinical hold of any research studies conducted by or on behalf of, or sponsored by, Yerbaé or any Yerbaé Subsidiary or in which Yerbaé or any Yerbaé Subsidiary has participated, and to Yerbaé or any Yerbaé Subsidiary’s knowledge, there are no reasonable grounds for the same. There has not been any violation of Applicable Law or regulation by any of Yerbaé or any Yerbaé Subsidiary in its product development efforts, submissions or reports to any regulatory authority that could reasonably be expected to require investigation, corrective action or enforcement action, except where such violation would not be reasonably expected to have, individually or in the aggregate, a Yerbaé Material Adverse Effect.

 

(qq)

Suppliers and Distributors. No supplier or distributor has notified Yerbaé or any Yerbaé Subsidiary, and to the knowledge of Yerbaé or any Yerbaé Subsidiary, as the case may be, there is no reason to believe that any such supplier or distributor will not continue dealing with Yerbaé or any Yerbaé Subsidiary on substantially the same terms as presently conducted, subject to changes in pricing and volume in the ordinary course.

 

(rr)

Governmental Licences. Yerbaé and each Yerbaé Subsidiary possess or has applied for all Permits, licences, approvals, consents and other Authorizations (collectively, “Governmental Licences”) issued by the appropriate federal, provincial, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, except where the failure to hold such Governmental Licences would not, individually or in the aggregate, result in a Yerbaé Material Adverse Effect in respect of Yerbaé or any Yerbaé Subsidiary, as applicable. Yerbaé and each Yerbaé Subsidiary is in compliance with the terms and conditions of all such Governmental Licences, except where the failure so to comply would not, individually or in the aggregate, result in a Yerbaé Material Adverse Effect in respect of Yerbaé or any Yerbaé Subsidiary, as applicable.

 

(ss)

Non-Reliance. Safety Shot acknowledges that none of Yerbaé, any Yerbaé Subsidiary, nor any Yerbaé Shareholder makes any representation or warranty with respect to Yerbaé, any Yerbaé Subsidiary or the Arrangement other than those expressly set forth in this Section 5.2 or any other agreement or instrument entered into by Yerbaé pursuant to this Agreement, and Safety Shot has not relied on any statement of any Person in entering into this Agreement other than such express representations and warranties.

 

5.3	Survival of Representations and Warranties

 

The representations and warranties of Yerbaé and Safety Shot contained in this Agreement shall not survive the completion of the Arrangement and shall expire and be terminated at the Effective Time. This Section 5.3 shall not limit any undertaking, obligation, covenant or agreement of whatever nature of Yerbaé or Safety Shot which, by its terms, contemplates performance after the Effective Time or date on which this Agreement is terminated, as the case may be.

 

 

Article 6
CONDITIONS PRECEDENT

 

6.1	Mutual Conditions Precedent

 

The respective obligations of the Parties to complete the Arrangement are subject to the satisfaction or mutual waiver, on or before the Effective Date or such other time specified, of the following conditions:

 

(a)

the Interim Order will have been granted in form and substance satisfactory to Safety Shot and Yerbaé, acting reasonably, and such order will not have been set aside or modified in a manner unacceptable to Safety Shot or Yerbaé, each acting reasonably, on appeal or otherwise;

 

(b)

the Arrangement Resolution will have been passed by the Yerbaé Shareholders by the Outside Date in accordance with the Interim Order;

 

(c)

the Safety Shot Stockholder Matters will have been passed by the Safety Shot Stockholder by the Outside Date;

 

(d)

the Final Order will have been granted by the Outside Date in form and substance satisfactory to Safety Shot and Yerbaé, acting reasonably, and such order will not have been set aside or modified in a manner unacceptable to Safety Shot or Yerbaé, each acting reasonably, on appeal or otherwise;

 

(e)

no Governmental Entity shall have enacted, issued, promulgated, enforced or entered any order or law which is then in effect and has the effect of making the Arrangement illegal or otherwise preventing or prohibiting consummation of the Arrangement;

 

(f)

all Regulatory Approvals will have been obtained on terms and conditions satisfactory to each of Safety Shot and Yerbaé, each acting reasonably;

 

(g)

the Consideration Shares to be issued upon the exchange of Yerbaé Shares, shall, subject to customary conditions, have been approved for listing on the NASDAQ; and

 

(h)

the Consideration Shares to be issued pursuant to the Arrangement shall be exempt from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof.

 

6.2	Additional Conditions to Obligations of Safety Shot

 

The obligation of Safety Shot to complete the Arrangement is subject to the fulfillment of each of the following conditions precedent on or before the Effective Time (each of which is for the exclusive benefit of Safety Shot and may be waived by Safety Shot, in whole or in part at any time, in its sole discretion, without prejudice to any other rights which Safety Shot may have):

 

(a)

the representations and warranties of Yerbaé set forth (i) in Section 5.2(a) [Execution and Binding Obligation], Section 5.2(b) [Authorization], Section 5.2(c) [Enforceability], Section 5.2(d) [No Violations], Section 5.2(e) [Subsidiaries], Section 5.2(h) [Authorized and Issued Capital], Section 5.2(ff) [Brokers], Section 5.2(nn) [Long-term Debt] and Section 5.2(oo) [Transaction Expenses] are, as of the date of this Agreement, and will be, as of the Effective Time, true and correct in all respects; and (ii) otherwise in this Agreement (other than those to which clause (i) above applies) are, as of the date of this Agreement, and will be, as of the Effective Time, true and correct, except to the extent that the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, has not had or would not reasonably be expected to have a Yerbaé Material Adverse Effect (and, for this purpose, any reference to “material”, “Yerbaé Material Adverse Effect” or other concepts of materiality in such representations and warranties shall be ignored), and except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of such specified date, and Yerbaé will have delivered a certificate confirming same to Safety Shot, executed by two (2) senior officers of Yerbaé (in each case without personal liability) addressed to Safety Shot and dated the Effective Date;

 

 

(b)

Yerbaé will have complied in all material respects with its covenants herein, and Yerbaé will have delivered a certificate confirming same to Safety Shot, executed by two (2) senior officers of Yerbaé (in each case without personal liability) addressed to Safety Shot and dated the Effective Date;

 

(c)

there shall be no action or proceeding (whether by a Governmental Entity or any other Person) pending or threatened in any jurisdiction to:

 

(i)

cease trade, enjoin or prohibit or impose any limitations, Damages or conditions on, Safety Shot’s ability to acquire, hold or exercise full rights of ownership over, any Yerbaé Shares, including the right to vote the Yerbaé Shares;

 

(ii)

impose terms or conditions on the completion of the Arrangement or on the ownership or operation by Safety Shot of the business or assets of Safety Shot, Yerbaé and any Yerbaé Subsidiaries, Affiliates and related entities; or

 

(iii)

prevent or materially delay the consummation of the Arrangement;

 

(d)

between the date hereof and the Effective Time, there will not have occurred any Yerbaé Material Adverse Effect;

 

(e)

Safety Shot shall have received the Yerbaé Shareholder Support Agreements duly executed by each of the Yerbaé Supporting Securityholders no later than 30 days following the date hereof;

 

(f)

as of the Effective Time, the Yerbaé Supporting Securityholders shall not have breached their obligations or covenants under the Yerbaé Shareholder Support Agreements in any material respect; and

 

(g)

Yerbaé Shareholders have not validly exercised and not withdrawn Dissent Rights with respect to more than 5% of the Yerbaé Shares then outstanding.

 

6.3	Additional Conditions to Obligations of Yerbaé

 

The obligation of Yerbaé to complete the Arrangement is subject to the fulfillment of each of the following conditions precedent on or before the Effective Time (each of which is for the exclusive benefit of Yerbaé and may be waived by Yerbaé, in whole or in part at any time, in its sole discretion, without prejudice to any other rights which Yerbaé may have):

 

(a)

Safety Shot shall have delivered the Consideration Shares in accordance with Section 2.14;

 

 

(b)

the representations and warranties of Safety Shot set forth (i) in Section 5.1(a) [Organization, Status and Qualification], Section 5.1(b) [Authorization], Section 5.1(c) [Enforceability], Section 5.1(d) [No Violations], and Section 5.1(g) [Capitalization] are, as of the date of this Agreement, and will be, as of the Effective Time, true and correct in all respects; and (ii) otherwise in this Agreement (other than those to which clause (i) above applies) are, as of the date of this Agreement, and will be, as of the Effective Time, true and correct, except to the extent that the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, has not had or would not reasonably be expected to have a Safety Shot Material Adverse Effect (and, for this purpose, any reference to “material”, “Safety Shot Material Adverse Effect” or other concepts of materiality in such representations and warranties shall be ignored), and except for representations and warranties made as of a specified date, the accuracy of which shall be determined as of such specified date, and Safety Shot will have delivered a certificate confirming same to Yerbaé, executed by two (2) senior officers of Safety Shot (in each case without personal liability) addressed to Yerbaé and dated the Effective Date;

 

(c)

Safety Shot will have complied in all material respects with its covenants herein, and Safety Shot will have delivered a certificate confirming same to Yerbaé, executed by two (2) senior officers of Safety Shot (in each case without personal liability) addressed to Yerbaé and dated the Effective Date;

 

(d)

between the date hereof and the Effective Time, there will not have occurred any Safety Shot Material Adverse Effect;

 

(e)

there shall be no action or proceeding (whether by a Governmental Entity or any other Person) pending or threatened in any jurisdiction to prevent or materially delay the consummation of the Arrangement; and

 

(f)

Safety Shot shall have appointed Todd Gibson to the Safety Shot Board, with such appointment to become effective as of the Effective Time.

 

6.4	Notice and Effect of Failure to Comply with Conditions

 

(a)

Each Party shall give prompt notice to the other Parties of the occurrence, or failure to occur, at any time from the date hereof to the Effective Date of any event or state of facts which occurrence or failure would, or would be likely to: (i) cause any of the representations or warranties of any Party contained herein to be untrue or inaccurate in any material respect; or (ii) result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by any Party hereunder; provided that, that no such notification will affect the representations or warranties of the Parties or the conditions to the obligations of the Parties hereunder.

 

 

(b)

If any of the conditions precedents set forth in Sections 6.1, 6.2 or 6.3 hereof shall not be complied with or waived by the Party or Parties for whose benefit such conditions are provided on or before the date required for the performance thereof, then a Party for whose benefit the condition precedent is provided may, in addition to any other remedies they may have at law or equity, rescind and terminate this Agreement provided that the Party intending to rely thereon has delivered a written notice to the other Parties, specifying in reasonable detail all breaches of covenants, representations and warranties or other matters which the Party delivering such notice is asserting as the basis for the non-fulfillment of the applicable condition or the availability of a termination right, as the case may be. If any such notice is delivered, provided that a Party is proceeding diligently to cure any such matter capable of being cured, and that has not occurred as a result of a willful breach, to the satisfaction of the other Parties, acting reasonably, no Party may terminate this Agreement if such matter capable of being cured has been cured to the satisfaction of the Parties seeking termination of this Agreement, acting reasonably, prior to the expiration of a period of ten (10) Business Days from the date of receipt of such notice (provided that no such cure period shall extend beyond the Outside Date and no such cure period shall be provided for a breach which by its nature cannot be cured). More than one such notice may be delivered by a Party. If a Party seeking termination of this Agreement hereunder delivers a notice of such termination within ten (10) Business Days of the scheduled date of the Safety Shot Meeting or Yerbaé Meeting, as applicable, unless the Parties agree otherwise and subject to compliance with Applicable Law, the respective Party shall postpone or adjourn its stockholders’ or shareholders’ meeting to the earlier of: (i) the date that is ten (10) Business Days from receipt of the termination notice; and (ii) five (5) Business Days prior to the Outside Date.

 

6.5	Satisfaction of Conditions

 

The conditions set out in this Article 6 are conclusively deemed to have been satisfied, waived or released at the Effective Time. For certainty, and notwithstanding the terms of any escrow arrangement entered into between the Parties and the Depositary, all funds held in escrow by the Depositary pursuant to Section 2.14 hereof shall be released from escrow at the Effective Time without any further act or formality required on the part of any Person.

 

Article 7
AMENDMENT

 

7.1

Amendment

 

This Agreement may at any time and from time to time before or after the holding of the Yerbaé Meeting be amended by written agreement of the Parties without, subject to Applicable Law, further notice to or authorization on the part of the Yerbaé Shareholders and any such amendment may, without limitation:

 

(a)

change the time for performance of any of the obligations or acts of the Parties;

 

(b)

waive any inaccuracies or modify any representation or warranty contained herein or in any document delivered pursuant hereto;

 

(c)

waive compliance with or modify any of the covenants herein contained and waive or modify performance of any of the obligations of the Parties; or

 

 

(d)

waive compliance with or modify any other conditions precedent contained herein,

 

provided that no such amendment reduces or materially adversely affects the consideration to be received by Yerbaé Shareholders without approval by the affected Yerbaé Shareholders given in the same manner as required for the approval of the Arrangement or as may be ordered by the Court.

 

7.2	Amendment of Plan of Arrangement

 

(a)

Yerbaé and Safety Shot reserve the right to amend, modify and/or supplement the Plan of Arrangement at any time and from time to time prior to the Effective Time by written agreement of the Parties, provided that any amendment, modification or supplement must be contained in a written document which is: (i) filed with the Court and, if made following the Yerbaé Meeting, approved by the Court; and (ii) communicated to Yerbaé Shareholders in the manner required by the Court (if so required).

 

(b)

Other than as may be required under the Interim Order, any amendment, modification or supplement to the Plan of Arrangement may be proposed by Yerbaé and Safety Shot (if consented to by each of the Parties, each acting reasonably) at any time prior to or at the Yerbaé Meeting with or without any other prior notice or communication and, if so proposed and accepted, in the manner contemplated and to the extent required by this Agreement, by the Yerbaé Shareholders, shall become part of the Plan of Arrangement for all purposes.

 

(c)

Any amendment, modification or supplement to the Plan of Arrangement which is approved or directed by the Court following the Yerbaé Meeting shall be effective only: (i) if it is consented to by Yerbaé and Safety Shot (each acting reasonably); and (ii) is not adverse to the financial interests of any former holder of Yerbaé Shares and, if required by the Court or Applicable Law, it is consented to by the Yerbaé Shareholders.

 

(d)

Any amendment, modification or supplement to this Plan of Arrangement which is approved or directed by the Court following the Effective Time shall be effective only if it is consented to in writing by Safety Shot and Yerbaé, and provided that it concerns a matter which, in the reasonable opinion of each of Safety Shot and Yerbaé, is of an administrative nature required to better give effect to the implementation of the Plan of Arrangement and is not adverse to the financial interests of any former holder of Yerbaé Shares, Yerbaé Options or Yerbaé Warrants.

 

Article 8
TERMINATION

 

8.1	Termination

 

(a)

This Agreement may be terminated at any time prior to the Effective Date:

 

(i)

by mutual written consent of the Parties;

 

(ii)

by either Safety Shot or Yerbaé, if the Arrangement Resolution shall have failed to receive the Yerbaé Shareholder Approval at the Yerbaé Meeting (including any adjournment or postponement thereof) in accordance with the Interim Order;

 

 

(iii)

by either Safety Shot or Yerbaé, if the Safety Shot Stockholder Matters shall have failed to receive the Safety Shot Stockholder Approval at the Safety Shot Meeting (including any adjournment or postponement thereof);

 

(iv)

by either Safety Shot or Yerbaé, if the Effective Time shall not have occurred on or prior to the Outside Date, except that the right to terminate this Agreement under this Section 8.1(a)(iv) shall not be available to any Party whose failure to fulfill any of its obligations has been the cause of, or resulted in, the failure of the Effective Time to occur by such date;

 

(v)

as provided in Section 6.4; provided that the Party seeking termination is not then in breach of this Agreement so as to cause any of the conditions set forth in Sections 6.1, 6.2 and 6.3, as applicable, not to be satisfied;

 

(vi)

by Safety Shot if:

 

(A)

prior to the Effective Time: (1) the Yerbaé Board or any committee thereof: (i) fails to recommend or withdraws, amends, modifies or qualifies, in a manner adverse to Safety Shot or fails to reaffirm (without qualification) the Yerbaé Board Recommendation, or its recommendation of the Arrangement within five (5) Business Days (and in any case prior to the Yerbaé Meeting) after having been requested in writing by Safety Shot to do so (acting reasonably); or (ii) takes no position or a neutral position with respect to an Acquisition Proposal for more than five (5) Business Days after the public announcement of such Acquisition Proposal; or (2) the Yerbaé Board or a committee thereof shall have resolved or proposed to take any of the foregoing actions ((1) or (2) each a “Change in Recommendation”);

 

(B)

prior to the approval by the Yerbaé Shareholders of the Arrangement Resolution, the breach by Yerbaé, the Yerbaé Subsidiaries or their respective Representatives of any of its obligations under Article 4;

 

(C)

a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Yerbaé set forth in this Agreement shall have occurred that would cause the conditions set forth in Section 6.2(a), Section 6.2(b) or Section 6.2(e) not to be satisfied, and such conditions are incapable of being satisfied by the Outside Date, as reasonably determined by Safety Shot and provided that Safety Shot is not then in breach of this Agreement so as to cause any condition in Section 6.3(a) or Section 6.3(c) not to be satisfied; or

 

(D)

there has occurred a Yerbaé Material Adverse Effect which is not capable of being cured on or before the Outside Date; and

 

(vii)

by Yerbaé if:

 

(A)

a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Safety Shot set forth in this Agreement shall have occurred that would cause the conditions set forth in Section 6.3(a), Section 6.3(b) or Section 6.3(c) not to be satisfied, and such conditions are incapable of being satisfied by the Outside Date, as reasonably determined by Yerbaé and provided that Yerbaé is not then in breach of this Agreement so as to cause any condition in Section 6.2(a) or Section 6.2(b) not to be satisfied;

 

 

(B)

prior to the approval by the Yerbaé Shareholders of the Arrangement Resolution, the Yerbaé Board authorizes Yerbaé to enter into a definitive written agreement with respect to a Superior Proposal (excluding a confidentiality agreement permitted by and in accordance with Section 4.3 [Responding to an Acquisition Proposal]), provided Yerbaé is then in compliance with Article 4 and that prior to or concurrent with such termination Yerbaé pays the Termination Fee in accordance with the provisions hereof;

 

(C)

there has occurred a Safety Shot Material Adverse Effect which is not capable of being cured on or before the Outside Date; or

 

(D)

there has occurred a Safety Shot Change of Recommendation.

 

(b)

The Party desiring to terminate this Agreement pursuant to this Section 8.1 shall deliver written notice of such termination to the other Parties, specifying in reasonable detail the basis for such Party’s exercise of its termination right.

 

(c)

If this Agreement is terminated in accordance with the foregoing provisions of this Section 8.1, this Agreement will forthwith become void and no Party will have any further liability or obligation to the other Parties hereunder except as provided this Section 8.1(b), Section 3.5(h), Section 3.6(j), Section 8.2, and Article 10, which will survive such termination. Notwithstanding the foregoing, nothing contained in this Section 8.1(c) shall relieve any Party from liability for any fraud or wilful or intentional breach of any provision of this Agreement.

 

8.2	Expenses and Termination Fee

 

(a)

Except as expressly otherwise provided in this Agreement, all fees, costs and expenses incurred in connection with this Agreement and the Plan of Arrangement and the transactions contemplated hereunder and thereunder, including all costs, expenses and fees of Yerbaé incurred prior to or after the Effective Time in connection with, or incidental to, the Plan of Arrangement, shall be paid by the Party incurring such expenses, whether or not the Arrangement is consummated, provided that in the event that the Arrangement is consummated, Safety Shot shall pay Yerbaé’s Transaction Expenses, up to a maximum of $500,000.

 

(b)

For the purposes of this Agreement, “Termination Fee” means an amount equal to $1,750,000 plus Transaction Expenses of Safety Shot, which Transaction Expenses shall not exceed $250,000.

 

 

(c)

For the purposes of this Agreement, “Termination Fee Event” means the termination of this Agreement:

 

(i)

by Safety Shot pursuant to Section 8.1(a)(vi)(A) [Change in Recommendation];

 

(ii)

by Safety Shot pursuant to Section 8.1(a)(vi)(B) [Breach of Non-Solicit];

 

(iii)

by Yerbaé pursuant to Section 8.1(a)(vii)(B) [Superior Proposal]; or

 

(iv)

by Yerbaé or Safety Shot pursuant to Section 8.1(a)(ii) [No Required Shareholder Approval], but only if:

 

(A)

prior to the Yerbaé Meeting, a bona fide Acquisition Proposal is made or proposed to Yerbaé or publicly announced by any Person other than Safety Shot or any of its Affiliates and such Acquisition Proposal has not been withdrawn; and

 

(B)

within twelve (12) months following the date of such termination, any Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clause (i) above) is (A) consummated or effected, or (B) Yerbaé and/or any of the Yerbaé Subsidiaries, directly or indirectly, in one or more transactions, enters into a definitive agreement (other than a confidentiality agreement permitted by and in accordance with Sections 4.1 or 4.4) in respect of an Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clause (i) above) and such Acquisition Proposal is later consummated or effected (whether or not within twelve (12) months following such termination),

 

provided that, for the purposes of this Section 8.2(c)(iv), the term “Acquisition Proposal” shall have the meaning assigned to such term in Section 1.1, except that references to “20% or more” shall be deemed to be references to “50% or more.”

 

(d)

If a Termination Fee Event occurs, Yerbaé shall pay the Termination Fee to Safety Shot by wire transfer of immediately available funds, as follows:

 

(i)

if the Termination Fee is payable pursuant to Sections 8.2(c)(i) or 8.2(c)(ii), the Termination Fee shall be payable within two (2) Business Days following such termination;

 

(ii)

if the Termination Fee is payable pursuant to Section 8.2(c)(iii), the Termination Fee shall be payable concurrently with such termination; and

 

(iii)

if the Termination Fee is payable pursuant to Section 8.2(c)(iv), the Termination Fee shall be payable concurrently with the consummation of the Acquisition Proposal referred to in Section 8.2(c)(iv)(B).

 

(e)

The Termination Fee payable by Yerbaé pursuant to this Agreement shall be paid free and clear of and without deduction or withholding for, or on account of, any present or future Taxes, unless such deduction or withholding is required by Applicable Law. If Yerbaé is required by Applicable Law to deduct or withhold any Taxes from the payment of the Termination Fee, (i) Yerbaé shall make such required deductions or withholdings, (ii) Yerbaé shall remit the full amount deducted or withheld to the appropriate Governmental Entity in accordance with Applicable Law and (iii) the amount of the Termination Fee shall be increased as necessary such that the amount received by Safety Shot shall be equal to the amount that would have been received had no such deduction or withholding been made.

 

 

(f)

If this Agreement shall have been terminated (i) by Safety Shot pursuant to Section 8.1(a)(vi)(C) [Breach of Yerbaé Representations, Warranties or Covenants], or (ii) by Yerbaé pursuant to Section 8.1(a)(vii)(A) [Breach of Safety Shot Representations, Warranties or Covenants] or Section 8.1(a)(vi)(C) [Safety Shot Change of Recommendation], the non-terminating Party shall pay, or cause to be paid, to the terminating Party by wire transfer of immediately available funds, an amount, after deduction for any applicable withholding Tax on such payment, equal to $500,000 plus the Transaction Expenses of the terminating Party, but in no event shall such aggregate amount exceed $750,000 (the “Expense Reimbursement”), such payment to be made within one (1) Business Day of any such termination. Yerbaé or Safety Shot shall only be obligated to pay the Expense Reimbursement once pursuant to this Section 8.2(f). No Expense Reimbursement shall be payable pursuant to this Section 8.2(f) if Yerbaé has paid the Termination Fee.

 

(g)

Each Party acknowledges that the payment amounts set forth in this Section 8.2 are an integral part of the transactions contemplated by this Agreement, and that without these agreements the Parties would not enter into this Agreement, and that the payment amounts set forth in this Section 8.2 represent liquidated Damages which are a genuine pre-estimate of the Damages, including opportunity costs, reputational Damages and expenses, which the Party entitled to such Damages will suffer or incur as a result of the event giving rise to such payment and the resultant termination of this Agreement and are not penalties and shall be the sole remedy at law or in equity with respect thereto. Yerbaé irrevocably waives any right it may have to raise as a defence that any such liquidated Damages are excessive or punitive. For greater certainty, each Party agrees that, upon any termination of this Agreement under circumstances where a Party is entitled to the applicable Termination Fee or Expense Reimbursement and such amount is paid in full, the Party entitled to such amount shall be precluded from any other remedy against the other Party under Applicable Law or in equity or otherwise (including, without limitation, an order for specific performance), and shall not seek to obtain any recovery, judgment, or Damages of any kind, including consequential, indirect, or punitive Damages, against the other Party or any of its Subsidiaries or any of their respective directors, officers, employees, partners, managers, members, Stockholders or affiliates or their respective representatives in connection with this Agreement or the transactions contemplated hereby. In no event shall a Party be entitled to collect the applicable Termination Fee or Expense Reimbursement on more than one occasion.

 

(h)

The Parties acknowledge that the agreements contained in Section 8.2 are an integral part of the transactions contemplated by this Agreement, and that without these agreements the Parties would not enter into this Agreement; accordingly, if Yerbaé or Safety Shot, as applicable, fails to pay the Termination Fee or Expense Reimbursement when due and, in order to obtain such payment, the other Party commences a suit that results in a judgment against Yerbaé or Safety Shot, as applicable, for the Termination Fee or Expense Reimbursement, such breaching Party shall pay to the other Party (a) its costs and expenses (including attorneys’ fees) in connection with such suit; and (b) interest on the Termination Fee or Expense Reimbursement, as applicable, from the date the Termination Fee or Expense Reimbursement, as applicable, becomes due and payable at a rate per annum equal to the prime rate published in the Wall Street Journal, Eastern Edition, in effect on the date of the termination of this Agreement plus five percent (5%).

 

 

Article 9
NOTICES

 

9.1

Notices

 

All notices that may or are required to be given pursuant to any provision of this Agreement are to be given or made in writing and delivered by personal delivery or delivery by recognized commercial courier, sent by email (with confirmation of transmission) or delivered by registered mail (return receipt requested, postage prepaid), addressed as follows:

 

(a)

in the case of Safety Shot to:

 

Safety Shot, Inc.

1061 E. Indiantown Rd., Ste. 110

Jupiter, FL 33477

 

Attention:	Jarrett Boon, Chief Executive Officer
Email:	jboon@drinksafetyshot.com

 

with copies to:

 

Law Office of Scott P. Barlow, a Professional Corporation

2745 Allyson Court

Westlake Village, CA 91362

 

Attention:	Scott P. Barlow
Email:	scott@barlowlegal.net

 

Mintz LLP

200 Bay St., South Tower, Suite 2800

Toronto , Ontario M5J 2J3

 

Attention:	Kenneth Koch | Eric Foster | Ivan Presant
Email:	krkoch@mintz.com | efoster@mintz.com | ijpresant@mintz.com

 

(b)

in the case of Yerbaé, to:

 

Yerbaé Brands Corp.

18801 N Thompson Peak Pkwy

Suite 380 Scottsdale AZ, 85255

 

Attention:	Todd Gibson, Chief Executive Officer
Email:	todd@yerbae.com

 

 

with a copy to:

 

Cozen O’Connor LLP

Bentall 5, 550 Burrard St., Suite 2501

Vancouver, BC V6C 2B5

 

Attention:	Virgil Hlus | Alex Farkas
Email:	VHlus@cozen.com | AFarkas@cozen.com

 

or at such other address or email of which the addressee may from time to time may notify the addressor. Any notice shall be deemed to have been validly and effectively given and received (a) if sent by personal delivery or by courier on the date of actual receipt by the receiving Party; (b) if sent by email on the date of transmission if a Business Day or if not a Business Day or after 5:00 p.m. (Eastern Standard Time) on the date of transmission, on the next following Business Day; or (c) if sent by certified or registered mail (postage prepaid) on the date indicated in the return receipt.

 

Article 10
GENERAL

 

10.1	Assignment, Binding Effect and Entire Agreement

 

(a)

Except as expressly permitted by the terms hereof, neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the Parties without the prior written consent of the other Parties. The above notwithstanding, Safety Shot may assign all or any part of its rights or obligations under this Agreement and any agreements ancillary hereto to one or more of Safety Shot’s Affiliates, and provided further that if such assignment takes place, Safety Shot will continue to be fully liable as primary obligor, on a joint and several basis with any such entity, to Yerbaé or the Yerbaé Shareholders, as applicable, for any default in performance by the assignee of any of Safety Shot’s obligations hereunder.

 

(b)

This Agreement will be binding on and will inure to the benefit of the Parties and their respective successors and permitted assigns.

 

(c)

This Agreement (including the schedules attached hereto), the Safety Shot Disclosure Letter, the Yerbaé Disclosure Letter and the Confidentiality Agreement constitute the entire agreement with respect to the subject matter hereof, and supersede all other prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof and thereof.

 

10.2	Public Communications

 

Each Party agrees to consult with the other Parties prior to issuing, or permitting any of its directors, officers, Employees or agents to issue, any press releases or otherwise make public statements with respect to this Agreement or the Arrangement. Without limiting the generality of the foregoing, no Party will issue any press release regarding the Arrangement, this Agreement or any transaction relating to this Agreement without first providing a draft of such press release to the other Parties and reasonable opportunity for comment and obtaining their consent to issue (which consent will not be unreasonably withheld, conditioned or delayed); provided, however, that the foregoing will be subject to each Party’s overriding obligation to make any such disclosure required in accordance with Applicable Law. If such disclosure is required and the other Party has not reviewed or commented on or consented to the disclosure, the Party making such disclosure will use all commercially reasonable efforts to give prior oral or written notice to the other Party, and if such prior notice is not possible, to give such notice promptly following such disclosure.

 

 

10.3	Mandatory Reporting Rules

 

The Parties shall reasonably cooperate in good faith to determine whether any transaction contemplated by this Agreement or the Plan of Arrangement, or any transaction that may be considered to be part of the same series of transactions as the transactions contemplated by this Agreement or the Plan of Arrangement, is a “reportable transaction” (as defined in Section 237.3 of the Tax Act), is a “notifiable transaction” (as defined in Section 237.4 of the Tax Act), or is otherwise required to be reported to any applicable Governmental Entity under any analogous provision of any comparable Applicable Law of any province or territory of Canada, including any transaction subject to mandatory disclosure rules under the Taxation Act (Québec). If any Party determines that any such transaction is reportable then it shall so notify all other Parties and the Parties shall reasonably cooperate in good faith (including sharing of draft reporting forms) to make any such reporting on a timely basis. Notwithstanding the foregoing and for greater certainty, each Party shall be permitted to report any transaction to an applicable Governmental Entity to the extent that such Party determines, acting reasonably, that such reporting is required by Applicable Law.

 

10.4	No Liability

 

No director or officer of Safety Shot shall have any personal liability whatsoever to Yerbaé under this Agreement, or any other document delivered in connection with the transaction contemplated hereby on behalf of Safety Shot. No director or officer of Yerbaé shall have any personal liability whatsoever to Safety Shot under this Agreement, or any other document delivered in connection with the transactions contemplated hereby on behalf of Yerbaé.

 

10.5	Severability

 

If any one or more of the provisions or parts thereof contained in this Agreement should be or become invalid, illegal or unenforceable in any respect, the remaining provisions or parts thereof contained herein will be and will be conclusively deemed to be severable therefrom and the validity, legality or enforceability of such remaining provisions or parts thereof will not in any way be affected or impaired by the severance of the provisions or parts thereof severed. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.

 

10.6	Further Assurances

 

Each Party hereto will, from time to time and at all times hereafter, at the request of another Party hereto, but without further consideration, do all such further acts, and execute and deliver all such further documents and instruments and provide all such further assurances as may be reasonably required in order to fully perform and carry out the terms and intent hereof.

 

 

10.7	Time of Essence

 

Time will be of the essence of this Agreement.

 

10.8	Applicable Law and Enforcement

 

This Agreement will be governed, including as to validity, interpretation and effect, by the laws of the Province of British Columbia and the laws of Canada applicable therein, and will be construed and treated in all respects as a British Columbia contract. Each of the Parties hereby irrevocably attorns to the non-exclusive jurisdiction of the Courts of the Province of British Columbia in respect of all matters arising under and in relation to this Agreement and the Arrangement. Each Party hereby waives any right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the transactions contemplated hereby or the actions of the Parties in the negotiation, administration, performance and enforcement of this Agreement.

 

10.9	Injunctive Relief

 

The Parties agree that irreparable harm would occur for which money Damages would not be an adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties will be entitled to equitable remedies, including specific performance, a restraining order and interlocutory, preliminary and permanent injunctive relief and other equitable relief to prevent breaches of this Agreement, any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief hereby being waived. Such remedies will not be the exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available at law or equity to each of the Parties. Notwithstanding the foregoing, the payment of a Termination Fee and/or Expense Reimbursement pursuant to Section 8.2 shall be the sole remedy of a Party at law or in equity in the circumstances in which such an amount is payable and is paid.

 

10.10

Waiver

 

Any Party may, on its own behalf only: (a) extend the time for the performance of any of the obligations or acts of another Party; (b) waive compliance with another Party’s agreements or the fulfillment of any conditions to its own obligations contained herein; or (c) waive inaccuracies in another Party’s representations or warranties contained herein or in any document delivered by such other Party; provided, however, that any such extension or waiver (with respect only to the Party delivering such extension or waiver) will be valid only if set forth in an instrument in writing signed on behalf of such Party and, unless otherwise provided in the written waiver, will be limited to the specific breach or condition waived.

 

10.11

Third Party Beneficiaries

 

Except as provided in Section 3.5(h) and Section 3.6(j), and except for the rights of the Yerbaé Shareholders to receive the Consideration for their Yerbaé Shares pursuant to the Arrangement following the Effective Time, which rights are hereby acknowledged and agreed by Safety Shot to be for the benefit of, and enforceable by, the Third Party Beneficiaries or the Yerbaé Shareholders (as applicable), or on their behalf, this Agreement is not intended to confer any rights or remedies upon any Person other than the Parties to this Agreement. The provisions of Section 3.5(h) are intended for the benefit of all present and former directors and officers of Yerbaé, as and to the extent applicable in accordance with their terms, and shall be enforceable by each of such Persons and his or her heirs, executors, administrators and other legal representatives, and the provisions of Section 3.6(j) are intended for the benefit of all present and former directors and officers of Safety Shot, as and to the extent applicable in accordance with their terms, and shall be enforceable by each of such Persons and his or her heirs, executors, administrators and other legal representatives (collectively, the “Third Party Beneficiaries”), and each of Safety Shot and Yerbaé, as applicable, shall hold the rights and benefits of Section 3.5(h) and Section 3.6(j) for and on behalf of the Third Party Beneficiaries and each of Safety Shot and Yerbaé hereby accepts such trust and agrees to hold the benefit of and enforce performance of such covenants on behalf of the Third Party Beneficiaries, and in addition to, and not in substitution for, any other rights that the Third Party Beneficiaries may have by contract or otherwise.

 

10.12

Counterparts, Execution

 

This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. The Parties will be entitled to rely upon delivery of an executed facsimile or similar executed electronic copy of this Agreement, and such facsimile or similar executed electronic copy will be legally effective to create a valid and binding agreement between the Parties.

 

[Remainder of page left blank intentionally – signatures follow]

 

 

Each of the Parties has caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

	SAFETY SHOT, INC.
	Per:	(signed) “Jarrett Boon”
	Name:	Jarrett Boon
	Title:	Chief Executive Officer

 

Signature Page – Arrangement Agreement

 

  

	YERBAÉ BRANDS CORP.
	Per:	(signed) “Todd Gibson”
	Name:	Todd Gibson
	Title:	Chief Executive Officer

 

Signature Page – Arrangement Agreement

 

 

SCHEDULE “A”

 

Arrangement Resolution

 

BE IT RESOLVED, AS A SPECIAL RESOLUTION, THAT:

 

1.	The arrangement (the “Arrangement”) under Part 9, Division 5 of the Business Corporations Act (British Columbia) involving Yerbaé Brands Corp. (the “Company”) and Safety Shot, Inc. (“Shot”), as more particularly described and set forth in the information circular of the Company dated [♦], 2025 accompanying the notice of this meeting, as the Arrangement may be modified or amended in accordance with its terms, is hereby authorized, approved and adopted.
2.	The plan of arrangement (the “Plan of Arrangement”) involving the Company, the full text of which is set out as Schedule “B” to the arrangement agreement dated January 7, 2025 between the Company and Shot (the “Arrangement Agreement”), as the Plan of Arrangement may be modified or amended in accordance with its terms, is hereby authorized, approved, ratified and adopted.
3.	The Arrangement Agreement, all of the transactions contemplated by the Arrangement Agreement, and the Arrangement, the actions of the directors of the Company in approving the Arrangement Agreement and the actions of the directors and officers of the Company in executing and delivering the Arrangement Agreement and any amendments thereto in accordance with its terms are hereby, authorized, approved and ratified.
4.	Notwithstanding that this resolution has been passed (and the Plan of Arrangement adopted) by the shareholders of the Company or that the Arrangement has been approved by the Supreme Court of British Columbia (the “Court”), the directors of the Company are hereby authorized and empowered without further notice to or approval of the shareholders of the Company (i) to amend the Arrangement Agreement or the Plan of Arrangement, to the extent permitted by the Arrangement Agreement, the Plan of Arrangement and the order of the Court, and (ii) subject to the terms of the Arrangement Agreement, not to proceed with the Arrangement.
5.	Any one director or officer of the Company be and is hereby authorized and directed for and on behalf of the Company to make an application to the Court for an order approving the Arrangement, to execute, under the corporate seal of the Company or otherwise, and to deliver or file such other documents as are necessary or desirable to give effect to the Arrangement and the Plan of Arrangement in accordance with the Arrangement Agreement.
6.	Any one director or officer of the Company be and is hereby authorized and directed for and on behalf of the Company to execute or cause to be executed, under the corporate seal of the Company or otherwise, and to deliver or cause to be delivered, all such other documents and instruments and to perform or cause to be performed all such other acts and things as in such person’s opinion may be necessary or desirable to give full effect to the foregoing resolutions and the matters authorized thereby, such determination to be conclusively evidenced by the execution and delivery of such document, agreement or instrument or the doing of any such act or thing.

 

 

SCHEDULE “B”

 

PLAN OF ARRANGEMENT

 

PLAN OF ARRANGEMENT UNDER DIVISION 5 OF PART 9 OF
THE BUSINESS CORPORATIONS ACT (BRITISH COLUMBIA)

 

Article 1
INTERPRETATION

 

Section 1.1

Definitions

 

In this Plan of Arrangement, unless there is something in the subject matter or context clearly inconsistent therewith, the following terms shall have the respective meanings set out below and grammatical variations of those terms shall have corresponding meanings:

 

	(1)	“Arrangement” means the arrangement under Division 5 of Part 9 of the BCBCA on the terms and subject to the conditions set out in this Plan of Arrangement, subject to any amendments or variations to the Arrangement made in accordance with the terms of the Arrangement Agreement or ‎Section 6.1 of this Plan of Arrangement or made at the direction of the Court in the Final Order with the prior written consent of the Company and the Purchaser, each acting reasonably;
	(2)	“Arrangement Agreement” means the arrangement agreement dated as of January 7, 2025 between the Purchaser and the Company, including the schedules and exhibits thereto, providing for, among other things, the Arrangement, as the same may be amended, supplemented or restated;
	(3)	“Arrangement Resolution” means the special resolution approving the Arrangement, substantially in the form attached as Schedule A to the Arrangement Agreement, passed by the Company Shareholders at the Meeting;
	(4)	“BCBCA” means the Business Corporations Act (British Columbia), as amended;
	(5)	“Business Day” means any day (other than a Saturday, a Sunday, a Canadian or U.S. statutory or civic holiday) on which commercial banks located in Vancouver, British Columbia, and Scottsdale, Arizona are open for the conduct of business;
	(6)	“Code” means the United States Internal Revenue Code of 1986, as amended;
	(7)	“Company” means Yerbaé Brands Corp., a corporation existing under the BCBCA;
	(8)	“Company Options” means the outstanding options, if any, to purchase Company Shares, issued pursuant to the Incentive Plan or otherwise;
	(9)	“Company PSUs” means any outstanding performance share units of the Company issued pursuant to the Incentive Plan or otherwise;
	(10)	“Company RSUs” means any outstanding restricted share units of the Company issued pursuant to the Incentive Plan or otherwise;

 

 

	(11)	“Company Securityholders” means, collectively, the Company Shareholders, the holders of Company Options, the holders of Company RSUs and the holders of Company PSUs;
	(12)	“Company Shareholders” means the registered and/or beneficial holders of Company Shares, as the context requires;
	(13)	“Company Shares” means the common shares in the authorized capital of the Company;
	(14)	“Consideration” means 0.2918 of a Purchaser Share per Company Share;
	(15)	“Court” means the Supreme Court of British Columbia;
	(16)	“Depositary” means ClearTrust, LLC;
	(17)	“Dissent Rights” has the meaning ascribed to such term in ‎Section 4.1(1);
	(18)	“Dissent Share” means a Company Share held by a Dissenting Shareholder who is ultimately determined to be entitled to be paid the fair value of his, her or its Company Shares in respect of which such Dissenting Shareholder has exercised Dissent Rights;
	(19)	“Dissenting Shareholder” means a registered holder of Company Shares who has duly and validly exercised the Dissent Rights in respect of the Arrangement in strict compliance with the Dissent Rights and who has not withdrawn or been deemed to have withdrawn such exercise of Dissent Rights;
	(20)	“DRS Advice” has the meaning ascribed to such term in ‎Section 5.1(1);
	(21)	“Effective Date” means the date designated by the Company and the Purchaser by notice in writing as the effective date of the Arrangement, after all of the conditions to the completion of the Arrangement as set out in the Arrangement Agreement and the Final Order have been satisfied (to the extent capable of being satisfied prior to the Effective Time) or waived;
	(22)	“Effective Time” means 12:01 a.m. (Vancouver time) on the Effective Date, or such other time on the Effective Date as the Parties may agree to in writing before the Effective Date;
	(23)	“Exchange Ratio” means 0.2918 of a Purchaser Share for each Company Share;
	(24)	“Final Order” means the final order of the Court approving the Arrangement under subsection 291(4) of the BCBCA, in a form acceptable to the Company and the Purchaser, each acting reasonably, after a hearing upon the procedural and substantive fairness of the terms and conditions of the Arrangement, as such order may be amended by the Court (with the consent of both the Company and the Purchaser, each acting reasonably) at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended (provided that any such amendment is acceptable to both the Company and the Purchaser, each acting reasonably) on appeal;

 

 

	(25)	“Governmental Entity” means any: (a) national, international, multinational, federal, provincial, state, regional, municipal, local or other government or any governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau ministry or agency, domestic or foreign, including the Securities Authorities; (b) any subdivision, agent, commission, board or authority of any of the foregoing; or (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing (including any stock exchange or interdealer quotation system on which a Party’s shares are listed);
	(26)	“holder” means, when used with reference to any securities of the Company or the Purchaser, the holder of such securities shown from time to time in the central securities register maintained by or on behalf of the Company or the Purchaser, as applicable, in respect of such securities;
	(27)	“Incentive Plan” means the equity incentive plan of the Company, as constituted immediately prior to the Effective Time;
	(28)	“Interim Order” means the interim order of the Court pursuant to subsection 291(2) of the BCBCA in a form acceptable to the Company and the Purchaser, each acting reasonably, providing for, among other things, the calling and holding of the Meeting, as such order may be amended, modified, supplemented or varied by the Court with the consent of the Company and the Purchaser, each acting reasonably;
	(29)	“In-The-Money Amount” means, in respect of an option at a particular time, the amount, if any, by which the aggregate fair market value at that time of the securities subject to such option exceeds the exercise price of such option;
	(30)	“Law” means any and all applicable law (statutory, common or otherwise), statute, by-law, constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, notice, judgment, decree, ruling or other similar requirement, whether domestic or foreign, enacted, adopted, promulgated or applied by a Governmental Entity that is binding upon or applicable to such Person or its business, undertaking, property or securities, and to the extent that they have the force of law, policies, guidelines, notices and protocols of any Governmental Entity, as amended; “applicable” with respect to such Laws and, in the context that refers to any Person, means such Laws as are applicable at the relevant time or times to such Person or its business, undertaking, property or securities and emanate from a Governmental Entity having jurisdiction over such Person or its business, undertaking, property or securities;
	(31)	“Letter of Transmittal” means the letter of transmittal to be delivered by the Company Shareholders to the Depositary as described therein;
	(32)	“Lien” means any mortgage, deed of trust, charge, pledge, hypothec, security interest, prior claim, encroachments, option, easement, right of first refusal or first offer, occupancy right, covenant, assignment, lien (statutory or otherwise), defect of title, or restriction or adverse right or claim, or other third party interest or encumbrance of any kind, in each case, whether contingent or absolute;

 

 

	(33)	“Meeting” means the special meeting of the Company Shareholders, including any adjournment or postponement thereof, to be called and held in accordance with the Interim Order for the purpose of considering and, if thought advisable, approving the Arrangement Resolution;
	(34)	“paid-up capital” shall have the meaning ascribed to such term in the Tax Act;
	(35)	“Parties” means, together, the Company and the Purchaser and “Party” means any one of them;
	(36)	“Person” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal representative, estate group, body corporate, limited liability company, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status;
	(37)	“Plan of Arrangement” means this plan of arrangement, subject to any amendments or variations thereto made in accordance with ‎Article 6 hereof or with the Arrangement Agreement or made at the direction of the Court in the Final Order with the consent of the Company and the Purchaser, each acting reasonably;
	(38)	“Purchaser” means Safety Shot Inc., a corporation incorporated under the laws of Delaware;
	(39)	“Purchaser Shares” means the shares of common stock in the authorized share capital of the Purchaser;
	(40)	“PSU Agreement” means an agreement evidencing the terms of any Company PSU;
	(41)	“Registrar” means the person appointed as the Registrar of Companies pursuant to section 400 of the BCBCA;
	(42)	“Replaced Option” has the meaning ascribed to such term in ‎Section 3.1(4);
	(43)	“Replacement Option” has the meaning ascribed to such term in ‎Section 3.1(4);
	(44)	“Replacement Option Exercise Price” has the meaning ascribed to such term in ‎Section 3.1(4);
	(45)	“RSU Agreement” means an agreement evidencing the terms of any Company RSU;
	(46)	“Securities Authorities” means, collectively, the securities commissions or similar securities regulatory authorities in each of the provinces and territories of Canada and the U.S. Securities Authorities;
	(47)	“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder, as amended;
	(48)	“U.S. Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; and
	(49)	“U.S. Securities Authorities” means, collectively, the United States Securities and Exchange Commission and securities regulatory authorities in each of the states, territories and possessions of the United States and the District of Columbia.

 

 

Any capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Arrangement Agreement. In addition, words and phrases used herein and defined in the BCBCA and not otherwise defined herein or in the Arrangement Agreement shall have the same meaning herein as in the BCBCA unless the context otherwise clearly requires.

 

Section 1.2

Interpretation Not Affected by Headings

 

The division of this Plan of Arrangement into Articles, Sections, paragraphs and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an “Article”, “Section” or “paragraph” followed by a number and/or a letter refer to the specified Article, Section or paragraph of this Plan of Arrangement.

 

Section 1.3

Number, Gender and Persons

 

In this Plan of Arrangement, unless the context otherwise clearly requires, words used herein importing the singular include the plural and vice versa; words imparting any gender shall include all genders and the neuter gender; and words imparting persons shall include individuals, partnerships, limited liability companies, associations, corporations, funds, unincorporated organizations, governments, regulatory authorities and other entities.

 

Section 1.4

Date of Any Action

 

If any date on which any action is required to be taken hereunder by any of the Parties is not a Business Day, then such action shall be required to be taken on the next succeeding day which is a Business Day.

 

Section 1.5

Time

 

Time shall be of the essence in every matter or action contemplated hereunder. All times expressed herein or in the Letter of Transmittal refer to the local time of the Company (being the time in Vancouver, British Columbia) unless otherwise stipulated herein or therein.

 

Section 1.6

Statutory References

 

Unless otherwise indicated, references in this Plan of Arrangement to any statute include all regulations made pursuant to such statute and the provisions of any statute or regulation which amends, supplements or supersedes any such statute or regulation.

 

Section 1.7

Currency

 

Unless otherwise stated, all references in this Plan of Arrangement to sums of money are expressed in lawful money of Canada, and “$” refers to Canadian dollars.

 

 

Article 2
EFFECT OF THE ARRANGEMENT

 

Section 2.1

Arrangement Agreement

 

This Plan of Arrangement is made pursuant to, is subject to the provisions of, and forms a part of the Arrangement Agreement, except in respect of the sequence of the steps comprising the Arrangement, which shall occur in the order set forth herein. This Plan of Arrangement constitutes an arrangement as referred to in section 288 of the BCBCA.

 

Section 2.2

Binding Effect

 

This Plan of Arrangement will become effective commencing at the Effective Time and shall be binding upon the Company, the Purchaser, the Company Securityholders, the Depositary, the transfer agents in respect of the Company Shares and the Purchaser Shares and all other Persons, in each case without any further act or formality required on the part of any Person. Each Company Securityholder shall, in respect of any step in ‎Section 3.1 applicable to such Company Securityholder, be deemed, at the time such step occurs, to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to exercise, convert, transfer or exchange (as the case may be) all Company Shares, Company Options, Company PSUs or Company RSUs, as applicable, held by such holder in accordance with such step.

 

Section 2.3

Transfers Free and Clear

 

Any transfer of securities pursuant to this Plan of Arrangement shall be free and clear of all Liens, claims and encumbrances.

 

Section 2.4

Effective Time of Transactions

 

The transfers, exchanges, issuances and cancellations provided for in ‎Section 3.1 shall occur, and shall be deemed to occur, at the time and in the order specified in ‎Section 3.1, notwithstanding that certain of the procedures related thereto may not be completed until after such time.

 

Article 3
ARRANGEMENT

 

Section 3.1

The Arrangement

 

Commencing at the Effective Time, each of the transactions or events set out below shall, unless otherwise specifically provided in this ‎Section 3.1, occur and be deemed to occur in the following sequence and immediately following the immediately preceding transaction or event, in each case without any further authorization, act or formality on the part of any Person:

 

(1)

each Dissent Share held by a Dissenting Shareholder shall be, and shall be deemed to be, transferred by the holder thereof, without any further act or formality, to the Purchaser in consideration for the right to receive the consideration in the amount and payable in accordance with ‎Article 4, and upon such transfer:

 

(a)

such Dissenting Shareholder will cease to be the holder of such Dissent Share or to have any rights as a holder in respect of such Dissent Share, other than the right to be paid the fair value of such Dissent Share determined and payable in accordance with ‎Article 4;

 

 

	(b)	the former holders of such Dissent Shares shall be removed from the Company’s central securities register for the Company Shares in respect of such Dissent Shares; and
	(c)	the Purchaser will be deemed to be the transferee of such Dissent Shares;

 

(2)

subject to ‎Section 5.3, each Company Share (other than (i) any Dissent Share in respect of which a registered Company Shareholder validly exercised his, her or its Dissent Right and (ii) any Company Share held by the Company) outstanding immediately prior to the Effective Time (including any Company Shares issued pursuant to Section 3.1(2)) shall be, and shall be deemed to be, transferred by the holder thereof to the Purchaser in exchange for the issuance by the Purchaser to such holder of the Consideration, and upon such exchange:

 

	(a)	the former holder of such exchanged Company Share shall cease to be the holder thereof or to have any rights as a holder thereof, other than the right to receive the Consideration issuable in respect of such Company Share pursuant to this ‎Section 3.1(2);
	(b)	the former holders of such exchanged Company Shares shall be removed from the Company’s central securities register for the Company Shares;
	(c)	the former holders of such exchanged Company Shares shall be entered in the Purchaser’s central securities register for the Purchaser Shares in respect of the Purchaser Shares issued to such holders pursuant to this ‎Section 3.1(2); and
	(d)	the Purchaser will be, and will be deemed to be, the legal and beneficial owner of such transferred Company Shares and will be entered in the central securities register of the Company as the sole holder thereof;

 

(3)

concurrently with the exchange of Company Shares pursuant to ‎Section 3.1(2), there shall be added to the capital of the Purchaser Shares, in respect of the Purchaser Shares issued pursuant to ‎Section 3.1(2), an amount equal to the product obtained when (i) the paid-up capital of the Company Shares immediately prior to the Effective Time, is multiplied by (ii) a fraction, (A) the numerator of which is the number of Company Shares (excluding any Dissent Shares) outstanding immediately prior to the Effective Time, and (B) the denominator of which is the number of Company Shares (including any Dissent Shares) outstanding immediately prior to the Effective Time;

 

 

(4)

each Company Option that is outstanding immediately prior to the Effective Time, whether vested or unvested (each such Company Option, a “Replaced Option”), shall be, and shall be deemed to be, exchanged for an option (each, a “Replacement Option”) entitling the holder to purchase that number of Purchaser Shares equal to the product obtained when the number of Company Shares subject to such Replaced Option immediately prior to the Effective Time is multiplied by the Exchange Ratio, which Replacement Option shall (A) be governed by the incentive plan of the Purchaser in place at the Effective Time, (B) be fully vested, (C) have an exercise price for each Purchaser Share that may be purchased under such Replacement Option (the “Replacement Option Exercise Price”) equal to the quotient obtained when the exercise price per Company Share under the Replaced Option is divided by the Exchange Ratio (provided that no fractional Purchaser Shares will be issued upon any particular exercise or settlement of Replacement Options, and the aggregate number of Purchaser Shares to be issued upon exercise by a holder of one or more Replacement Options shall be rounded down to the nearest whole number (with all exercises that are effectuated concurrently by a holder of Replacement Options being aggregated before any such reduction is effectuated), and the aggregate exercise price payable on any particular exercise of Replacement Options shall be rounded up to the nearest whole cent (with all exercises that are effectuated concurrently by a holder of Replacement Options being aggregated before any such increase is effectuated)), and (C) otherwise have the same terms and conditions (including exercisability terms and expiry date) as were applicable to such Replaced Option immediately prior to the Effective Time. Notwithstanding the foregoing;

 

	(a)	if necessary to satisfy the requirements of subsection 7(1.4) of the Tax Act in respect of the exchange of a Replaced Option for a Replacement Option pursuant to this Section 3.1(4), the Replacement Option Exercise Price shall automatically be adjusted, effective as of and from the effective time of such exchange, so that the In-The-Money Amount of the Replacement Option (as adjusted) immediately after such exchange does not exceed the In-The-Money Amount of the Replaced Option immediately before such exchange;
	(b)	for any Replaced Option that is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the U.S. Tax Code, it is intended that such adjustment described in Section 3.1(4) will comply with Treasury Regulation Section 1.424(1)(a);
	(c)	for any Replaced Option that is a nonqualified option held by a U.S. taxpayer, it is intended that such adjustment described in Section 3.1(4) will be implemented in a manner intended to comply with Section 409A of the Code;

 

	(5)	each Company PSU, whether vested or unvested, that is outstanding immediately prior to the Effective Time, notwithstanding the terms of the Incentive Plan or any applicable PSU Agreement in relation thereto, shall be, without any further action by or on behalf of the holder of such Company PSU, cancelled and terminated as of the Effective Time and such holder shall receive in consideration for the cancellation and termination of such Company PSU, subject to ‎Section 5.8, the Consideration and: (A) the holder thereof shall cease to be the holder of such Company PSU, (B) the holder thereof shall cease to have any rights as a holder in respect of such Company PSU or under the Incentive Plan, other than the right to receive the consideration to which such holder is entitled pursuant to this ‎Section 3.1(5), (C) such holder’s name shall be removed from the applicable register, and (D) all agreements, grants and similar instruments relating thereto shall be cancelled; and
	(6)	each Company RSU, whether vested or unvested, that is outstanding immediately prior to the Effective Time, notwithstanding the terms of the Incentive Plan or any applicable RSU Agreement in relation thereto, shall be, without any further action by or on behalf of the holder of such Company RSU, cancelled and terminated as of the Effective Time and such holder shall receive in consideration for the cancellation and termination of such Company RSU, subject to ‎Section 5.8, the Consideration and: (A) the holder thereof shall cease to be the holder of such Company RSU, (B) the holder thereof shall cease to have any rights as a holder in respect of such Company RSU or under the Incentive Plan, other than the right to receive the consideration to which such holder is entitled pursuant to this ‎Section 3.1(6), (C) such holder’s name shall be removed from the applicable register, and (D) all agreements, grants and similar instruments relating thereto shall be cancelled.

 

 

Article 4
DISSENT RIGHTS

 

Section 4.1

Rights of Dissent

 

	(1)	Registered holders of the Company Shares may exercise rights of dissent in connection with the Arrangement under section 238 of the BCBCA, in the manner set forth in sections 237 to 247 of the BCBCA, as modified by the Interim Order, the Final Order and this ‎Section 4.1 (collectively, “Dissent Rights”); provided that notwithstanding subsection 242(1)(a) of the BCBCA, the written objection to the Arrangement Resolution referred to in subsection 242(1)(a) of the BCBCA must be received by the Company not later than 4:00 p.m. (Vancouver time) two (2) Business Days immediately preceding the date of the Meeting (as it may be adjourned or postponed from time to time).
	(2)	Dissenting Shareholders who are ultimately determined to be entitled to be paid by the Purchaser the fair value for the Company Shares in respect of which they have exercised Dissent Rights will be deemed to have irrevocably transferred such Company Shares to the Purchaser pursuant to ‎Section 3.1(1) in consideration of such fair value paid by the Purchaser and will not be entitled to any other payment or consideration, including any payment that would be payable under the Arrangement had such holders not exercised their Dissent Rights in respect of such Company Shares.
	(3)	Dissenting Shareholders who are ultimately not entitled, for any reason, to be paid by the Purchaser the fair value for the Company Shares in respect of which they have exercised Dissent Rights will be deemed to have participated in the Arrangement on the same basis as a Company Shareholder who has not exercised Dissent Rights, as at and from the Effective Time and be entitled to receive only the consideration set forth in ‎Section 3.1 that such holder would have received if such holder had not exercised Dissent Rights.
	(4)	In no case will the Company or the Purchaser or any other person be required to recognize a Person exercising Dissent Rights as a holder of Company Shares after the Effective Time, and each Dissenting Shareholder will cease to be entitled to the rights of a Company Shareholder in respect of Company Shares in relation to which such Dissenting Shareholder has exercised Dissent Rights and the central securities register of the Company will be amended to reflect that such former holder is no longer the holder of such Company Shares as and from the Effective Time.
	(5)	For greater certainty, in accordance with the BCBCA, none of the following are entitled to exercise Dissent Rights:‎ (i) holders of Company Options; (ii) holders of Company RSUs; (iii) holders of Company PSUs; and (iv) holders of Company Shares who vote, or have instructed a proxyholder to vote, in favour of the Arrangement Resolution.

 

 

Article 5
DELIVERY OF PURCHASER SHARES

 

Section 5.1

Delivery of Purchaser Shares

 

	(1)	Upon return to the Depositary of a properly completed Letter of Transmittal by a registered former Company Shareholder together with certificate(s) or a direct registration statement advice (a “DRS Advice”) representing one or more Company Shares that such Company Shareholder held immediately before the Effective Time, together with such additional documents and instruments as the Depositary may reasonably require, the Company Shareholder shall be entitled to receive the Purchaser Shares that they are entitled to receive pursuant to ‎Section 3.1 in exchange therefor, and the Depositary shall deliver to such holder, following the Effective Time, certificate(s) or DRS Advice recorded on a book-entry basis representing the Purchaser Shares that such holder is entitled to receive pursuant to ‎Section 3.1.
	(2)	After the Effective Time and until surrendered for cancellation as contemplated by ‎Section 5.1(1), each certificate or DRS Advice that immediately prior to the Effective Time represented one or more Company Shares shall be deemed at all times to represent only the right to receive in exchange therefor the Purchaser Shares that the holder of such certificate or DRS Advice is entitled to receive pursuant to ‎Section 3.1.
	(3)	For greater certainty, none of the holders of Company Options, holders of Company PSUs, holders of Company RSUs, or Company Shareholders shall be entitled to receive any consideration with respect to such Company securities other than the consideration such holder is entitled to receive in accordance with ‎Section 3.1, and, for greater certainty, no such former holder will be entitled to receive any interest, dividends, premium or other payment in connection therewith.

 

Section 5.2

Dividends and Distributions

 

No dividends or other distributions declared or made after the Effective Time with respect to Purchaser Shares with a record date after the Effective Time shall be paid to the holder of any unsurrendered certificate which immediately prior to the Effective Time represented outstanding Company Shares that were exchanged pursuant to ‎Section 3.1 unless and until the holder of record of such certificate shall surrender such certificate (or affidavit in accordance with ‎Section 5.6) in accordance with ‎Section 5.1(1). Subject to applicable Law, at the time of such surrender of any such certificate (or in the case of subclause (B) below, at the appropriate payment date), there shall be paid to the holder of record of the certificates formerly representing whole Company Shares, without interest, (A) the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to each whole Purchaser Share issued to such holder, and (B) on the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole Purchaser Share.

 

 

Section 5.3

Fractional Shares

 

In no event shall any fractional Purchaser Shares be issued under this Arrangement. Where the aggregate number of Purchaser Shares to be issued to a holder of Company Shares as consideration under this Arrangement would result in a fraction of a Purchaser Share being issuable, the number of Purchaser Shares to be received by such holder shall be rounded to the nearest whole Purchaser Share.

 

Section 5.4

Adjustment to Share Consideration

 

THE AMOUNT OF CONSIDERATION, IF ANY, THAT A COMPANY SHAREHOLDER IS ENTITLED TO RECEIVE PURSUANT TO SECTION 3.1 SHALL BE ADJUSTED TO REFLECT FULLY THE EFFECT OF ANY STOCK SPLIT, REVERSE SPLIT OR STOCK DIVIDEND (INCLUDING ANY DIVIDEND OR DISTRIBUTION OF SECURITIES CONVERTIBLE INTO SHARES), CONSOLIDATION, REORGANIZATION, RECAPITALIZATION OR OTHER LIKE CHANGE WITH RESPECT TO PURCHASER SHARES OCCURRING AFTER THE DATE OF THE ARRANGEMENT AGREEMENT AND PRIOR TO THE EFFECTIVE TIME, IN COMPLIANCE WITH SUCH AGREEMENT.

 

Section 5.5

Effective Time Procedures

 

Following the receipt of the Final Order and prior to the Effective Date, the Purchaser shall arrange to be delivered to the Depositary the Purchaser Shares required to be issued to Company Shareholders in accordance with the provisions of ‎Section 3.1, which Purchaser Shares shall be held by the Depositary as agent and nominee for such Company Shareholders for delivery to such Company Shareholders in accordance with the provisions of ‎Article 5.

 

Section 5.6

Loss of Certificates

 

In the event any certificate which immediately prior to the Effective Time represented any outstanding Company Shares that were acquired by the Purchaser pursuant to ‎Section 3.1 has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the former holder of such Company Shares, the Depositary will, in exchange for such lost, stolen or destroyed certificate, deliver to such former holder of Company Shares, or make available for pick up at its offices, the Purchaser Shares such former holder is entitled to receive in respect of such Company Shares pursuant to ‎Section 3.1 together with any distributions or dividends which such holder is entitled to receive pursuant to ‎Section 5.2 and less, in each case, any amounts withheld pursuant to ‎Section 5.8. When authorizing such delivery in relation to any lost, stolen or destroyed certificate, the former holder of such Company Shares shall, as a condition precedent to the delivery of Purchaser Shares, give a bond satisfactory to the Purchaser and the Depositary (acting reasonably) in such sum as the Purchaser may direct, or otherwise indemnify the Company, the Purchaser and the Depositary against any claim that may be made against any of them with respect to the certificate alleged to have been lost, stolen or destroyed.

 

Section 5.7

Extinction of Rights

 

Any certificate or book-entry advice statements which immediately prior to the Effective Time represented one or more outstanding Company Shares that were acquired by the Purchaser pursuant to ‎Section 3.1 which is not deposited with the Depositary in accordance with the provisions of ‎Section 5.1(1) on or before the sixth (6th) anniversary of the Effective Date shall, on the sixth (6th) anniversary of the Effective Date, cease to represent a claim or interest of any kind or nature whatsoever, whether as a securityholder or otherwise and whether against the Company, the Purchaser, the Depositary or any other person. On such date, the consideration such former holder of Company Shares would otherwise have been entitled to receive pursuant to ‎Section 3.1, together with any distributions or dividends such holder would otherwise have been entitled to receive pursuant to ‎Section 5.2, shall be deemed to have been surrendered for no consideration to the Purchaser. Neither the Company nor the Purchaser will be liable to any person in respect of any cash or securities (including any cash or securities previously held by the Depositary in trust for any such former holder) which is forfeited to the Purchaser or delivered to any public official pursuant to any applicable abandoned property, escheat or similar law.

 

 

Section 5.8

Withholding Rights

 

The Purchaser, the Company and the Depositary, as applicable, shall be entitled to deduct or withhold ‎‎from any consideration payable or otherwise deliverable to any Person, including Company ‎Shareholders ‎exercising Dissent Rights, pursuant to the Arrangement and from all dividends, other ‎distributions or ‎other amounts otherwise payable to any former Company Shareholders, such Taxes or ‎other amounts as ‎the Purchaser, the Company or the Depositary are required, entitled or permitted to ‎deduct or withhold ‎with respect to such payment under the Tax Act, or any other provisions of any ‎Laws. To the extent that ‎Taxes or other amounts are so deducted or withheld, such deducted or ‎withheld Taxes or other amounts ‎shall be treated for all purposes under this Agreement as having been ‎paid to the Person in respect of ‎which such deduction or withholding was made, provided that such ‎deducted or withheld Taxes or other ‎amounts are actually remitted to the appropriate taxing authority. ‎Each of the Purchaser, the Company ‎and the Depositary, as applicable, ‎is hereby authorized to sell or ‎‎otherwise dispose of, on behalf of such ‎Person, such portion of ‎any share or other security deliverable ‎to ‎such Person as is necessary to provide ‎sufficient funds ‎to the Purchaser, the Company or the ‎Depositary, ‎as the case may be, to enable it to ‎comply with such ‎deduction or withholding requirement ‎and the ‎Purchaser, the Company or the ‎Depositary shall notify such ‎Person thereof and remit the ‎applicable ‎portion of the net proceeds of such ‎sale to the ‎appropriate taxing authority and, if applicable, ‎any portion ‎of such net proceeds that is not ‎‎required to be so remitted shall be paid to such Person‎.

 

Section 5.9

U.S. Securities Laws Exemption

 

Notwithstanding any provision herein to the contrary, the Parties each agree that the Plan of Arrangement will be carried out with the intention that all Purchaser Shares to be issued by the Purchaser to Company Shareholders in exchange for their Company Shares pursuant to the Plan of Arrangement will be issued and exchanged in reliance on the exemption from the registration requirements of the U.S. Securities Act as provided by Section 3(a)(10) thereof and applicable state securities laws, and pursuant to the terms, conditions and procedures set forth in the Arrangement Agreement.

 

Article 6
AMENDMENTS

 

Section 6.1

Amendments to Plan of Arrangement

 

(1)

The Company and the Purchaser reserve the right to amend, modify or supplement this Plan of Arrangement at any time and from time to time prior to the Effective Time, provided that each such amendment, modification or supplement must be: (i) set out in writing, (ii) approved by the Company and the Purchaser, (iii) filed with the Court and, if made following the Meeting, approved by the Court, and (iv) communicated to or approved by the Company Shareholders if and as required by the Court.

 

 

	(2)	Any amendment, modification or supplement to this Plan of Arrangement pursuant to ‎Section 6.1(1) may be proposed by the Company at any time prior to the Meeting (provided the Purchaser shall have consented thereto, such consent not to be unreasonably withheld, conditioned or delayed) with or without any other prior notice or communication and, if so proposed and accepted by the persons voting at the Meeting (other than as may be required under the Interim Order), will become part of this Plan of Arrangement for all purposes.
	(3)	Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by the Court following the Meeting will be effective only if such amendment, modification or supplement: (i) is consented to by each of the Company and the Purchaser, and (ii) if required by the Court or applicable law, is consented to by Company Shareholders voting in the manner directed by the Court.
	(4)	Any amendment, modification or supplement to this Plan of Arrangement may be made following the Effective Date but shall only be effective if it is consented to by each of the Parties provided that such amendment, modification or supplement concerns a matter which, in the reasonable opinion of the Company and the Purchaser, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the financial or economic interests of the Company and the Purchaser or any former Company Securityholder.

 

Article 7
TERMINATION

 

This Plan of Arrangement may be withdrawn prior to the Effective Time in accordance with the terms of the Arrangement Agreement. Upon the termination of the Arrangement Agreement pursuant to Article 8 of the Arrangement Agreement prior to this Plan of Arrangement becoming effective, no Party shall have any liability or further obligation to any other Party hereunder other than as set out in the Arrangement Agreement.

 

Article 8
FURTHER ASSURANCES

 

Section 8.1

Further Assurances

 

Notwithstanding that the transactions and events set out herein will occur and be deemed to occur in the order set out in this Plan of Arrangement without any further act or formality, each of the Parties will make, do and execute, or cause to be made, done and executed, any such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required by any of them in order to further document or evidence any of the transactions or events set out herein.

 

Section 8.2

Paramountcy

 

From and after the Effective Time:

 

	(1)	this Plan of Arrangement shall take precedence and priority over any and all rights related to the securities of the Company issued prior to the Effective Time;
	(2)	the rights and obligations of the holders of the securities of the Company and any trustee and transfer agent therefor, shall be solely as provided for in this Plan of Arrangement; and
	(3)	all actions, causes of actions, claims or proceedings (actual or contingent, and whether or not previously asserted) based on or in any way relating to securities of the Company shall be deemed to have been settled, compromised, released and determined without liability except as set forth herein.

 

 

Exhibit 99.1

 

 

Safety Shot to Acquire Yerbaé Brands Corp., adding approximately $12 Million to Annual Revenue and Creating a Potential Force in Wellness and Functional Beverages

 

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Yerbaé is a scalable, growth-oriented complementary brand with a large and growing addressable market

 

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Yerbaé creates clean, simple, and delicious plant-based energy beverages that are “better-for-you”

 

●

Yerbaé had approximately $12 million in revenue for the fiscal year ending 2023

 

●

Safety Shot and Yerbaé will combine primary and secondary management teams in an attempt to deliver top-line growth

 

●

The proposed transaction is expected to deliver significant cost synergies, driven by G&A and supply chain efficiencies

 

SCOTTSDALE, Ariz. – (Globe Newswire) – January 8, 2025 – Safety Shot, Inc. (Nasdaq: SHOT) (“SHOT”, “Safety Shot”, or the “Company”), a wellness and dietary supplement company, and Yerbaé Brands Corp. (TSX-V: YERB.U; OTCQX: YERBF) (“Yerbaé”), a plant-based energy beverage company, today announced the execution of a definitive arrangement agreement dated January 7, 2025 (the “Arrangement Agreement”) that will seek to redefine the landscape of healthy and functional beverages. This proposed strategic acquisition (the “Transaction”) looks to bring together Safety Shot’s innovative wellness solutions with Yerbaé’s popular line of plant-based energy drinks, adding a company that generated approximately $12 million of revenue in fiscal year 2023 and creating a powerful platform for potential accelerated growth and market leadership.

 

A Complementary Partnership for Growth

 

Yerbaé, founded in 2017 by Todd and Karrie Gibson, is a rapidly growing brand that has captured the attention of health-conscious consumers with its clean, simple, and delicious plant-based energy beverages. With approximately $12 million in revenue for its fiscal year ending 2023 against $5.9 million in cost of sales, Yerbaé has demonstrated its ability to resonate with a large and expanding market seeking healthier alternatives to traditional energy drinks. Yerbaé’s beverages are specifically formulated to provide a more refreshing taste than coffee, with added benefits compared to existing sodas and sparkling waters, and healthier ingredients than traditional energy drinks. Yerbaé’s product line aligns with a variety of healthy lifestyles, including non-GMO, Keto, Vegan, Kosher, Paleo, and gluten-free diets.

 

 

“We believe that this acquisition could be a significant revenue catalyst for Safety Shot on top of an expected revenue growth rate of 50% expected in Q4, versus Q3” said John Gulyas, Chairman of SHOT. “We believe Yerbaé’s impressive growth and established presence in the plant-based beverage market, generating approximately $12 million in revenue in fiscal year 2023, could be instrumental in driving our potential growth.”

 

Todd Gibson, Chief Executive Officer of Yerbaé, added, “We are thrilled to join forces with Safety Shot and leverage their expertise and resources to potentially accelerate our growth. We believe that the Transaction will provide us with access to new distribution channels, expanded marketing capabilities, and valuable synergies that will look to benefit both brands.”

 

Compelling Strategic and Financial Benefits

 

1. Leveraging Yerbaé’s Robust Distribution and Customer Relationships

 

Yerbaé has established a strong network of distribution channels and deep customer relationships across multiple regions. By merging with SHOT, we believe Yerbaé’s proven ability to penetrate retail markets can be extended to SHOT’s product lines, potentially driving greater visibility and availability for both companies’ beverages. We believe that this could create a platform for rapid market expansion, increased sales velocity, and a broader consumer base.

 

●

Sales and Distribution Value for Public Markets:

 

○

If the Transaction is consummated, SHOT will gain immediate access to Yerbaé’s well-established retail partnerships, including key grocery, convenience, and specialty store channels, which could accelerate product placement and consumer adoption.

 

○

Yerbaé’s distribution partners are expected to provide SHOT with access to high-volume markets where demand for functional and energy beverages is growing rapidly.

 

○

Cross-leveraging Yerbaé’s strong customer relationships is expected to enable SHOT to tap into Yerbaé’s existing retail programs and promotional initiatives, which could potentially reduce the time-to-market for SHOT’s product lines.

 

 

○

The Transaction supports shared logistics and supply chain efficiencies, which could optimize distribution costs and improve margins for both Yerbaé and SHOT.

 

○

We believe that Yerbaé’s expertise in launching and scaling products can be applied to SHOT’s product lines, which could enhance their visibility and growth trajectory in both the U.S. and Canada.

 

2. Synergies Between Yerbaé’s Robust Supply Chain and SHOT’s Emerging Supply Chain

 

The Transaction brings together Yerbaé’s well-developed, scalable supply chain with SHOT’s emerging supply chain capabilities, which are expected to create significant operational synergies:

 

●

Optimization of Resources: Yerbaé’s established supplier relationships and logistics infrastructure can help streamline SHOT’s procurement processes, reducing costs and improving efficiency.

 

●

Scalability: SHOT is expected to benefit from Yerbaé’s ability to scale production quickly to meet increased demand, ensuring timely fulfillment of larger orders and facilitating market expansion.

 

●

Improved Logistics: Combining supply chain networks will seek to enhance distribution coverage, minimize delivery lead times, and potentially allow for better inventory management across markets.

 

●

Innovation in Sourcing: Yerbaé’s supply chain expertise can help SHOT implement best practices in sourcing sustainable and high-quality ingredients, supporting both companies’ growth ambitions and brand positioning.

 

●

Shared Efficiencies: The Transaction is expected to enable shared warehousing, transportation, and fulfillment resources, which could drive down operational costs.

 

3. Supercharging Product Portfolios

 

The Transaction brings together two innovative beverage portfolios with distinct market appeal. We believe that Yerbaé’s functional beverages and SHOT’s targeted energy drink products complement one another, creating opportunities for cross-promotion and bundling strategies. Together, the combined company hopes to be positioned to meet diverse consumer demands for healthier, functional, and performance-based beverages.

 

 

4. Fostering a Robust Pipeline of Innovation

 

Both Yerbaé and SHOT have demonstrated a strong commitment to innovation, with a robust pipeline of new product concepts  that align with evolving consumer trends:

 

●

Accelerated Product Development: The Transaction will look to streamline research and development processes, potentially allowing for faster innovation and more efficient product launches.

 

●

Shared Expertise: Yerbaé’s experience in developing functional beverages and SHOT’s expertise in targeted energy drinks will strive to foster collaborative innovation, driving new product ideas and formulations.

 

●

Market Responsiveness: By leveraging shared insights and resources, the combined entity intends to be well-positioned to respond quickly to changing consumer preferences and market demands.

 

●

Innovation at Scale: The merged company will strive to ensure greater investment in product development, potentially driving long-term growth through an innovative and differentiated product pipeline.

 

5. Significant Cost Savings Across the System

 

The Transaction intends to deliver meaningful cost savings through operational efficiencies and the consolidation of key external functions:

 

●

Streamlined Professional Services: Combining efforts under one auditor and one legal team will look to significantly reduce administrative costs.

 

●

Team Synergies: The integration of sales, distribution, finance, and operations teams are expected to allow for improved collaboration, reduced redundancies, and cost savings across the system.

 

●

External Supplier Efficiencies: The combined entity intends to leverage economies of scale when negotiating with external suppliers, which could potentially reduce costs for procurement, packaging, and logistics.

 

●

Operational Excellence: Shared processes and infrastructure may enhance cost efficiency across the supply chain, potentially creating long-term savings and improving margins.

 

6. The Power of Yerbaé’s Experienced Team

 

Yerbaé’s leadership team has a track record of executing growth strategies and navigating competitive beverage markets. We believe that their expertise in product development, branding, and scaling distribution could be instrumental in integrating SHOT’s operations and realizing the full potential of the combined entity. This leadership will look to drive operational efficiencies, improve margins, and accelerate growth.

 

 

7. Market Positioning and Global Growth Potential

 

The Transaction is intended to create a stronger, more diversified beverage company with a presence in both Canadian and U.S. markets. We believe that this dual-market access enhances the combined company’s ability to scale internationally, capitalize on emerging trends in functional and energy beverages, and attract institutional and retail investors across borders.

 

Enhancing Shareholder Value Through Strategic Acquisition

 

The Transaction marks a significant milestone for Safety Shot, building on a year of notable achievements, including:

 

●

Securing major new distribution deals with 7-Eleven corporate stores in the Chicagoland area, multiple convenience store chains across the US, and major grocery chains;

 

●

Launching innovative product formats like Sure Shot in 4-ounce bottles and on-the-go stick packs;

 

●

Forming key partnerships with companies like KeHE Distributors and Capital Drugs;

 

●

Achieving positive clinical trial results confirming the reduction of blood alcohol content in study participants;

 

●

Successfully raising capital to fuel further growth; and

 

●

Rebranding its flagship product from “Safety Shot” to “Sure Shot.”

 

These achievements have contributed to the Company’s strong momentum and an anticipated 50% revenue growth in the fourth quarter. Additionally, Safety Shot expanded its e-commerce presence on platforms like Walmart.com and Amazon, announced its intention to focus on business-to-business (B2B) sales, and mentioned plans to expand into international markets, specifically Canada, in 2025.

 

Leadership & Integration

 

The combined company will be led by an experienced management team with deep expertise in the wellness and beverage industries. The integration process will be carefully managed to ensure a smooth transition. Safety Shot’s existing management team will continue to lead the company, with Yerbaé’s leadership team assuming secondary management roles.

 

 

Market Opportunity

 

The global plant-based energy beverage market is growing rapidly, driven by demand for healthier and more sustainable alternatives to traditional energy drinks. We believe that this Transaction positions Safety Shot to capitalize on this trend and potentially secure a substantial market share. The global plant-based energy drink market is projected to grow at a compound annual growth rate (“CAGR”) of 6.7% from 2024 to 2033, reaching a value of $10.5 billion by 2033 (Source: Market.us). The global wellness market is expected to grow at a CAGR of 9.9% from 2020 to 2025, reaching a value of $7 trillion by 2025 (Source: Global Wellness Institute) .

 

Transaction Overview 

 

Pursuant to the terms of the Arrangement Agreement, at the effective time of the arrangement (the “Effective Time”), all of the common shares (each, a “Yerbaé Share”) of Yerbaé then issued and outstanding immediately prior to the Effective Time (including the Yerbaé Shares to be issued on the settlement of all of the performance share units and restricted share units of Yerbaé, which will be settled immediately prior to the Effective Time) will be acquired by the Company in consideration for the right to receive an aggregate of 20,000,000 shares of common stock (each, a “SHOT Share”) of the Company, translating into a basic equity value of $15.2 million and an enterprise value of $19.7 million respectfully. Post closing of the Transaction, SHOT shareholders are expected to own approximately 75.8% and former holders of the Yerbaé Shares are expected to own approximately 24.2% of the combined company.

 

The Transaction will be effected by way of a plan of arrangement pursuant (the “Plan of Arrangement”) to the Business Corporations Act (British Columbia). Under the terms of the Arrangement Agreement, SHOT will acquire all of the issued and outstanding Yerbaé Shares, with each holder of Yerbaé Shares expected to receive 0.2918 of a SHOT Share for each Yerbaé Share held, implying a current market price per Yerbaé Share of US$0.76, based on the closing share price of the SHOT Shares on January 6, 2025. Each outstanding Yerbaé restricted share unit and performance share unit is expected to have its vesting accelerated and be settled for Yerbaé Shares immediately prior to the completion of the Transaction. Each option (each, a “Replaced Option”) to purchase common shares of Yerbaé outstanding immediately prior to the Effective Time (whether or not vested) will be deemed to be exchanged for an option (each, a “Replacement Option”) entitling the holder to purchase shares of common stock of the Company. The number of shares of common stock of the Company underlying each Replacement Option will equal the number of common shares of Yerbaé underlying the Replaced Option multiplied by the applicable exchange ratio. The exercise price of each Replacement Option will equal the exercise price of the corresponding Replaced Option divided by the exchange ratio and each Replacement Option will be fully vested. In accordance with the respective terms of Yerbaé’s outstanding warrants and debentures, the terms of each warrant and debenture of Yerbaé will entitle the holder thereof to receive, upon exercise or conversion, as applicable, in substitution for the number of Yerbaé common shares subject to such warrant or debenture, a number of shares of Company common stock.

 

 

The Transaction is expected to close in the second quarter of 2025, subject to satisfying certain customary closing conditions, including: (i) the receipt of approvals from both SHOT’s and Yerbaé’s shareholders; (ii) the issuance of interim and final orders by the Supreme Court of British Columbia; (iii) the absence of any law or order prohibiting, rendering illegal or permanently enjoining the consummation of the Arrangement; (iv) the obtainment of any regulatory approvals required in connection with the Plan of Arrangement, except for such approvals the failure of which to obtain would not reasonably be expected to have a material adverse effect on the parties or would not materially impede or delay the completion of the Arrangement; (v) the approval by the TSX Venture Exchange (“TSXV”); (vi) the approval of the listing of the SHOT Shares by Nasdaq; (vii) the exemption of the issuance of the SHOT Shares from the registration requirements of the Securities Act of 1933, as amended (the “U.S. Securities Act”), pursuant to Section 3(a)(10) thereof; (viii) that the representations of the other party in the Arrangement Agreement are true and correct as of the date of the Arrangement Agreement and the Effective Time (subject to certain materiality qualifiers) and (ix) that the other party will have complied in all material respects with its covenants in the Arrangement Agreement, among other customary closing conditions for a transaction of this nature and size.

 

Additionally, the obligation of the Company to consummate the Arrangement is subject to the satisfaction or waiver of the following conditions, among others: (i) that there will not have occurred during the Interim Period any material adverse effect with respect to Yerbaé; (ii) that the Company shall have received Support Agreements (as defined below) from certain shareholders of Yerbaé representing not less than 40.1% of the issued and outstanding Yerbaé Shares no later than 30 days following the date of the Arrangement Agreement (and such shareholders shall not have breached their obligations or covenants thereunder in any material respect as of the Effective Time); and (iii) that the Yerbaé shareholders shall have not validly exercised and not withdrawn dissent rights with respect to more than 5% of the Yerbaé Shares then outstanding.

 

 

The obligation of Yerbaé to consummate the Arrangement is also conditioned upon (i) the Company appointing Todd Gibson to the board of directors of Shot (the “SHOT Board”) as of the Effective Time and (ii) that there will not have occurred during the Interim Period any material adverse effect with respect to the Company.

 

The Arrangement Agreement also contains customary representations, warranties and covenants made by Safety Shot and Yerbaé, including covenants that both parties will during the period between the date of the execution of the Arrangement Agreement and the Effective Time (the “Interim Period”), in all material respects, conduct their respective businesses in the ordinary course consistent with past practice, and to refrain from taking certain specified actions without the prior written consent of the other party, in each case, subject to certain exceptions and qualifications.

 

Implementation of the Transaction is subject to the approval of at least (i) two-thirds (66 2/3%) of the votes cast by the holders of the Yerbaé Shares present in person or represented by proxy at the meeting of holders of Yerbaé Shares held to consider the Transaction, voting as a single class; (ii) if required pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), the approval of the majority of the votes cast by the holder of the Yerbaé Shares, excluding the votes of shareholders whose votes are required to be excluded for the purposes of “minority approval” pursuant to MI 61-101; and (iii) the affirmative vote of a majority of the votes cast by the SHOT stockholders present in person or represented by proxy at the meeting of holders of SHOT stockholders to consider the Transaction.

 

The Transaction has been unanimously approved by the boards of directors of Yerbaé (the “Yerbaé Board”) and SHOT. The Yerbaé Board has unanimously determined, after receiving financial and legal advice along with the Yerbaé Fairness Opinion (as defined below), that the Transaction is in the best interests of Yerbaé and is fair to the Yerbaé shareholders and the Yerbaé Board recommends that the Yerbaé shareholders vote in favor of the Transaction. The SHOT Board has, after receiving financial and legal advice along with the SHOT Fairness Opinion (as defined below), recommends that the SHOT shareholders vote in favor of the Transaction.

 

Evans & Evans, Inc. provided the Yerbaé Board with a fairness opinion, dated December 30, 2024, to the effect that, as of the date of such opinion, the consideration payable pursuant to the Transaction is fair, from a financial point of view, to the Yerbaé Shareholders, in each case, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinions (the “Yerbaé Fairness Opinion”). Newbridge Securities Corporation provided the SHOT Board with an oral opinion, dated January 7, 2025, to the effect that, as of the date of such opinion, the consideration being offered by SHOT to the Yerbaé shareholders pursuant to the Transaction, is fair, from a financial point of view, to the SHOT shareholders, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinion (the “SHOT Fairness Opinion”).

 

 

Upon closing of the Transaction, SHOT intends to cause the Yerbaé Shares to cease to be listed on the TSXV and to cause Yerbaé to submit an application to cease to be a reporting issuer under applicable Canadian securities laws.

 

A more complete description of the terms of and conditions of the Transaction and related matters will be included in a current report on Form 8-K to be filed by each of SHOT and Yerbaé respectively with the U.S. Securities and Exchange Commission (“SEC”) and the applicable Canadian securities commissions (collectively, the “Commissions”) on SEDAR+. A copy of the Arrangement Agreement will be an exhibit to the Form 8-Ks. All parties desiring details regarding the terms and conditions of the proposed transaction are urged to review the Form 8-Ks, and the exhibits attached thereto, which will be available on the SEC’s website found at www.sec.gov and on the Commission’s website at www.sedarplus.ca.

 

At the time of closing of the Transaction, none of the SHOT Shares or any other securities to be issued pursuant to the Transaction will have been registered under the U.S. Securities Act, or any U.S. state securities laws, and any securities issuable in the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities.

 

Unlocking Value for Shareholders

 

“The Transaction is about more than just two companies coming together; it’s about creating a new force in the wellness and beverage sector,” said SHOT CEO Jarrett Boon. “We are bringing together the best of both worlds—Safety Shot’s expertise in wellness solutions and Yerbaé’s strength in plant-based beverages—to create a company with significant potential.”

 

This strategic Transaction looks to creates a powerhouse in the wellness and beverage industry. We believe that Safety Shot will benefit from Yerbaé’s established presence in the natural and organic foods sector, gaining access to new markets and retail channels. We expect that Yerbaé’s robust distribution network will accelerate product placement and consumer adoption for both companies’ beverages, potentially allowing for rapid market expansion.

 

The Transaction also seeks to strengthen Safety Shot’s financial position. We expect that Yerbaé’s anticipated annual revenue could boost Safety Shot’s top line results. Furthermore, it diversifies Safety Shot’s product offerings, creating a more robust and resilient business model.

 

 

Yerbaé also benefits significantly from the Transaction. By joining forces with Safety Shot, Yerbaé gains access to potential growth capital and resources, enabling it to expand its operations, marketing efforts, and product development initiatives. The combined company is expected to leverage the expertise of both teams, including Yerbaé’s experienced leadership with a proven track record in the beverage industry, to drive product innovation and development.

 

Creating a More Efficient and Profitable Organization

 

The Transaction is expected to generate favorable synergies and cost savings through the integration of operations, supply chains, and marketing efforts. By leveraging the combined company’s scale and expertise, Safety Shot anticipates achieving greater efficiency and profitability. This includes streamlining manufacturing and distribution processes, optimizing marketing and sales initiatives, leveraging combined purchasing power, and eliminating redundant overhead expenses.

 

Positioned for a Bright Future

 

The combined company intends to be well-positioned to capitalize on the growing global market for healthy and functional beverages. With a diversified product portfolio, strong distribution network, and a shared commitment to innovation, Safety Shot and Yerbaé are poised to become a driving force in the wellness and beverage industry. The Transaction marks a significant step forward for both companies, unlocking exciting potential opportunities for growth, innovation, and long-term value creation for shareholders.

 

About Safety Shot, Inc.

 

Safety Shot, Inc., a wellness and dietary supplement company, has developed Sure Shot, the first patented wellness product on Earth that lowers blood alcohol content by supporting its metabolism, while boosting clarity, energy, and overall mood. Sure Shot is available for purchase online at www.sureshot.com, www.walmart.com and Amazon. The Company is introducing business-to-business sales of Sure Shot to distributors, retailers, restaurants, and bars throughout 2025.

 

 

Yerbaé Brands Corp.

 

Yerbaé Brands Corp., (TSXV: YERB.U; OTCQX: YERBF) makes great-tasting energy beverages with yerba mate and other premium, plant-based ingredients. All Yerbaé energy beverages are zero calorie, zero sugar, non-GMO, vegan, kosher, keto-friendly, paleo-approved, gluten-free and diabetic-friendly. Founded in Scottsdale, AZ in 2017, Yerbaé seeks to disrupt the energy beverage marketplace by offering a no-compromise energy solution, with input and support from its recently announced Yerbaé Advisory Board, Sports and Entertainment. Find us @DrinkYerbae on Instagram, Facebook, Twitter/X and TikTok, or online at https://yerbae.com. For more information regarding Yerbaé’s financial results, refer to Yerbaé’s annual audited financial statements for the fiscal year ended December 31, 2023 and Yerbaé’s interim unaudited financial statements for the nine months ended September 30, 2024, which are filed on SEDAR+ at www.sedarplus.ca under Yerbaé’s profile.

 

Advisors

 

Maxim Group LLC is serving as the exclusive financial advisor to Safety Shot in connection with the merger. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. are serving as legal counsel to Safety Shot in connection with the merger and Cozen O’Connor LLP is serving as legal counsel to Yerbaé.

 

Additional Information and Where to Find It

 

In connection with the proposed Transaction, Safety Shot and Yerbaé plan to file or cause to be filed relevant materials in the United States with the SEC and in Canada with the applicable Commissions on Sedar+, including a joint proxy statement and other relevant documents relating to the proposed transaction. This communication is not a substitute for the joint proxy statement or any other document that the Company or Yerbaé may file with the SEC, the Commissions or send to their security holders in connection with the transaction. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY AND YERBAÉ ARE URGED TO READ THESE MATERIALS, INCLUDING THE JOINT PROXY STATEMENT, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT YERBAÉ, THE COMPANY, THE TRANSACTION, AND RELATED MATTERS. The joint proxy statement and other relevant materials (when they become available), and any other documents filed by the Company or Yerbae with the SEC or the Commissions, may be obtained free of charge at the SEC website at www.sec.gov or www.sedarplus.ca. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by the Company by directing a written request to: Safety Shot, Inc., 1061 E. Indiantown Rd., Ste. 110, Jupiter, FL 33477 or to Yerbae Brands Corp., 18801 N Thompson Peak Pkwy, Suite 380, Scottsdale, AZ 85255. Investors and security holders are urged to read the joint proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the proposed transaction.

 

 

Participants in the Solicitation

 

The Company, Yerbaé and their respective directors and executive officers may be deemed participants in the solicitation of proxies in connection with the transaction. The Company’s and Yerbaé’s stockholders and other interested persons may obtain, without charge, more detailed information (i) regarding the directors and executive officers of the Company in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024, its definitive proxy statement on Schedule 14A relating to its 2024 Annual Meeting of Stockholders filed with the SEC on June 24, 2024 and other relevant materials filed with the SEC when they become available; and (ii) regarding Yerbaé’s directors and executive officers in Yerbaé’s Form 10 filed with the SEC on July 19, 2024 and other relevant materials filed with the SEC when they become available. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of proxies in connection with the transaction will be set forth in the joint proxy statement for the transaction when available. Additional information regarding the interests of participants in the solicitation of proxies in connection with the transaction will be included in the joint proxy statement that the Company and Yerbaé intend to file with the SEC and the Commissions on SEDAR+.

 

No Offer or Solicitation

 

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of any securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such other jurisdiction.

 

Additional Information

 

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this news release. Completion of the Transaction is subject to a number of conditions, including but not limited to acceptance of the TSXV. There can be no assurances that the Transaction will be completed as proposed or at all. Trading in the securities of either Safety Shot or Yerbaé should be considered highly speculative.

 

On Behalf of the Board of Directors of Safety Shot, Inc.

 

“Jarrett Boon”

 

Jarrett Boon, Chief Executive Officer

 

Safety Shot Contact Information:

 

Investor Relations

 

Phone: 561-244-7100

 

Email: investors@drinksafetyshot.com

 

 

On Behalf of the Board of Directors of Yerbaé Brands Corp.

 

“Todd Gibson”

 

Todd Gibson, Chief Executive Officer and Co-Founder

 

Yerbaé Contact Information:

 

For investors, investors@yerbae.com or 480,471.8391

 

To reach CEO Todd Gibson, todd@yerbae.com or 480.471.8391

 

Forward-Looking Statements

 

This press release contains certain forward-looking statements within the meaning of applicable securities laws with respect to the proposed Transaction and business combination between SHOT and Yerbaé. All statements other than statements of historical facts contained in this press release, including statements regarding the Transaction and closing thereof, SHOT’ or Yerbaé’s future results of operations and financial position, SHOT’ and Yerbaé’s business strategy, prospective costs, timing and likelihood of success, plans and objectives of management for future operations, future results of current and anticipated operations of SHOT and Yerbaé, and the expected value of the combined company after the transactions, are forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, but not limited to, the following risks relating to the proposed business combination: the risk that the Transaction may not be completed in a timely manner or at all, which may adversely affect the price of each of SHOT’s and Yerbaé’s securities; the occurrence of any event, change or other circumstances that could give rise to the termination of the Arrangement Agreement; the inability to complete the transactions contemplated by the Arrangement Agreement, including due to failure to obtain approval of the shareholders of SHOT or Yerbae, the Court, that of the TSXV or Nasdaq as well as other conditions to closing in the Arrangement Agreement; the inability to maintain the listing of SHOT ordinary shares on Nasdaq following the completion of the Transaction; the risk that the transactions contemplated by the Arrangement Agreement may disrupt current plans and operations of SHOT as a result of the announcement and consummation of these transactions; the ability to recognize the anticipated benefits of the business combination contemplated by the Arrangement Agreement, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth economically and hire and retain key employees; costs related to the business combination; changes in applicable laws or regulations; the possibility that Yerbaé or SHOT may be adversely affected by other economic, business, and/or competitive factors; and other risks and uncertainties to be identified in the proxy statement (when available) relating to the Transaction, including those under “Risk Factors” therein, and in other filings with the SEC made by SHOT or Yerbaé, as applicable. Moreover, each of Yerbaé and SHOT operate in very competitive and rapidly changing environments. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond Yerbaé’s and SHOT’ control, readers should not rely on these forward-looking statements as predictions of future events. Forward-looking statements speak only as of the date they are made. Neither Yerbaé nor SHOT give any assurance that either Yerbaé or SHOT will achieve its expectations as stated herein. Readers are cautioned not to put undue reliance on forward-looking statements, and, except as required by law, Yerbaé and SHOT assume no obligation and do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.

 

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

 

 

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.3

 

RISK FACTORS

 

Risks Related to the Arrangement

 

The completion of the Arrangement is subject to a number of conditions precedent and may not occur.

 

The completion of the Arrangement is subject to a number of conditions precedent, some of which are outside Yerbaé’s and Safety Shot’s control, including, but not limited to, the approval by the Court as well as the receipt of each of the Yerbaé Shareholder Approval and the Company Stockholder Approval. In addition, the completion of the Arrangement by Yerbaé and Safety Shot is conditional on, among other things, no material adverse effect having occurred in respect of either Yerbaé or Safety Shot that is continuing. There can be no certainty, nor can Yerbaé or Safety Shot provide any assurance, that all conditions precedent to the Arrangement will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived and, accordingly, the Arrangement may not be completed. If the Arrangement is not completed, the market price of Yerbaé common shares and Safety Shot common stock may be adversely affected.

 

The market price of the Yerbaé common shares and Safety Shot common stock may be adversely affected if the Arrangement is not completed or is delayed.

 

If, for any reason, the Arrangement is not completed or its completion is materially delayed or the Arrangement Agreement is terminated, the market price of Yerbaé common shares and Safety Shot common stock may be materially adversely affected. Depending on the reasons for terminating the Arrangement Agreement, Yerbaé’s or Safety Shot’s business, financial condition or results of operations could also be subject to various material adverse consequences, including as a result of paying a Termination Fee (as defined below) or Expense Reimbursement Fee (as defined below), as applicable.

 

The Arrangement may be terminated in certain circumstances.

 

Pursuant to the terms of the Arrangement Agreement, each of Yerbaé and Safety Shot has the right, in certain circumstances, in addition to termination rights relating to the failure to satisfy the conditions of closing, to terminate the Arrangement. Accordingly, there can be no certainty, nor can Yerbaé or Safety Shot provide any assurance, that the Arrangement will not be terminated by either of Yerbaé or Safety Shot prior to the completion of the Arrangement. The Arrangement Agreement also includes a Termination Fee and Expense Reimbursement Fee payable if the Arrangement Agreement is terminated in certain circumstances. Additionally, any termination will result in the failure to realize the expected benefits of the Arrangement in respect of the business of Yerbaé and Safety Shot.

 

The termination fees provided under the Arrangement Agreement may discourage other parties from attempting to acquire Yerbaé or Safety Shot.

 

Under the Arrangement Agreement, Yerbaé has certain termination rights if (i) prior to the receipt of the Yerbaé Shareholder Approval, the board of directors of Yerbaé authorizes Yerbaé to enter into a definitive written agreement with respect to a superior proposal, Yerbaé is otherwise in compliance with its non-solicit obligations under the Arrangement Agreement, and Yerbaé pays the Company a termination fee of [$1,750,000 plus up to $250,000] of the Company’s transaction expenses (the “Termination Fee”); or (ii) the board of directors of the Company, among other things, withdraws or changes its recommendation with respect to the Company Stockholder Approval, in which case the Company will be obligated to pay to Yerbaé a fee of $500,000 plus up to $250,000 of transaction expenses (the “Expense Reimbursement Fee”). These termination-related fees may discourage other parties from attempting to acquire Yerbaé common shares or Safety Shot common stock or otherwise make an acquisition proposal to Yerbaé, even if those parties, in the case of Yerbaé, would otherwise be willing to offer greater value to Yerbaé shareholders than that offered by Safety Shot under the Arrangement.

 

 

Completion of the Arrangement is uncertain given, among other things, the conditions precedent to the Arrangement.

 

As the Arrangement is dependent upon, among other things, satisfaction of certain conditions, its completion is uncertain. If the Arrangement is not completed for any reason, there are risks that the announcement of the Arrangement and the dedication of Yerbaé’s and Safety Shot’s resources to the completion thereof could have a negative impact on their respective relationships with their stakeholders and could have a material adverse effect on the current and future operations, financial condition and prospects of each of Yerbaé and Safety Shot. In addition, each of Yerbaé and Safety Shot will incur significant transaction expenses in connection with the Arrangement, regardless of whether the Arrangement is completed.

 

Yerbaé and Safety Shot are restricted under the Arrangement Agreement from pursuing certain business opportunities.

 

Each of Yerbaé and Safety Shot is subject to customary non-solicitation provisions under the Arrangement Agreement, pursuant to which, the parties are restricted from soliciting, initiating, encouraging or otherwise facilitating any acquisition proposal, among other things. The Arrangement Agreement also restricts them from taking specified actions until the Arrangement is completed without the consent of the other party. These restrictions may prevent each party from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement.

 

Safety Shot stockholders and Yerbaé shareholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the Arrangement as compared to their current ownership and voting interest in the respective companies.

 

After the completion of the Arrangement, the current Safety Shot stockholders and Yerbaé shareholders will own a smaller percentage of the combined company than their ownership in their respective companies prior to the Arrangement. Upon completion of the transactions contemplated by the Arrangement Agreement, it is estimated that the issuance of the Consideration Shares in exchange for Yerbaé shares will result in Yerbaé shareholders and Safety Shot stockholders owning approximately 24.2% and 75.8%, respectively, of the outstanding economic interest in the combined company. For a more complete description of the Arrangement Agreement, please see “The Arrangement Agreement - Consideration” in this Current Report on Form 8-K.

 

Another attractive take-over, merger or business combination may not be available if the Arrangement is not completed.

 

If the Arrangement is not completed and is terminated, there can be no assurance that Yerbaé will be able to find a party willing to pay equivalent or more attractive consideration than the consideration to be provided under the Arrangement or be willing to proceed at all with a similar transaction or any alternative transaction.

 

The pending Arrangement may divert the attention of management of Yerbaé and Safety Shot.

 

The pendency of the Arrangement could cause the attention of management of Yerbaé and Safety Shot to be diverted from their day-to-day operations, and suppliers, customers or distributors may seek to modify or terminate their business relationships with Yerbaé or Safety Shot, as applicable. These disruptions could be exacerbated by a delay in the completion of the Arrangement and could have an adverse effect on the business, operating results or prospects of Yerbaé and Safety Shot regardless of whether the Arrangement is ultimately completed, or of the combined company if the Arrangement is completed.

 

Directors and officers of Yerbaé may have interests in the Arrangement different from the interests of Yerbaé shareholders.

 

Directors and executive officers of Yerbaé negotiated the terms of the Arrangement Agreement, and the Yerbaé Board has unanimously recommended that Yerbaé shareholders vote for the resolution approving the Arrangement. These directors and executive officers may have interests in the Arrangement that are different from, or in addition to, those of Yerbaé shareholders generally. Yerbaé shareholders should be aware of these interests. The Yerbaé Board was aware of, and considered, these interests when it declared the advisability of the Arrangement Agreement and unanimously recommended that Yerbaé shareholders approve the resolution approving the Arrangement.

 

 

The issuance of a significant number of Safety Shot shares of common stock could adversely affect the market price of the Safety Shot common stock.

 

On completion of the Arrangement, a significant number of Safety Shot shares of common stock will be issued to Yerbaé shareholders. The increase in the number of Safety Shot shares of common stock may lead to sales of such shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, the Safety Shot common stock.

 

Safety Shot and Yerbaé have incurred, and may continue to incur, substantial transaction fees and costs in connection with the Arrangement.

 

Safety Shot and Yerbaé have incurred and expect to incur additional material non-recurring expenses in connection with the Arrangement and completion of the transactions contemplated by the Arrangement Agreement, including without limitation, costs relating to obtaining required shareholder and regulatory approvals. Additional unanticipated costs may be incurred in the course of coordinating the businesses of the combined company after completion of the Arrangement. If the Arrangement is not consummated, Safety Shot and Yerbaé will be required to pay certain costs relating to the Arrangement incurred prior to the date the Arrangement is abandoned, such as legal, accounting and financial advisory. Such costs may be significant and could have an adverse effect on each company’s future results of operations, cash flows and financial condition.

 

There are risks associated with securities litigation related to the Arrangement.

 

Securities litigation or shareholder derivative litigation frequently follows the announcement of certain significant business transactions. Yerbaé or Safety Shot may become involved in this type of litigation in connection with the Arrangement, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could have a material adverse effect on the business and the results of operations of Yerbaé, Safety Shot or the combined company.

 

 

 

Exhibit 99.4

 

YERBAÉ BRANDS CORP.

(the “Company” or “Yerbaé)

 

RISK FACTORS

 

Risks Related to the Business of Yerbaé

 

The Company may have difficulty realizing consistent and meaningful revenues and achieving profitability.

 

Yerbaé’s ability to successfully develop its products and to realize consistent and meaningful revenues and to achieve profitability cannot be assured. For the Company to realize consistent, meaningful revenues and to achieve profitability, its products must receive broad market acceptance by consumers. Without this market acceptance, the Company will not be able to generate sufficient revenue to continue its business operations. If Yerbaé’s products are not widely accepted by the market, the business may fail.

 

Yerbaé’s ability to achieve and maintain profitability and positive cash flow is dependent upon the Company’s ability to generate revenues, manage operational and marketing costs and expenses, and compete successfully with its direct and indirect competitors. The Company anticipates operating losses in upcoming future periods. This will occur because there are expenses associated with the development, production, marketing, and sales of the Company’s products.

 

Yerbaé’s continued operating losses express substantial doubt about the Company’s ability to continue as a going concern.

 

The Company’s financial statements are prepared using generally accepted accounting principles in the U.S. applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Yerbaé has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow the Company to continue as a going concern. As of December 31, 2023, the Company had an accumulated deficit of $34.5 million. Yerbaé’s ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to significantly curtail or cease operations.

 

Yerbaé management has concluded that its historical recurring losses from operations and negative cash flows from operations as well as its dependence on financings raise substantial doubt about the Company’s ability to continue as a going concern and the Company’s auditor has included an explanatory paragraph relating to Yerbaé’s ability to continue as a going concern in its audit report for the fiscal year ended December 31, 2023.

 

Yerbaé will need additional funds to continue producing, marketing, and distributing its products.

 

Yerbaé will have to spend additional funds to continue producing, marketing and distributing its products. If the Company cannot raise sufficient capital, it may have to curtail or cease operations. Accordingly, the Company will need additional funds to continue to produce its products for distribution in its target markets.

 

 

There is no guarantee that sufficient sale levels will be achieved.

 

There is no guarantee that the expenditure of money on distribution and marketing efforts will translate into sufficient sales to cover the Company’s expenses and result in profits. Consequently, there is a risk that investors may lose all of their investment.

 

Yerbaé’s development, marketing, and sales activities are limited by its size.

 

Because of Yerbaé’s relative size, the Company must limit its product development, marketing, and sales activities to the amount of capital it raises. As such, Yerbaé may not be able to complete its production and business development program in a manner that is as thorough as the Company would like. The Company may not ever generate sufficient revenues to cover its operating and expansion costs.

 

A failure to introduce new products or product extensions into new marketplaces successfully could prevent Yerbaé from achieving long-term profitability.

 

Yerbaé competes in an industry characterized by rapid changes in consumer preferences, so the Company’s ability to continue developing new products to satisfy our consumers’ changing preferences will determine its long-term success. A failure to introduce new products or product extensions into new marketplaces successfully could prevent the Company from achieving long-term profitability. In addition, customer preferences are also affected by factors other than taste, such as publicity and marketing campaigns. If the Company does not adjust to respond to these and other changes in customer preferences, Yerbaé’s sales may be adversely affected.

 

Yerbaé’s growth and profitability depends on the performance of third-party distributors and on the Company’s ongoing relationships with them.

 

Yerbaé’s distribution network is essential for the Company’s success and relies on the performance of various third-parties. This includes wholesalers, direct store delivery distributors, direct distribution channels, and e-commerce platforms. Any failure or inadequate performance by these distribution parties could impact the Company’s operations, profitability, and pose risks to any investment in the securities of the Company.

 

Yerbaé’s distribution model involves a diverse network of wholesalers, distributors, and retailers. Wholesalers purchase our products in bulk and distribute them to retailers or directly to consumers. Distributors handle direct store delivery distribution, ensuring Yerbaé’s products reach retail shelves efficiently. Additionally, the Company’s direct distribution channels and e-commerce platform enable it to reach customers directly.

 

There are several potential risks associated with these various arrangements:

 

Non-Performance – There is a risk that wholesalers, distributors, or retailers may refuse to carry or cease marketing Yerbaé’s products, disrupting the Company’s supply chain and sales channels.

 

 

Inadequate Performance – Third-parties may not fulfill their obligations effectively, such as failing to distribute to enough retailers or positioning Yerbaé’s products in unfavorable locations.

 

Financial Instability – The financial health or market share of these third-parties may deteriorate, impacting Yerbaé’s distribution, marketing, and sales activities.

 

Relationship Management – Maintaining positive commercial relationships with wholesalers, distributors, and retailers is essential to ensure continued promotion and availability of Yerbaé’s products. Any strain or deterioration in these relationships could have adverse effects on the operations and profitability of the Company.

 

Overall, the performance of third-party distribution parties and Yerbaé’s relationships with them are crucial factors that could affect the business outcomes of the Company and returns for investors.

 

Yerbaé’s business is sensitive to public perception. If any product proves to be harmful to consumers or if scientific studies provide unfavorable findings regarding their safety or effectiveness of caffeinated beverages, then the Company’s image in the marketplace would be negatively impacted.

 

Yerbaé’s results of operations may be significantly affected by the public’s perception of the Company and similar companies. Accordingly, the business of the Company could be adversely affected if any of Yerbaé’s products or similar products distributed by other companies proves to be harmful to consumers or if scientific studies provide unfavorable findings regarding the safety or effectiveness of the Company’s products or any similar products. If Yerbaé’s products suffer from negative consumer perception, it is likely to adversely affect the Company’s business and results of operations.

 

Increases in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm the business of Yerbaé.

 

Yerbaé and its third-party bottlers will use water, flavors, yerba mate, white tea, caffeine and stevia and packaging materials for bottles such as aluminum and paper products. The prices for these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in the prices of the Company’s or its bottler’s ingredients, other raw materials and packaging materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, could increase the operating costs of the Company and could reduce profitability.

 

Increases in the prices of Yerbaé’s finished products resulting from a higher cost of ingredients, other raw materials and packaging materials could affect the affordability of the Company’s products and reduce sales.

 

An increase in the cost, a sustained interruption in the supply, or a shortage of some of the ingredients used in the Company’s products, other raw materials, or packaging materials and containers that may be caused by a deterioration of Yerbaé’s or its third-party bottlers’ relationships with suppliers; by supplier quality and reliability issues; or by events such as natural disasters, power outages, labor strikes, political uncertainties or governmental instability, or the like, could negatively impact the Company’s net revenues and profits.

 

 

Yerbaé relies on third-parties to produce and bottle its products, which creates additional risk.

 

Yerbaé does not own or operate bottling or co-packing facilities used for the production of the various products in its portfolio. The Company relies on certain third-parties to ensure the quality, safety and integrity of Yerbaé’s products. If the third-parties that the Company engages to produce and bottle its products fail to meet Yerbaé’s demands or are found by government agencies to be out of compliance with applicable regulatory requirements, the supply of those products and the future profit margins of the Company could be adversely affected.

 

Yerbaé presently relies on a limited number of customers

 

Yerbaé’s business is highly dependent on a limited number of customers, which exposes the Company to significant risks related to revenue concentration. As such, a substantial portion of the Company’s sales is generated from a small number of key customers. Consequently, the loss of, or a significant reduction in orders from, any of these customers could materially and adversely affect Yerbaé’s financial condition, results of operations, and cash flows.

 

Several factors could lead to a loss or reduction in orders from these key customers, including:

 

Customer Consolidation – Mergers or acquisitions among Yerbaé’s customers could reduce the number of purchasing entities, potentially leading to decreased demand for our products.

 

Changes in Customer Demand – Shifts in consumer preferences towards other beverages, new health trends, or changes in the Company’s customers’ business strategies could reduce the demand for Yerbaé products.

 

Competitive Pressures – Yerbaé’s customers may choose to source functional beverages from competitors, including new entrants with innovative products or larger companies with established brands, which could result in a loss of business.

 

Economic Downturns – Economic instability or downturns affecting the Company’s customers’ markets could lead to reduced orders, as consumers may cut back on discretionary spending, including premium beverages.

 

Contractual Relationships – Changes in or termination of any existing relationships, or failure to renew or replace any arrangement with Yerbaé customers on favorable terms, could negatively impact the Company’s revenue. This includes private label agreements or exclusive supply contracts with major retailers or distributors.

 

Yerbaé’s dependence on a limited number of customers may also limits its negotiating power and increase its vulnerability to adverse changes in pricing and contract terms. Additionally, this concentration risk could negatively impact Yerbaé’s ability to obtain favorable financing terms or secure new business opportunities.

 

 

To mitigate these risks, the Company is actively seeking to diversify its customer base and broaden its market reach. However, there can be no assurance that these efforts will be successful or that they will sufficiently offset the risks associated with Yerbaé’s current customer concentration. Failure to diversify Yerbaé’s customer base could result in a significant decline in financial performance.

 

Product contamination or tampering or issues or concerns with respect to product quality, safety and integrity could adversely affect Yerbaé’s business, reputation, financial condition or results of operations.

 

Product contamination or tampering, the failure to maintain high standards for product quality, safety and integrity, including with respect to raw materials and ingredients obtained from suppliers, or allegations (whether or not valid) of product quality issues, mislabeling, misbranding, spoilage, allergens, adulteration or contamination with respect to products in Yerbaé’s portfolio may reduce demand for such products, and cause production and delivery disruptions or increase costs, each of which could adversely affect the business, reputation, financial condition or results of operations of the Company. If any of the products in Yerbaé’s portfolio are mislabeled or become unfit for consumption or cause injury, illness or death, or if appropriate resources are not devoted to product quality and safety or to comply with changing food safety requirements, the Company could decide to, or be required to, recall products or withdraw from the marketplace and/or it may be subject to liability or government action, which could result in payment of damages or fines, cause certain products in the Company’s portfolio to be unavailable for a period of time, result in destruction of product inventory, or result in adverse publicity (whether or not valid), which could reduce consumer demand and brand equity. Moreover, even if allegations of product contamination or tampering or suggestions that Yerbaé’s products were not fit for consumption are meritless, the negative publicity surrounding assertions against the Company or its products or processes could adversely affect Yerbaé’s reputation or brand. The business of the Company could also be adversely affected if consumers lose confidence in product quality, safety and integrity generally, even if such loss of confidence is unrelated to products in Yerbaé’s portfolio. Any of the foregoing could adversely affect the business, reputation, financial condition or results of operations of the Company. In addition, if Yerbaé does not have adequate insurance, if it does not have enforceable indemnification from suppliers, bottlers, distributors or other third-parties or if indemnification is not available, the liability relating to such product claims or disruption as a result of recall efforts could materially adversely affect the business, financial condition or results of operations of the Company.

 

Yerbaé will compete in an industry that is brand-conscious, so brand name recognition and acceptance of its products are critical to its success and significant marketing and advertising could be needed to achieve and sustain brand recognition.

 

Yerbaé’s business is substantially dependent upon awareness and market acceptance of its products and brands by its targeted consumers. Its business also depends on acceptance by independent distributors of the Yerbaé brand as one that has the potential to provide incremental sales growth rather than reduce distributors’ existing functional energy drinks. The development of brand awareness and market acceptance is likely to require significant marketing and advertising expenditures. There can be no assurance that Yerbaé will achieve and maintain satisfactory levels of acceptance by independent distributors and retail customers. Any failure of the Yerbaé brand to maintain or increase acceptance or market penetration would likely have a material adverse effect on business, financial condition and results of operations.

 

 

If Yerbaé is unable to successfully manage new product launches, its business and financial results could be adversely affected.

 

Due to the highly competitive nature of the global functional energy drink sector, Yerbaé expects and intends to continue to introduce new products and evolve existing products to better match consumer demand. The success of new and evolved products depends on several factors, including timely and successful development and consumer acceptance. Such endeavors may also involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return on capital, exposure to additional regulations and reliance on the performance of third-parties.

 

Alternative non-commercial beverages or processes could hurt Yerbaé’s business.

 

The availability of non-commercial beverages, such as tap water, and machines capable of producing naturally caffeinated, plant-based energy beverages at the consumer’s home could hurt Yerbaé’s business, market share, and profitability.

 

Water scarcity and poor quality could negatively impact Yerbaé’s production costs and capacity.

 

Water is an ingredient in the product. It is also a limited resource, facing unprecedented challenges from overexploitation, increasing pollution, poor management, and climate change. As demand for water continues to increase, as water becomes scarcer, and as the quality of available water deteriorates, Yerbaé may incur increasing production costs or face capacity constraints that could adversely affect its profitability or net operating revenues in the long run.

 

Climate change and natural disasters may affect Yerbaé’s business.

 

There is concern that a gradual increase in global average temperatures due to increased carbon dioxide and other greenhouse gases in the atmosphere could cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Changing weather patterns could result in decreased agricultural productivity in certain regions, and/or outbreaks of diseases or other health issues, which may limit availability and/or increase the cost of certain ingredients used in Yerbaé’s products and could impact the food security of communities around the world. Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt Yerbaé’s supply chain and/or impact demand for its products.

 

 

Natural disasters and extreme weather conditions, such as hurricanes, wildfires, earthquakes or floods, and outbreaks of diseases (such as the COVID-19 pandemic) or other health issues may affect Yerbaé’s operations and the operation of its supply chain, impact the operations of its distributors and unfavorably impact Yerbaé’s consumers’ ability to purchase its products. In addition, public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation, and raw material costs, and may require Yerbaé to make additional investments in facilities and equipment. Changes in applicable laws, regulations, standards or practices related to greenhouse gas emissions, packaging and water scarcity, as well as initiatives by advocacy groups in favor of certain climate change-related laws, regulations, standards or practices, may result in increased compliance costs, capital expenditures and other financial obligations, which could affect Yerbaé’s business, financial condition and results of operations. Sales of Yerbaé’s products may also be influenced to some extent by weather conditions in the markets in which it operates. Yerbaé’s third-party co-packers use a number of key ingredients in the manufacturing of its products and powder packets that are derived from agricultural commodities. Increased demand for food products and decreased agricultural productivity in certain regions of the world as a result of changing weather patterns and other factors may limit the availability or increase the cost of such agricultural commodities and could impact the food security of communities around the world. Weather conditions may influence consumer demand for certain of Yerbaé’s products, which could have an effect on its operations, either positively or negatively.

 

Because Yerbaé has a limited operating history, Yerbaé’s ability to fully and successfully develop the business is unknown.

 

Yerbaé has only recently begun producing and distributing energy beverages and does not have a significant operating history with which investors can evaluate Yerbaé’s business. Yerbaé’s ability to successfully develop its products, and to realize consistent, meaningful revenues and profit has not been established and cannot be assured. For Yerbaé to achieve success, the products must receive broad market acceptance by consumers. Without this market acceptance, Yerbaé will not be able to generate sufficient revenue to continue Yerbaé’s business operations. If Yerbaé’s products are not widely accepted by the market, the business may fail.

 

Dependence on personnel.

 

Due to the specialized nature of Yerbaé’s business, Yerbaé’s success depends on its ability to attract and retain qualified personnel and management. In particular, Yerbaé’s future success will depend in part on the continued services of its executive officers and other key employees. Competition for qualified personnel in the industry in which Yerbaé operates is intense. Yerbaé believes that there are only a limited number of people with the requisite skills to serve in many key positions and it is difficult to hire and retain these people. The loss of one or more of these key personnel may have a significant adverse effect on Yerbaé or its sales, operations and profits.

 

Conflicts of Interest.

 

Certain of the directors and officers of Yerbaé are also directors and officers of other companies. In addition, they may devote time to other outside business interests, so long as such activities do not materially or adversely interfere with their duties to Yerbaé. The interests of these persons could conflict with those of Yerbaé. Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws, including the requirements of the BCBCA. In particular, in the event that such a conflict of interest arises at a meeting of Yerbaé’s Board of Directors (the “Board”), a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable laws, the directors of Yerbaé will be required to act honestly, in good faith and in the best interests of Yerbaé.

 

 

Yerbaé’s growth and profitability depends on the performance of third-parties and its relationship with them.

 

Yerbaé and its distribution network and its success depend on the performance of third-parties, such as third-party co-packers and distribution partners. Any non-performance or deficient performance by such parties may undermine Yerbaé’s operations, profitability, and result in total loss to your investment. To manufacture products, Yerbaé will rely on third-party co-packers. These third-party co-packers may not be able to fulfill Yerbaé’s demand, or such third-parties could begin to charge rates that make using their services cost inefficient. In such a case, Yerbaé’s business, financial condition, and results of operation would be adversely affected. To distribute product, Yerbaé will use a broker-distributor-retailer network whereby brokers represent products to distributors and retailers who will in turn sell product to consumers. The success of this network will depend on the performance of the brokers, distributors and retailers of this network. There is a risk that a broker, distributor, or retailer may refuse to or cease to market or carry Yerbaé’s products. There is a risk that the mentioned entities may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning Yerbaé’s products in localities that may not be receptive to it. Furthermore, such third-parties’ financial position or market share may deteriorate, which could adversely affect Yerbaé’s distribution, marketing and sale activities. Yerbaé must maintain good commercial relationships with third-party brokers, distributors and retails so that they will promote and carry its product. Any adverse consequences resulting from the performance of third-parties or Yerbaé’s relationship with them could undermine Yerbaé’s operations, profitability and may result in total loss of your investment.

 

Risks Related to Regulations Applicable to Yerbaé’s Industry

 

Changes in the caffeinated energy beverage business environment and retail landscape could adversely impact the Company’s financial results.

 

The caffeinated energy beverage business environment is rapidly evolving as a result of, among other things, changes in consumer preferences, including changes based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the caffeinated energy beverage retail landscape is very dynamic and constantly evolving, not only in emerging and developing markets, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed markets, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If Yerbaé is unable to successfully adapt to the rapidly changing environment and retail landscape, its share of sales, volume growth and overall financial results could be negatively affected.

 

Increase in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm Yerbaé’s business.

 

Yerbaé’s bottling partners will use water, yerba mate, guarana, white tea, stevia, flavoring and packaging materials for bottles such as aluminum, plastic and paper products. The prices for these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in the prices of Yerbaé’s or its bottling partners’ ingredients, other raw materials and packaging materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, would increase Yerbaé’s operating costs and could reduce its profitability. Increases in the prices of Yerbaé’s finished products resulting from a higher cost of ingredients, other raw materials and packaging materials could affect the affordability of its products and reduce sales.

 

 

An increase in the cost, a sustained interruption in the supply, or a shortage of some of these ingredients, other raw materials, or packaging materials and containers that may be caused by a deterioration of Yerbaé’s or its bottling partners’ relationships with suppliers; by supplier quality and reliability issues; or by events such as natural disasters, power outages, labor strikes, political uncertainties or governmental instability, or the like, could negatively impact Yerbaé’s net revenues and profits.

 

Intense competition and increasing competition in the commercial beverage market could hurt Yerbaé’s business.

 

The commercial retail beverage industry, and in particular its functional caffeinated energy beverage segment is highly competitive. Market participants are of various sizes, with various market shares and geographical reach, some of whom have access to substantially more sources of capital.

 

Yerbaé will compete generally with all commercial beverages, including specialty beverages, such functional energy drinks. Yerbaé will compete indirectly with major international beverage companies including, but not limited to: the Coca Cola Company, Dr. Pepper Snapple Group, PepsiCo, Inc., Nestle, Waters North America, Inc., Hansen Natural Corp. and Red Bull. These companies have established market presence in the United States, and offer a variety of beverages that are substitutes to Yerbaé’s products. Yerbaé faces potential direct competition from such companies, because they have the financial resources, and access to manufacturing and distribution channels to rapidly enter the energy beverage market.

 

Yerbaé also competes with companies that are smaller or primarily local in operation as well as with private label brands such as those carried by supermarket chains, convenience store chains, drug store chains, mass merchants and club warehouses. These companies could bolster their position in the caffeinated plant-based energy beverage market through additional expenditure and promotion.

 

As a result of both direct and indirect competition, Yerbaé’s ability to successfully distribute, market and sell its products, and to gain sufficient market share in the United States to realize profits may be limited, greatly diminished, or totally diminished, which may lead to partial or total loss of your investments in Yerbaé.

 

Changes in consumer product and shopping preferences may reduce demand for Yerbaé’s products.

 

The functional energy drink and supplement categories are subject to changing consumer preferences and shifts in consumer preferences may adversely affect Yerbaé. There is increasing awareness of and concern for health, wellness, and nutrition considerations, including concerns regarding caloric intake associated with sugar-sweetened drinks and the perceived undesirability of artificial ingredients. Yerbaé’s products do not contain the artificial preservatives often found in many energy drinks and sodas. Yerbaé has no artificial preservatives, aspartame or high fructose corn syrup and is very low in sodium. Yerbaé has sweetened line of products that are sweetened with stevia, a composite herb native to South America whose leaves are the source of a noncaloric sweetener. However, consumer preferences may shift away from the trend towards healthier options that Yerbaé has observed, and as such, there can be no assurance that Yerbaé’s current products and product lines will maintain their current levels of demand. There are also changes in demand for different packages, sizes, and configurations. This may reduce demand for Yerbaé’s products, which could reduce Yerbaé’s revenues and adversely affect Yerbaé’s results of operations.

 

 

Consumers are seeking greater variety in their functional energy drinks. Yerbaé’s success will depend, in part, upon its continued ability to develop and introduce different and innovative drinks and supplements that appeal to consumers. In order to retain and expand Yerbaé’s market share, Yerbaé must continue to develop and introduce different and innovative supplements and be competitive in the areas of efficacy, taste, quality, and price, although there can be no assurance of its ability to do so. There is no assurance that consumers will continue to purchase Yerbaé products in the future. Product lifecycles for some functional energy drink brands, products and/or packages may be limited to a few years before consumers’ preferences change. The functional energy drinks that Yerbaé currently markets are in varying stages of their product lifecycles, and there can be no assurance that such products will become or remain profitable for Yerbaé. Yerbaé may be unable to achieve volume growth through product and packaging initiatives. Yerbaé may also be unable to penetrate new markets.

 

Expansion of the naturally caffeinated, plant-based energy beverage market or sufficiency of consumer demand in that market for operations to be profitable are not guaranteed.

 

The naturally caffeinated, plant-based energy beverage market is an emerging market and there is no guarantee that this market will expand or that consumer demand will be sufficiently high to allow Yerbaé to successfully market, distribute and sell its products, or to successfully compete with current or future competition, all of which may result in total loss of your investment.

 

Health benefits of caffeinated energy beverages are not guaranteed or proven, rather it is perceived by consumers.

 

Health benefits of caffeinated energy beverages are not guaranteed and have not been proven. There is a perception that consuming naturally caffeinated, plant-based energy beverages have beneficial health effects. Consequently, negative changes in consumers’ perception of the benefits of such beverages or negative publicity surrounding them may result in loss of market share or potential market share and hence loss of your investment.

 

The U.S. Food and Drug Administration has not passed on the efficacy of Yerbaé’s products or the accuracy of any claim made related to its products. The FTC regulates advertising and may review the truthfulness of and substantiation for any claim Yerbaé makes related to its products.

 

Yerbaé’s advertising activities within the United States are subject to regulation by the United States Federal Trade Commission (“FTC”) under the Federal Trade Commission Act. In recent years, the FTC and state attorneys general have initiated numerous investigations of dietary and nutritional supplement companies and products. Any actions or investigations initiated against the Company by governmental authorities or private litigants could have a material adverse effect on Yerbaé’s business, financial condition, and results of operations.

 

 

The shifting regulatory environment through the various jurisdictions in which are products are sold necessitates building and maintaining robust systems to achieve and maintain compliance in multiple jurisdictions and increases the possibility that Yerbaé may violate one or more of the legal requirements. If its operations are found to be in violation of any applicable laws or regulations, Yerbaé may be subject to, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of its operations, injunctions, or product withdrawals, recalls or seizures, any of which could adversely affect its ability to operate its business, its financial condition and results of operations.

 

Risks Related to Yerbaé’s Intellectual Property

 

Dependence on trademarks and proprietary rights.

 

Yerbaé’s success depends, in large part, on its ability to protect its brands and products and to defend its intellectual property rights. Yerbaé currently has registered both the name “Yerbaé” and Yerbaé’s frog logo as trademarks with the United States Patent and Trademark Office. Yerbaé cannot be sure that trademarks will be issued with respect to any future trademark applications or that its competitors will not challenge, invalidate or circumvent any existing or future trademarks issued to, or licensed by, Yerbaé. Additionally, Yerbaé’s products will be manufactured using proprietary blends of ingredients created by third-party suppliers and then supplied to co-packers. Although the third-parties in Yerbaé’s supply and manufacturing chain will execute confidentiality agreements, there can be no assurances that trade secrets, such as the proprietary ingredient blends, will not become known to competitors.

 

Yerbaé may face intellectual property infringement claims that could be time-consuming and costly to defend, and could result in loss of significant rights and the assessment of treble damages.

 

From time to time the Company may face intellectual property claims from third-parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome could affect Yerbaé negatively. For example, were a third-party to succeed on an infringement claim against the Company, Yerbaé may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, the Company could face an injunction, barring it from conducting the allegedly infringing activity. The outcome of the litigation could require Yerbaé to enter into a license agreement which may not be under acceptable, commercially reasonable, or practical terms or the Company may be precluded from obtaining a license at all. It is also possible that an adverse finding of infringement against the Company may require Yerbaé to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible.

 

Finally, Yerbaé may initiate claims to assert or defend its intellectual property against third-parties. Any intellectual property litigation, irrespective of whether the Company is the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert management’s attention from Yerbaé’s business and negatively affect the operating results or financial condition of the Company.

 

 

Yerbaé may be subject to claims by third-parties asserting that its employees or the Company has misappropriated their intellectual property, or claiming ownership of what the Company regard as its own intellectual property.

 

Although Yerbaé tries to ensure that the Company, its employees, and independent contractors (suppliers/vendors/distributors) do not use the proprietary information or know-how of others in their work, Yerbaé may be subject to claims that the Company, its employees, or independent contractors (suppliers/vendors/distributors) have used or disclosed intellectual property in violation of others’ rights. These claims may cover a range of matters, such as challenges to Yerbaé’s trademarks, as well as claims that its employees or independent contractors are using trade secrets or other proprietary information of any such employee’s former employer or independent contractors. As a result, the Company may be forced to bring claims against third-parties, or defend claims brought against Yerbaé, to determine the ownership of what the Company regard as its intellectual property. If Yerbaé fails in prosecuting or defending any such claims, in addition to paying monetary damages, the Company may lose valuable intellectual property rights or personnel. Even if successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management of the Company.

 

Risks Related to Yerbaé’s Common Shares

 

Market price of Common Shares

 

The market price of the common shares of the Company (the “Common Shares”) may be volatile and subject to wide fluctuations in response to ‎numerous factors, many of which are beyond Yerbaé’s control. This volatility may affect the ‎ability of holders of Common Shares to sell their securities at an advantageous price. Market price ‎fluctuations in the Common Shares may be due to Yerbaé’s operating results failing to meet ‎expectations of securities analysts or investors in any period, downward revision in securities analysts’ ‎estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions or ‎other material public announcements by Yerbaé or its competitors, along with a variety of additional ‎factors. These broad market fluctuations may adversely affect the market price of the Common Shares.‎

 

Financial markets have historically at times experienced significant price and volume fluctuations that ‎have particularly affected the market prices of equity securities of companies and have often been ‎unrelated to the operating performance, underlying asset values or prospects of such companies. ‎Accordingly, the market price of the Common Shares may decline even if Yerbaé’s operating results, ‎underlying asset values or prospects have not changed. Additionally, these factors, as well as other ‎related factors, may cause decreases in asset values that are deemed to be other than temporary, which ‎may result in impairment losses. There can be no assurance that continuing fluctuations in price and ‎volume will not occur. If such increased levels of volatility and market turmoil continue, Yerbaé’s ‎operations could be adversely impacted and the trading price of the Common Shares may be ‎materially adversely affected.‎

 

Additional Financing

 

The continued development of Yerbaé will require additional financing. There is no guarantee that Yerbaé will be able to achieve its business objectives, including with respect to the expansion of its product offerings and entering into new markets. Yerbaé intends to fund its business objectives by way of additional offerings of equity and/or debt financing as well as through anticipated positive cash flow from operations in the future. The failure to raise or procure such additional funds or the failure to achieve positive cash flow could result in the delay or indefinite postponement of current business objectives. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, will be on terms acceptable to the Company.

 

 

Given Yerbaé’s plans and expectations that additional capital and personnel will be needed, the Company may need to issue additional debt or equity securities. Yerbaé cannot predict the size of future sales and issuances of debt or equity securities or the effect, if any, that future sales and issuances of debt or equity securities will have on the market price of the Common Shares. Sales or issuances of a substantial number of equity securities, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares. With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in Yerbaé’s earnings per share.

 

Liquidity

 

Shareholders may be unable to sell significant quantities of Common Shares into the public trading markets without a significant reduction in the price of their Common Shares, or at all. There can be no assurance that there will be sufficient liquidity of the Common Shares on the trading market, and that Yerbaé will continue to meet the listing requirements of the TSX Venture Exchange, OTCQX^® or other public listing exchanges.

 

History of negative cash flows

 

Yerbaé has a history of negative cash flow from operating activities. To the extent that the Company has negative cash flow in future periods, Yerbaé may need to allocate a portion of the net proceeds from the sale of securities to fund such negative cash flow. There can be no assurance that additional capital or other types of financing will be available when need or that these financings will be on terms at least as favorable to Yerbaé as those previously obtained, or at all.

 

Yerbaé derives virtually all of its revenues from functional energy drinks, and competitive pressure in the functional energy drink category could adversely affect Yerbaé’s business and operating results.

 

Yerbaé’s focus is in the functional energy category, and its business is vulnerable to adverse changes impacting the fitness supplement category and business, which could adversely impact Yerbaé’s business and the trading price of its Common Shares.

 

Virtually all of Yerbaé’s sales are derived from its functional energy beverage product lines. Any decrease in the sales of its functional energy drinks could significantly adversely affect Yerbaé’s future revenues and net income. Historically, Yerbaé have experienced substantial competition from new entrants in the functional energy drink category. The increasing number of competitive products and limited amount of shelf space, including in coolers, in retail stores may adversely impact Yerbaé’s ability to gain or maintain a share of sales in the marketplace. In addition, certain actions of competitors, including unsubstantiated and/or misleading claims, false advertising claims and tortious interference in Yerbaé’s business, as well as competitors selling misbranded products, could impact Yerbaé’s sales. Competitive pressures in the functional energy drink and supplement categories could impact Yerbaé’s revenues, cause price erosion and/or lower market share, any of which could have a material adverse effect on its business and results of operations.

 

Because Yerbaé does not intend to pay any cash dividends on its Common Shares in the near future, shareholders will not be able to receive a return on their Common Shares unless they sell them.

 

Yerbaé intends to retain any future earnings to finance the development and expansion of its business. Accordingly, the Company does not anticipate paying any cash dividends on the Common Shares in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless Yerbaé pays dividends, shareholders of the Company will not be able to receive a return on their Common Shares unless they sell them.

 

 

 

Exhibit 99.5

 

YERBAÉ BRANDS CORP.
(the “Company” or “Yerbaé”)

 

SUMMARY OF DESCRIPTION OF BUSINESS

 

General

 

Yerbaé develops plant-based energy drinks that contain no added sugar or artificial ingredients. Yerbaé was founded by Todd and Karrie Gibson in 2016 to create plant-based energy drinks containing Yerba Mate, a South American herb and a natural source of caffeine. Yerbaé’s first beverage was launched in the first quarter of 2017.

 

Yerbaé is engaged in the development, marketing, sale, and distribution of plant-based energy beverages that do not contain calories, carbohydrates, or sugar. Yerbaé’s line of beverages are blended with non-GMO plant-based ingredients and offer the benefits of Yerba Mate and White Tea, sustainably sourced from Brazil and other growing regions in South America.

 

Yerbaé beverages are created to provide products targeted at consumers seeking healthier beverages as an alternative to existing energy drinks and focused on health, wellness, and fitness. The products are formulated to provide a more refreshing taste than coffee, with additional benefits to existing sodas and sparkling waters, along with healthier ingredients than traditional energy drinks. Yerbaé’s products complement a variety of healthy lifestyles, such as non-GMO, Keto, Vegan, Kosher, Paleo and gluten-free diets.

 

Reverse Recapitalization with Kona Bay Technologies

 

The Transaction

 

On May 19, 2022, Kona Bay Technologies Inc. (renamed to “Yerbaé Brands Corp.” following closing) (“Kona Bay”) entered into an arrangement agreement and plan of merger dated May 19, 2022 (the “Arrangement Agreement”) with Yerbae Brands Co. (“Yerbaé USA”), Kona Bay Technologies (Delaware) Inc. (“Merger Sub”), a company incorporated under the DGCL for the purposes of the transaction, FinCo, a company incorporated under the BCBCA for the purposes of the transaction, and Todd Gibson and Karrie Gibson, pursuant to which Kona Bay proposed to acquire all of the issued and outstanding securities of Yerbaé USA from the securityholders of Yerbaé USA prior to the closing (collectively, the “Original Yerbaé Securityholders”) (the “Transaction”). The Transaction was subject to the approval of the TSX Venture Exchange (“TSXV”) and constituted a reverse recapitalization of Kona Bay by Yerbaé USA as defined in TSXV Policy 5.2 – Change of Business and Reverse Takeovers. The TSXV deemed the transaction a non-arm’s length transaction and, in connection with the announcement of the transaction, trading in the common shares of Yerbae (the “Common Shares”) were halted on May 20, 2022 and remained halted until the closing of the transaction.

 

Arrangement Agreement

 

Pursuant to the terms of the Arrangement Agreement, Kona Bay proposed to acquire all of the issued and outstanding securities of Yerbaé USA from the Original Yerbaé Securityholders in exchange for the right to receive Common Shares at an exchange ratio of one post-consolidation Common Share for each one share of common stock (each, an “Yerbaé USA Share”) of Yerbaé USA prior to the closing. Accordingly, the Transaction was to be completed by way of a reverse triangular merger conducted pursuant to: (i) the provisions of DGCL in which Merger Sub, a newly incorporated wholly-owned subsidiary of Kona Bay incorporated for the purpose of the Transaction, was to merge with and into Yerbaé USA; and (ii) the arrangement under Part 9, Division 5 of the BCBCA as approved by the Supreme Court of British Columbia in the final order, which also resulted in the Amalgamation (as defined herein).

 

 

The Closing of the Transaction

 

The Transaction was completed by way of a reverse triangular merger on February 8, 2023, conducted pursuant to (i) the provisions of the DGCL in which Merger Sub merged with and into Yerbaé US, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA, which also resulted in the amalgamation of the Company (formerly, Kona Bay Technologies Inc.) with FinCo (the “Amalgamation”).

 

Corporate Structure

 

As of the date of the filing, the Company has the following wholly-owned subsidiaries:

 

Subsidiary		Date of Incorporation		Jurisdiction of Incorporation		Ownership Percentage		Direct or Indirect Ownership
Yerbaé Brands Co.		February 8, 2023		Delaware		100%		Direct
Yerbaé LLC1		February 8, 2023		Delaware		100%		Indirect

 

¹ Yerbae LLC is a wholly owned subsidiary of Yerbae Brands Co.

 

Principal Products and Services

 

Yerbaé offers two primary beverage lines with a total of fourteen flavors. Yerbaé’s two primary product lines are the 12oz Plant-Based Energy Seltzer Water and 16oz Plant-Based Energy Drink.

 

 

12 oz Energy Seltzer Water

 

Yerbaé’s unsweetened Energy Seltzer Water line is served in a 12 oz can with zero sugar and zero calories. The beverage offers a lighter flavor than the 16 oz Energy Drink line and contains 100 mg of caffeine.

 

 

16 oz Energy Drink

 

Yerbaé’s zero calorie 16oz Energy Drink line was introduced to the market in 2020 to provide consumers with a greater energy boost. The flavor is more full-bodied than the 12oz Energy Seltzer Water and uses non-GMO Stevia as the sweetener.

 

Products are generally packaged and sold in 12 and 15 can packs for all its flavors as well as variety packs which include an assortment of three flavors. The Company’s website also offers a subscription service.

 

Yerbaé is consistently optimizing its portfolio and innovating new flavors to continuously deliver a new and fresh flavor profile for the ever-changing taste buds of consumers. Yerbaé also intends to continue to build sales and distribution throughout the United States through its distribution channels and increasing consumer brand awareness through its marketing efforts.

 

The Market

 

Yerbaé competes in a large and fast-growing market that is driven by an increased demand for energy drinks with a diverse nutritional profile and an increased adoption of healthy lifestyles since the COVID-19 pandemic. The U.S. energy-drink industry is estimated to be a US $15 billion industry, and it represents the fastest growing category within the non-alcoholic beverage space, rapidly gaining share from soft drinks and juices. The U.S. energy drink industry is estimated to reach US $21 billion in sales by 2026, reflecting a 7% CAGR (see table below).

 

 

The Market Opportunity

 

Many consumers are looking for functional beverages with cleaner ingredients and zero sugar, and Yerbaé believes it is uniquely positioned to be a significant player in this large addressable market and fastest growing non-alcoholic beverage category.

 

 

 

Strategy

 

Yerbaé is a naturally caffeinated beverage that is clean, simple, and delicious and gives the body energy from its plant-based functional ingredients. Yerbaé has successfully sold over 31 million cans of product.

 

Every part of Yerbaé was created to fit today’s modern diets and serve wellness forward consumers.

 

 

 

Yerbaé’s products were formulated with five key pillars in mind:

 

	1.	Plant Power – Utilizes the power of plants as the source of energy.
	2.	Anti-Inflammation – Created with zero sugar, calories, and carbohydrates or other inflammatory ingredients.
	3.	Diet Friendly – Gluten-free, non-GMO, Keto, Paleo, Vegan, Kosher, & diabetic friendly.
	4.	Sustainability – Zero Single-use plastic bottles.
	5.	Simple-Clean-Delicious.

 

To support those 5 key pillars, Yerbaé has undertaken significant marketing efforts aimed at building brand awareness, including digital, social media, sponsorships, TV, and podcasts. Yerbaé also undertakes various promotions at the retail level such as display activity, coupons and other in-store incentives and sampling.

 

The energy drink market is expected to experience significant growth through 2031, as reported by Research and Markets in 2022. The North American market is currently dominated by two legacy brands that share about 82% of the market, as reported by Information Resources, Inc in 2021. However, emerging brands like Yerbaé have started to erode that market share lead with new products aimed at solving the industry’s biggest problem: its ingredients list.

 

Yerbaé’s consumers are estimated to be 56% male and 44% female with the average age range of 24 to 45 years of age. Yerbaé’s consumers are engaged in active lifestyles and are looking for healthier energy drink alternatives for their mind and body. 

 

Distribution Channels

 

Since the initial product launch in 2017, Yerbaé has sold over 31 million cans of Yerbaé. Yerbaé’s line of products are currently available in over 14,000 retail locations in the US marketplace. Yerbaé sells across many retail segments that include wholesale club stores, convenience stores, drug stores, grocery stores, natural food stores, mass merchants, food services, and direct to consumer, as well as health clubs, gyms, Yoga Studios, and quick serve restaurants.

 

Yerbaé uses four main distribution channels to deliver its products to retailers and consumers in the United States:

 

1.

Broadline Distribution – This distribution channel consists of wholesaler distributors who purchase product from the Company, which they store at their warehouse distribution centers, for resale and delivery to retailers of the products or to their retailer warehouses for re-distribution to their retail stores. The relationship with these wholesaler distributors is a cost plus model, whereby the Company sells the product to the wholesaler distributor at agreed prices, the wholesaler distributor takes possession of the product and then the wholesaler distributor marks up the prices of the product and re-sells the products to the retailers. If the wholesaler distributors become dissatisfied with the product, the Company loses future opportunities with the retailers who purchase products through this distribution channel. The benefits of this distribution channel include that the wholesaler distributors have an extensive distribution network and provide access to national and other retailers that Yerbaé may not otherwise have access to. This gives Yerbaé the ability to compete with companies like Celsius, Guyaki, Monster, Red Bull, Rock Star, and other national brands.

 

 

	2.	DSD (Direct Store Delivery) – This distribution channel is comprised of local distributors who service nationally recognized brands or other independent distribution networks and market and sell the Company’s products on Yerbaé’s behalf. Once the local distributor sells the products, the Company then ships the products directly to the retailer’s store rather than a distribution center. Similar to the broadline distribution channel, the relationship with these distributors is a cost plus model, whereby the Company sells the product to the distributor at agreed prices and then the distributor marks up the prices of the product and re-sells the products to the retailers. The distributor and the Company work together to build a local distribution and execution plan for the delivery of the products to the retailers. The benefits from this distribution channel is that it allows Yerbaé to have access to the distributor’s relationships with retailers and that access, in turn, allows the Company to market its products in competition with the big national brands such as Celsius, Guyaki, Monster, Red Bull, Rock Star, and other national brands. In addition, it allows the Company to have access to the distributor’s sales and merchandising teams, which could lead to elevating the brands presence in the local market place. The risks from this channel are that the Company may not attract enough new consumers within a local marketplace to justify the shelf placement that the distributor has secured with the local retailers. If the Company cannot gain the desired attention of the distributors’ sales and merchandising teams, this may result in disproportionally low service levels and may result in slower than expected sales.
	3.	Direct Distribution – Yerbaé sells its products directly to the retailer and then ships them to retailer owned warehouses for store distribution and merchandising. The Company will work with national retailers, like the largest club store chain, that have a high desire to work directly with the Company instead of through a distribution partner. In these cases, the retailer will order directly from the Company and the Company will deliver the product directly to these retailers or their warehouses. These relationships may also involve marketing activities and sales representation at the retailer’s locations. The advantage of this distribution channel is that it leads to the highest gross margins for the Company. The disadvantage of this distribution channel is that the Company has to be highly sensitive to and responsive to the retailer’s needs and, if the product is not generating enough sales for the retailer, then the retailer may discontinue sales of the product.
	4.	Direct to Consumer (D2C) – Yerbaé sells directly to consumers through e-commerce platforms such as Amazon and the Company’s own website. The Company lists its products for sale on the Company’s website and other affiliated websites such as Amazon.com, Walmart.com and others. The advantage of this distribution channel is that the Company can sell directly to the consumer without a distributor or another retail party in-between the Company and the consumer. Other advantages include that the Company maintains the opportunity to communicate directly to the consumer through email or other forms of communication. The disadvantage of this distribution channel is that the consumer can request a refund if they receive damaged products, late deliveries or are dissatisfied with the products. The Company experiences less than 0.5% of all sales in the form of refunds.

 

Manufacturing

 

Yerbae engages with third-party bottling service providers. Through these relationships, Yerbae provides the concentrate, blending and batching instructions as well as quality guidance, carbonation requirement and settlement times for the bottling process. The bottling service providers extend various services and 30-day payment terms for all finished goods. Yerbaé has not formalized any partnerships or arrangements in connection with these services.

 

Competitive Conditions

 

The functional energy drink industry is highly competitive. The principal areas of competition are pricing, packaging, distribution channel penetration, development of new products and flavors, product positioning as well as promotion and marketing strategies. Yerbaé’s products compete with a wide range of drinks produced by a relatively large number of manufacturers, most of which have substantially greater financial, marketing and distribution resources and name recognition than Yerbaé does.

 

 

Important factors affecting Yerbaé’s ability to compete successfully include the efficacy, taste and flavor of Yerbaé’s products, trade and customer promotions, rapid and effective development of new, unique cutting-edge products, attractive and different packaging, branded product advertising and pricing. The success of Yerbaé’s social media and other general marketing endeavors may impact Yerbaé’s business, financial condition, and results of operation. Yerbaé’s products compete with all liquid refreshments and with products of much larger and substantially better financed competitors, including the products of numerous nationally and internationally known producers, such as The Coca Cola Company, Dr. Pepper Snapple Group, PepsiCo, Inc., Nestle, Waters North America, Inc., Monster Energy and Red Bull. Yerbaé also competes with companies that are smaller or primarily local in operation. Yerbaé’s products also compete with private label brands such as those carried by supermarket chains, convenience store chains, drug store chains, mass merchants and club warehouses. New competitors continue to emerge, some of which target specific markets as well as the health and wellness space. This may require additional marketing expenditures on Yerbaé’s part to remain competitive.

 

Information about Raw Materials

 

The primary raw materials and ingredients used to make our beverages are sourced both from domestic and international suppliers like Argentina and Brazil. The principal raw materials used in the manufacturing of our products are water, flavors, Yerba mate, White Tea, caffeine & Stevia, as well as, aluminum cans, sleek aluminum cans, and cardboard boxes for packaging. Our functional energy beverages are bottled by established third-party beverage co-packers strategically located across the United States. This allows us to efficiently produce and distribute our products.

 

Major Customers

 

Our revenues are highly dependent on a limited number of customers and the loss of any one of our major customers could materially and adversely affect our growth and revenues. During the fiscal years ended December 31, 2023 and 2022, our five largest customers contributed 95% and 80% of our revenues, respectively.

 

Proprietary Protection

 

Yerbaé owns domestic trademarks and other proprietary rights that are important to Yerbaé’s business, including Yerbaé’s main trademark. Yerbaé® LOGO is a registered trademark of Yerbaé in the United States. Depending upon the jurisdiction, trademarks are valid as long as they are used in the regular course of trade and/or their registrations are properly maintained. All of Yerbaé’s material trademarks are registered with the U.S. Patent and Trademark Office.

 

 

Yerbaé’s trademarks are as follows:

 

Trademark		Country		Date of Registration		Register		Registration Number
		United States		February 13, 2018		Supplemental Register		5,403,553
		United States		November 7, 2017		Principal Register		5,328,481
		United States		December 20, 2019		Principal Register		7,286,651

 

Pursuant to a trademark license agreement dated May 4, 2017 between the Non-GMO Project and Yerbaé LLC as the licensee, the Non-GMO Project has granted to Yerbaé LLC a non-exclusive, non-transferable, non-assignable, revocable license in the United States and Canada in and to certain of trademarks owned by the Non-GMO Project for use on or in relation to the products of Yerbaé LLC.

 

Business Cycles

 

Yerbaé’s business is not cyclical. Accordingly, the U.S. market, the sole market in which Yerbaé operates, generally does not see the same type of seasonal sales trend as other jurisdictions in North America. Yerbaé produces and sells energy drinks throughout the entire year.

 

Environmental Protection

 

As of the date of this filing, there are no financial and/or operational impacts in relation to environmental protection requirements on the capital expenditures, earnings and competitive position of Yerbaé.

 

Employees

 

As of the date of this filing, Yerbaé employs approximately 11 employees, all of which are full time, with the majority at its corporate headquarters in Scottsdale, Arizona.

 

 

 

Exhibit 99.6

 

YERBAÉ BRANDS CORP.

(the “Company” or “Yerbaé”)

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Form 10, as filed with the U.S. SEC on July 19, 2024, any of which may cause our Company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Readers should carefully review and consider the various disclosures made by us in the Form 10 filed with the SEC on July 19, 2024, this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.

 

Use of United States Generally Accepted Accounting Principles (“GAAP”) Financial Measures

 

We use United States GAAP financial measures, unless otherwise noted. All of the GAAP financial measures used by us in this report relate to the inclusion of financial information. This discussion and analysis should be read in conjunction with our financial statements and the notes thereto included elsewhere in this quarterly report. All references to dollar amount in this section are in United States dollars, unless expressly stated otherwise.

 

 

Overview

 

Yerbaé was founded by Todd Gibson and Karrie Gibson in 2016 to create plant-based energy drinks containing yerba mate, a South American herb and a natural source of caffeine. Yerbaé’s first beverage was launched in the first quarter of 2017.

 

Yerbaé is engaged in the development, marketing, sale, and distribution of plant-based energy beverages that do not contain calories, carbohydrates, or sugar. Yerbaé’s line of beverages are blended with non-GMO plant-based ingredients and offer the benefits of yerba mate and white tea; sustainably sourced from Brazil and other growing regions in South America.

 

Yerbaé beverages are created to provide products targeted at consumers focused on health, wellness, and fitness and seeking healthier beverages as an alternative to existing energy drinks. The products are formulated to provide a more refreshing taste than coffee, with additional benefits to existing sodas and sparkling waters, along with healthier ingredients than traditional energy drinks. Yerbaé’s products complement a variety of healthy lifestyles, such as non-GMO, Keto, Vegan, Kosher, Paleo and gluten-free diets.

 

The accompanying unaudited condensed interim consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company had an accumulated deficit of $41.5 million and $34.5 million as of September 30, 2024, and December 31, 2023, respectively. Further, the Company had cash and cash equivalents of approximately $0.3 million and $1.0 million as of September 30, 2024, and December 31, 2023, respectively. The Company’s primary focus in recent months has been and will continue to be supporting the manufacturing of its products which requires capital and resources. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future. Based on the Company’s currently available cash resources, current and forecasted level of operations, and forecasted cash flows for the 12-month period subsequent to the date of issuance of these unaudited condensed interim consolidated financial statements, the Company will require additional funding to continue to progress its operational obligations as they come due. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements through financing, operations, or other transactions, including third party loans.

 

Management’s discussion and analysis of financial condition and results of operations

 

Liquidity and Capital Resources

 

As of September 30, 2024, and December 31, 2023, the Company had a working capital deficit of $5,095,669 and surplus of $843,478, respectively. The Company has incurred losses since inception and as of September 30, 2024, and December 31, 2023, had an accumulated deficit of approximately $41.5 million and $34.5 million, respectively. The Company’s objective in managing its capital is to ensure that there is sufficient liquidity to finance and grow its operations, maximize the preservation of capital, provide adequate capital to fund its business objectives, and deliver competitive returns on invested capital. To fund its activities, the Company has primarily relied on private placement financing, warrant exercises, loans and other forms of debt. The material debt financing and loan transactions were as follows:

 

 

Notes Payable

 

Convertible Notes

 

During 2023, convertible notes payable were issued in the amount of $3,802,000 with a stated interest rate of 6.00%. The convertible notes were unsecured and are due on April 30, 2025. The balance, net of debt discount, of the convertible notes as of September 30, 2024, and December 31, 2023, was $2,734,936 and $2,196,302, respectively.

 

Motor Vehicle Loan

 

During 2023, the Company entered into various notes payable related to vehicles with monthly installments ranging from $543 to $652, including interest ranging from 2.90% to 5.49%, due October 2026. The notes are secured by vehicles and had a balance of $30,968 and $60,914 as of September 30, 2024 and December 31, 2023. There were no changes to the terms of these loans. All changes were a result of repayment.

 

Amazon Lending

 

During 2023, the Company entered into a financing arrangement with Amazon Lending, maturing December 26, 2024 at an interest rate of 14.49%, secured by inventories. There were no changes to the terms of these loans. All changes were a result of repayment.

 

Ampla and Oxford Financing

 

On May 16, 2023, Yerbaé replaced their finance provider Ampla LLC (“Ampla”) and secured a new accounts receivable and inventory of $2,500,000 with Oxford Commercial Finance, a Michigan banking corporation, through its Delaware subsidiary Yerbaé LLC. The Company can draw down funds as needed, and only pay interest on the amount borrowed. The debt facility was secured by a security interest in all assets of Yerbaé, including a first security interest in Yerbaé’s accounts receivable and inventory. The facility was repaid during 2023.

 

Unrelated Third-Party Loans

 

On July 5, 2024, the Company entered into a loan agreement with MaximCash solutions for $750,000. The loan included an origination cost of $22,500. In addition, the Company agreed to issue the lender $75,000 in common stock of the Company for a total discount of $97,500. The loan matures on July 5, 2025. The balance of the loan was $584,801 net of discounts and repayments as of September 30, 2024 and had an effective interest rate of 42%.

 

On August 26, 2024, the Company entered into an agreement with a lender whereby the lender agreed to loan an aggregate of up to $60,000 The loan matures on February 26, 2025. The balance of the loan was $51,667 net of discount and repayments as of September 30, 2024 and had an effective interest rate of approximately 8.3%.

 

 

On September 16, 2024, the Company entered into an agreement with a private lender whereby the lender agreed to loan an aggregate of up to $540,000. The loan matures on August 16, 2025. The balance of the loan was $500,000 as of September 30, 2024 and had an effective interest rate of approximately 8.0%.

 

During June of 2024, the Company entered into a loan agreement with Parafin for $230,000 and stated fee of $30,000; of which $10,000 was paid during period. This stated fee is treated as an interest and amortized over the term of the loan. The loan agreement includes a payment rate of 15% of the Company’s weekly sales over an 8-month period. The balance of the loan was $159,137, net of discounts and repayments as of September 30, 2024.

 

Related Party Loans

 

On January 30, 2023, the Company entered into a loan agreement with a director of the Company. An aggregate of $100,000 was advanced by the related party pursuant to the loan agreement. The loan was fully repaid during 2023.

 

On July 1, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $330,000. The loan matures on June 15, 2025 and had an effective interest rate 10%. The net balance of the loan as of September 30, 2024, was $307,500 which includes accrued interest to the end of the period.

 

On August 26, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $24,000 with an effective rate of 8.3%. The loan matures on February 26, 2024. The net balance of the loan as of September 30, 2024, was $20,667 net of discount and repayments.

 

Warrant Exercise and Expiration

 

On January 16, 2024, the Company issued, in connection with the exercise by one eligible warrant holder who participated in the Company’s warrant exercise incentive program an aggregate of 835,000 Warrants for gross proceeds to the Company of $1,002,000, and an aggregate of 835,000 warrants to the Eligible Holder. The Incentive Warrants are exercisable into the same number of common shares of the Company at an exercise price of $1.50 per common share until December 14, 2025, subject to an acceleration provision whereby, if for any thirty (30) consecutive trading days (the “Premium Trading Days”) following the repricing the closing price of the common shares exceeds $2.50 per common share, the Incentive Warrants’ expiry date will be accelerated such that holders will have thirty (30) calendar days to exercise the Incentive Warrants (if they have not first expired in the normal course) (the “Acceleration Clause”).

 

On January 22, 2024, the Company issued 263,157 Common Shares upon the exercise of 263,157 share purchase warrants at an exercise price of $0.95 per Common Share for gross aggregate proceeds of $250,000.

 

On January 30, 2024, the Company issued 352,941 Common Shares upon the exercise of 352,941 share purchase warrants at an exercise price of $0.85 per Common Share for gross aggregate proceeds of $300,000.

 

 

On April 8, 2024, the Company issued an aggregate of 1,103,811 common shares and 1,103,811 share purchase warrants pursuant to the exercise and terms of 1,003,468 special warrants originally issued pursuant to the closing of a special warrants offering which closed on December 6, 2023. The proceeds of the special warrants of approximately $1.5 million were received on December 6, 2023, and no proceeds were received upon the exercise of the special warrants.

 

During the three months ended September 30, 2024, there was a total of 3,208,498 warrants expired unexercised.

 

Commitments

 

As discussed in our consolidated financial statements for the annual period ended December 31, 2023, the Company entered into an office lease agreement during December of 2022. The ongoing monthly payments are not expected to have a material impact on the Company’s financial condition.

 

In addition to the lease agreement, the Company also enters into unconditional purchase obligations for inventory items such as cans and product ingredients. However, these obligations are not entered into for a period greater than one year. The Company has not entered into any off-balance sheet arrangements.

 

Going Concern

 

Yerbaé’s evaluation of its ability to continue as a going concern requires it to evaluate its future sources and uses of cash sufficient to fund its currently expected operations in conducting business activities one year from the date the financial statements are issued. Yerbaé evaluates the probability associated with each source and use of cash resources in making its going concern determination.

 

Due to our recurring losses, the ongoing challenging market conditions for beverage companies and our limited cash balance as of September 30, 2024, management believes that it is probable that the Company will be unable to meet its obligations as they come due within one year after the date that the unaudited condensed consolidated financial statements are issued. While the Company is attempting to plan additional financings, which are intended to mitigate the conditions or events that raise substantial doubt about our ability to continue as a going concern, those financings may not occur. If the financings do not occur, management will try and implement alternative arrangements, and such arrangements could have a potentially significant negative impact on the current net asset value of the Company. These alternatives include: (1) raising additional capital by means other than those planned through equity and/or debt financings; and/or (2) entering into new commercial relationships to help fund future expenses.

 

As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements within one year after the date that the financial statements are issued, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.

 

 

Cash Flows

 

The following tables summarize the results of the Company’s cash flows for the below respective periods:

 

		For the Nine Months Ended September 30,
		2024				2023
Net cash provided by (used in):
Operating activities		$	(3,598,634	)		$	(9,985,012	)
Investing activities			-				736,877
Financing activities			2,890,409				9,992,329
Net change in cash		$	(708,225	)		$	744,194

 

Operating Activities

 

Net cash used in operating activities was approximately $3.6 million for the nine months ended September 30, 2024, and was comprised of the net loss of $7.0 million and had net non-cash items totalling $2.2 million, consisting primarily of $1.7 million in share-based compensation expense and $0.5 million in accretion expense. Changes in operating assets and liabilities was $1.1 million, primarily consisting of a change in accounts receivable of $0.3 million, inventory of $0.2 million, prepaid expenses of $0.2 million, accounts payable of $0.1 million, accrued interest of $0.1 million and accrued expenses of $0.1 million.

 

Net cash used in operating activities was $10.0 million for the nine months ended September 30, 2023. The net loss for the nine months ended September 30, 2023, was $16.7 million and had net noncash items of $8.0 million, primarily consisting of performance shares granted upon consummation of the reverse takeover of $6.1 million, share-based compensation of $1.7 million and accretion expense of $0.2 million. Changes in operating assets and liabilities was ($1.3 million), primarily consisting of a change in accounts payable of ($1.1 million), prepaid expenses of ($0.3 million), accrued expenses of $0.1 million and ($0.1 million) in inventory.

 

Investing Activities

 

The Company did not engage in any material investing activities during the nine months ended September 30, 2024. Net cash provided from investing activities for the nine months ended September 30, 2023 was $0.6 million. The $0.6 million amount for the nine months ended September 30, 2023, was comprised primarily of $0.6 million of cash acquired as part of the reverse merger with Kona Bay.

 

Financing Activities

 

Net cash provided by financing activities was $2.9 million and $10.0 million for the nine months ended September 30, 2024, and 2023, respectively. For the nine months ended September 30, 2024, these amounts consisted of net proceeds from the exercise of warrants of $1.6 million and net proceeds from debt instruments and notes payable of $1.0 million and proceeds from note to related party of $0.3 million. For the nine months ended September 30, 2023, these amounts consisted of proceeds from issuance of common stock and warrants of $8.2 million, net proceeds from debt instruments and notes payable of $2.0 million and fees related to the issuance of convertible notes of ($0.2 million).

 

 

Results of Operations

 

Three months ended September 30, 2024, compared to three months ended September 30, 2023

 

The following tables set forth the Company’s results of operations for the periods presented. The comparison of financial results is not necessarily indicative of future results.

 

		For the Three Months Ended September 30,
		2024				2023
Revenues		$	1,631,615			$	2,986,734
Cost of sales			599,845				1,417,603
Gross profit		$	1,031,770			$	1,569,131
General and administrative		$	1,792,423			$	3,589,314
Sales, advertising and marketing			311,915				1,886,414
Total expenses		$	2,104,338			$	5,475,728
Net loss before other income (expense)			(1,072,568	)			(3,906,597	)
Interest expense			(406,926	)			(234,756	)
Net loss before income taxes			(1,479,494	)			(4,141,353	)
Income tax expense			-				-
Net loss and comprehensive loss		$	(1,479,494	)		$	(4,141,353	)

 

Revenues

 

		For the Three Months Ended September 30,								Change
		2024				2023				$				%
Revenues		$	1,631,615			$	2,986,734			$	(1,355,119	)			-45	%

 

Yerbaé’s revenues declined by $1.4 million, or 45%, for the three months ended September 30, 2024, compared to the same period in the prior year. This decline was primarily attributed to the non-renewal of its agreement with Sam’s Club, the nation’s second-largest club retailer, as well as the challenging consumer packaged goods (CPG) U.S. market today, which has been impacted by inflation and may be contributing to a reduction in consumer basket size. Despite this decrease, Yerbaé continued to advance its distribution footprint, executing with major retailers such as Kroger, Amazon, and Costco, along with multiple other retail chains. In the third quarter of 2024, the Company prioritized efforts to stabilize its business foundation, focusing on core strengths. Key growth was seen in the Natural Foods, Direct-to-Consumer, and Direct Store Delivery (“DSD”) channels, bolstered by the successful rollout of the new 12oz can platform launched in Q1 2024. Club store placements continued to perform well in select regions; however, a reduction in the number of stocked club stores as noted above led to a decline in quarterly sales.

 

 

Cost of Sales

 

		For the Three Months Ended September 30,								Change
		2024				2023				$				%
Cost of sales		$	599,845			$	1,417,603				(817,758	)			-58	%

 

Cost of sales is primarily comprised of product materials, ingredient costs, bottling, inbound freight, and other related expenses. Costs of sales decreased by $0.8 million, or 58%, as compared to the same period in the prior year. The decrease in cost of goods sold was directly related to the decrease in sales during 2024.

 

General and Administrative

 

		For the Three Months Ended September 30,								Change
		2024				2023				$				%
General and administrative		$	1,792,423			$	3,589,314				(1,796,891	)			-50	%

 

General and administrative expense included operational and administrative costs as detailed in the following table:

 

		For the Three Months Ended September 30,
		2024				2023
Share-based compensation		$	198,784			$	733,686
Outbound freight			442,380				575,560
Employee benefits			471,508				756,147
Professional fees			420,757				1,030,786
Office expenses			222,801				254,353
Other			36,193				238,782
Total general and administrative expenses		$	1,792,423			$	3,589,314

 

General and administrative expenses decreased to $1.8 million for the three months ended September 30, 2024, as compared to $3.6 million for the prior comparable period. The decrease was primarily due to decreases in share-based compensation of $0.5, professional fees of $0.6 million, employee benefits of $0.3 million, a decrease of outbound freight of $0.1 million and other expense of $0.2 million.

 

Sales, Advertising and Marketing

 

		For the Three Months Ended September 30,								Change
		2024				2023				$				%
Sales, advertising and marketing		$	311,915			$	1,886,414				(1,574,499	)			-83	%

 

 

Sales, advertising and marketing decreased to $0.3 million for the three months ended September 30, 2024, compared to $1.9 million for the prior year period. Throughout 2024, the Company has prioritized delivering efficiencies across its sales, advertising, and marketing platforms. This effort included a strategic focus on optimizing product availability in both retail and eCommerce channels. As the Company continues its expansion, maximizing the effectiveness of every dollar spent has been a top priority. This optimization involved streamlining fewer less-effective programs and leveraging insights gained about our customers’ evolving needs in a dynamic consumer landscape. Our efforts included refining consumer messaging and enhancing in-market activities with higher quality visuals and retailer-specific programs. These initiatives have contributed to the continuous improvement of the brand’s positioning and increased consumer engagement.

 

Interest Expense

 

		For the Three Months Ended September 30,								Change
		2024				2023				$				%
Total interest expense		$	406,926			$	234,756				172,170				73	%

 

Interest expense includes interest expense and accretion expense related to the principal amount of $3,802,000 convertible debentures issued in 2023 and new debt issuances in 2024 and increased to $0.4 million for the three-month period ended September 30, 2024, compared to $0.2 million during the comparable prior year period. The increase was primarily related to an increase in interest and accretion expense related to new debt instruments that were entered into during 2024.

 

Nine months ended September 30, 2024, compared to nine months ended September 30, 2023

 

The following tables set forth the Company’s results of operations for the periods presented. The comparison of financial results is not necessarily indicative of future results.

 

		For the Nine Months Ended September 30,
		2024				2023
Revenues		$	4,628,830			$	9,991,758
Cost of sales			2,122,316				4,968,058
Gross profit		$	2,506,514			$	5,023,700
General and administrative		$	7,469,589			$	15,735,214
Sales, advertising and marketing			1,136,839				5,542,848
Total expenses		$	8,606,428			$	21,278,062
Net loss before other income (expense)			(6,099,914	)			(16,254,362	)
Interest expense			(932,637	)			(418,748	)
Net loss before income taxes			(7,032,551	)			(16,673,110	)
Income tax expense			-				-
Net loss and comprehensive loss		$	(7,032,551	)		$	(16,673,110	)

 

 

Revenues

 

		For the Nine Months Ended September 30,								Change
		2024				2023				$				%
Revenues		$	4,628,830			$	9,991,758			$	(5,362,928	)			-54	%

 

Yerbaé’s revenues declined by $5.4 million, or 54%, for the nine months ended September 30, 2024, compared to the same period in the prior year. Throughout this period, the Company prioritized optimizing its customer base by phasing out less profitable accounts, including previously announced exits from Sam’s Club and other high-slotting, low-volume retailers, which resulted in lower revenues for the nine-month period ended September 30, 2024 compared to the prior period. Yerbaé has instead focused on growth-oriented retail partnerships that enhance gross margins and deliver greater shareholder value. Significant progress was made in core focus channels, establishing a strong foundation for future growth. The Company also expanded its Direct-to-Consumer segment, introducing new variety packs and increasing brand awareness through a broader network of social media influencers and digital advertising. Additionally, Yerbaé strengthened its distributor relationships, onboarding 14 new distributors in the third quarter of 2024 to support its growth initiates for 2025 and beyond. Nine-month 2024 revenues were also impacted by the challenging CPG U.S. market, which has been impacted by higher inflation earlier in the period and as the Company transitioned from 16oz to 12 oz packaging, aligning with consumer demand for a more efficient product size, however this also resulted in decreased sales as the Company transitioned to the new can format. This transition was completed in Q2 2024.

 

Cost of Sales

 

		For the Nine Months Ended September 30,								Change
		2024				2023				$				%
Cost of sales		$	2,122,316			$	4,968,058				(2,845,742	)			-57	%

 

Cost of sales is primarily comprised of product materials, ingredient costs, bottling, inbound freight, and other related expenses. Costs of sales decreased by $2.8 million, or 57%, as compared to the same period in the prior year. The decrease in cost of goods sold was directly related to the decrease in sales during 2024.

 

General and Administrative

 

		For the Nine Months Ended September 30,								Change
		2024				2023				$				%
General and administrative		$	7,469,589			$	15,735,214				(8,265,625	)			-53	%

 

General and administrative expense included operational and administrative costs as detailed in the following table:

 

 

		For the Nine Months Ended September 30,
		2024				2023
Share-based compensation		$	1,734,941			$	1,694,970
Outbound freight			1,333,707				1,956,911
Employee benefits			1,788,796				2,272,388
Professional fees			1,314,551				2,197,653
Office expenses			838,652				889,376
Performance shares granted upon consummation of RTO			-				6,086,596
Other			458,942				637,320
Total general and administrative expenses		$	7,469,589			$	15,735,214

 

General and administrative expenses decreased to $7.5 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease in expense related to performance shares granted upon consummation of the reverse takeover during the nine months ended September 30, 2023, of $6.1 million, a decrease of professional fees of $0.9 million, a decrease of outbound freight of $0.6 million, a decrease of employee benefits of $0.5 million and a decrease of other expenses $0.2 million.

 

Sales, Advertising and Marketing

 

		For the Nine Months Ended September 30,								Change
		2024				2023				$				%
Sales, advertising and marketing			1,136,839			$	5,542,848				(4,406,009	)			-79	%

 

Sales, advertising and marketing decreased to $1.1 million for the nine months ended September 30, 2024, compared to $5.5 million for the prior year period. Over the past nine months, the Company has focused on evaluating and optimizing retailer performance, promotions, and growth levels. By concentrating on select channels, the Company has demonstrated its ability to operate more efficiently. This has involved reducing the number of promotions during the period and eliminating programs that did not meet expectations, such as paid pallet positions, slotting fees, and other sales initiatives. Additionally, the Company has prioritized more efficient and effective digital targeting in its eCommerce channels, which continues to deliver positive results.

 

 

Interest Expense

 

		For the Nine Months Ended September 30,								Change
		2024				2023				$				%
Total interest expense			932,637				418,748				513,889				123	%

 

Interest expense includes interest expense and accretion expense related to the principal amount of $3,802,000 convertible debentures issued in 2023 and new debt issuances in 2024. Interest expense increased to $0.9 million for the nine months ended September 30, 2024, compared to $0.4 million during the comparable prior year period. The increase was primarily related to an increase in accretion expense of $0.3 million and an increase in interest expense related to new debt instruments that were entered into during 2024.

 

Critical Accounting Estimates

 

Refer to the Company’s critical accounting estimates section provided in its consolidated annual financial statements for the period ended December 31, 2023. There were no material updates or changes to the disclosure for the nine-month period ended September 30, 2024.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.7

 

Condensed Consolidated Annual Financial Statements of

 

YERBAÉ BRANDS CORP.

 

For the fisical year ended December 31, 2023 and December 31, 2022

Audited Expressed in U.S Dollars

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Directors of Yerbaé Brands Corp.

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of Yerbaé Brands Corp. (the “Company”) as of December 31, 2023, and 2022 and related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficiency, and cash flows for the years ended December 31, 2023, and 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022 and the results of its operations and its cash flows for the years ended December 31, 2023, and 2022, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the Company’s auditor since 2023.
	/s/ DAVIDSON & COMPANY LLP
Vancouver, Canada	Chartered Professional Accountants
April 22, 2024

 

 

 

YERBAÉ BRANDS CORP.

CONSOLIDATED BALANCE SHEETS

(In United States dollars, except share data)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

YERBAÉ BRANDS CORP.

STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

(In United States dollars, except share data)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

YERBAÉ BRANDS CORP.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ DEFICIENCY

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(In United States dollars, except share data)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

YERBAÉ BRANDS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In United States dollars)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

NOTE 1 - NATURE AND DESCRIPTION OF BUSINESS

 

Yerbaé Brands Corp. (“Yerbaé” and, together with its subsidiary, the “Company”. “we”, or “us”) is a corporation existing under the Business Corporations Act (British Columbia) (“BCBCA”). Yerbaé’s principal subsidiaries are Yerbaé Brands Co. (“Yerbaé USA”) and Yerbaé LLC of which Yerbaé owns 100% interests in. Yerbaé is a beverage manufacturer focusing on the development and distribution of plant-based energy drinks and seltzers.

 

On May 19, 2022, Yerbaé (formerly Kona Bay Technologies Inc. (“Kona Bay”)) entered into a definitive arrangement agreement and plan of merger, as amended on August 31, 2022 and February 8, 2023, with Yerbaé USA, Kona Bay Technologies (Delaware) Inc. (“Merger Sub”), a wholly-owned Delaware subsidiary of the Company, 1362283 B.C. Ltd. (“FinCo”), a wholly-owned British Columbia subsidiary of Kona Bay, Todd Gibson and Karrie Gibson, pursuant to which Kona Bay proposed to complete a business combination with Yerbaé USA via the acquisition of all of the issued and outstanding securities of Yerbaé USA from the securityholders (collectively, the “Original Yerbaé Securityholders”) of Yerbaé USA (the “Transaction”). The Transaction was subject to the approval of the TSX Venture Exchange (“TSXV”) and constituted a reverse takeover of Kona Bay by Yerbaé USA as defined in TSXV Policy 5.2 – Change of Business and Reverse Takeovers.

 

On February 8, 2023, Yerbaé completed the Transaction with Yerbaé USA by way of a reverse merger conducted pursuant to: (i) the provisions of the Delaware General Corporations Law (“DGCL”) in which Merger Sub merged with and into Yerbaé USA, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA, which resulted in the amalgamation of Kona Bay with FinCo. In connection with the closing of the Transaction, Yerbaé (formerly, Kona Bay Technologies Inc.) consolidated its issued and outstanding common shares (each, a “Common Share”) on the basis of 5.8 pre-consolidation Common Shares for every one post-consolidation Common Share and changed its name from “Kona Bay Technologies Inc.” to “Yerbaé Brands Corp.”, details of the reverse takeover Transaction is fully described in Note 4 to the consolidated financial statements.

 

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), and include Yerbaé and its subsidiaries and include the accounts of all majority owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation. The Company had the following wholly-owned consolidated subsidiaries as of December 31, 2023:

 

Subsidiary		Date of Incorporation		Jurisdiction of Incorporation		Ownership Percentage		Direct or Indirect Ownership
Yerbaé Brands Co.		August 21, 2020		Delaware		100%		Direct
Yerbaé LLC(1)		May 18, 2016		Delaware		100%		Indirect

 

(1)	Yerbaé LLC is a wholly-owned subsidiary of Yerbaé Brands Co.

 

Going Concern

 

Yerbaé’s evaluation of its ability to continue as a going concern requires it to evaluate its future sources and uses of cash sufficient to fund its currently expected operations in conducting business activities one year from the date its consolidated financial statements are issued. Yerbaé evaluates the probability associated with each source and use of cash resources in making its going concern determination.

 

As discussed in Yerbaé’s consolidated financial statements, management believes that it is probable that the Company will be unable to meet its obligations as they come due within one year after the date that the financial statements are issued. Should the additional planned financings not occur as expected, management will implement alternative arrangements and such arrangements could have a potentially significant negative impact on the current net asset value of the Company. These alternatives include: (1) raising additional capital by means other than those planned through equity and/or debt financings; and/or (2) entering into new commercial relationships to help fund future expenses.

 

 

As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements within one year after the date that the financial statements are issued, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.

 

Management Estimates

 

The preparation of consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on historical experience and various other assumptions that management believes to be reasonable under the circumstances, including the potential future effects of macroeconomic trends and events, such as inflation and interest rate levels; supply chain disruptions; uncertainty from potential recessionary effects; climate-related matters; market, industry and regulatory factors, including permitting issues; global events, such as the ongoing military conflicts in Ukraine and Palestine; and public health matters. These estimates form the basis for making judgments about the Company’s operating results and the carrying values of assets and liabilities that are not readily apparent from other sources. While management believes that such estimates are reasonable when considered in conjunction with the Company’s consolidated financial position and results of operations taken as a whole, actual results could differ materially from these estimates.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the five-step model outlined in ASC 606-Revenue from Contracts with Customers. Specifically, the Company recognizes revenue from the sale of Yerbaé product to its customers by applying the following steps:

 

	1.	Identify the contract(s) with a customer
	2.	Identify the performance obligations in the contract
	3.	Determine the transaction price
	4.	Allocate the transaction price to the performance obligations in the contract
	5.	Recognize revenue when (or as) the entity satisfies a performance obligation

 

Refer to Note 3 to the consolidated financial statements for additional information regarding the Company’s recognition, measurement and disclosure of its contracts with customers.

 

Income Taxes

 

Income taxes are accounted for using the asset and liability method in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

The Company records net deferred tax assets to the extent it believes these assets will more-likely-than-not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company was to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

 

 

Cash and Cash Equivalents

 

Cash in the statement of financial position are comprised of cash at banks and on hand and short-term highly liquid deposits with a maturity date of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits. At certain times, the amount of cash equivalents at any one institution may exceed the federally insured prescribed limits; however, no losses have been incurred to date.

 

Accounts Receivable

 

Accounts receivables, net of the allowance for doubtful accounts, represent their estimated net realizable value, which approximates fair value. Provisions for doubtful accounts are recorded based on historical collection experience and the age of the receivables. Receivables are written off when they are deemed uncollectible.

 

Inventory

 

Inventory is valued at the lower of cost or net realizable value with cost determined on a first-in/first-out basis. The cost of inventory includes material and manufacturing costs. Inventoriable costs are expensed to cost of goods sold on the Consolidated Statement of Operations and Comprehensive Loss in the same period as finished products are sold. The amount of any write-down of inventory to net realizable value and all losses of inventory are recognized as an expense in the period when the write-down or loss.

 

Leases

 

In the ordinary course of business, the Company enters into agreements that provide financing for equipment and for other warehouse facility and vehicle needs. The Company reviews all agreements to determine if a leasing arrangement exists. When a leasing arrangement is identified, a determination is made at inception as to whether the lease is an operating or a finance lease. A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, the Company considers whether a contract provides both the right to obtain substantially all of the economic benefits from the use of an asset and the right to direct the use of the asset. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of the minimum future lease payments over the expected term of the lease. The Company’s lease assets are primarily concentrated in vehicles, machinery and equipment.

 

Leases with an initial term of 12 months or less are classified as short-term leases and are not recognized in the consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised, or unless it is reasonably certain that the equipment will be leased for greater than 12 months. The volume of lease activity for leases with an initial term of 12 months or less varies depending upon the number of ongoing projects at a given time, as well as the location and type of equipment required in connection with those projects. Lease payments for short-term leases are recognized on a straight-line basis over the lease term, and primarily relate to equipment used on construction projects, for which the rentals are based on daily, weekly or monthly rental rates, and typically contain termination for convenience provisions. Lease determinations are reassessed in the event of a change in lease terms. The Company has a limited number of sublease, equipment and other leasing arrangements, which are not considered material to the consolidated financial statements.

 

Long-Lived Assets

 

Management regularly reviews property and equipment and other long-lived assets for possible impairment. This review occurs annually, or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If there is an indication of impairment, management then prepares an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. The fair value is estimated using the present value of the future cash flows discounted at a rate commensurate with management’s estimates of the business risks. Preparation of estimated expected future cash flows is inherently subjective and is based on management’s best estimate of assumptions concerning expected future conditions. No impairments were recognized during either the year ended December 31, 2023 or December 31, 2022.

 

 

Fair Value Measurement

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in markets that are not active.

 

Level 3: Unobservable inputs that reflect the Company’s own assumptions. While the Company does not have any financial instruments that are measured to fair value on a recurring or non-recurring basis, it does have financial instruments, such as cash, notes payable, and the line of credit as of both December 31, 2023, and December 31, 2022. The fair value of the cash and line of credit is equal to their carrying value due to the short-term nature and liquidity of the instruments. Similarly, the fair value of the notes payable, which are categorized as level 3 instruments, are also equal to their carrying value due to their recent issuance at interest rates that are prevalent in the market for a smaller company as of the reporting date.

 

Sales, Advertising and Marketing

 

The Company supports its products with advertising to build brand awareness of the Company’s various products in addition to other marketing programs executed by the Company’s contract marketing teams. Advertising costs for the years ended December 31, 2023 and 2022 were approximately $6.9 million and $4.0 million, respectively.

 

Deferred Financing Costs

 

In accordance with the guidance in SAB Topic 5.A, the Company defers specific incremental costs directly attributable to proposed or actual offerings and will subsequently charge the deferred costs against the gross proceeds of the offering. Deferred costs of an aborted offering are not deferred and charged against the proceeds of a subsequent offering.

 

Share-Based Compensation

 

The Company measures fair value of employee stock-based compensation awards on the date of grant and allocates the related expense over the requisite service period. Further, the Company also grants non-employee options in exchange for certain goods and services. Similar to employee options, non-employee options are measured at fair value as of the grant date and are recognized when the goods or services or obtained. The fair value of restricted share units and performance share units is equal to the market price of the Company’s common share on the date of grant.

 

The fair value of stock options are measured using the Black-Scholes-Merton valuation model. The expected volatility is based on the implied volatilities for comparable companies and the expected life of the award is based on the simplified method.

 

When awards include a performance condition that impacts the vesting of the award, the Company records compensation cost when it becomes probable that the performance condition will be met and the expense will be attributed over the explicit or implicit service period. The Company accounts for forfeitures as they occur. Any previously recognized expense related to the forfeited awards will be reversed during the period of forfeiture.

 

 

When awards include a performance condition that impacts the vesting of the award, the Company records compensation cost when it becomes probable that the performance condition will be met and the expense will be attributed over the explicit or implicit service period. The Company accounts for forfeitures as they occur. Any previously recognized expense related to the forfeited awards will be reversed during the period of forfeiture.

 

Segment Reporting

 

The Company’s operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (“CEO”). In addition to requiring certain information about operating segments, ASC 280 also requires that entities report certain information about their products and services, the geographic areas in which they operate, and their major customers.

 

Currently, the Company conducts its business within a single operating segment. Further, the Company does not have any long-lived assets located outside of the United States.

 

Complex Financial Instruments

 

Convertible Debt

 

To support its ongoing financing needs, the Company may issue debt with certain embedded options, such as a conversion option, and detachable warrants. In accounting for the convertible debt, the Company follows the guidance in ASC 815-15 to determine whether the embedded conversion option should be considered an embedded derivative. If Yerbaé determines that the conversion option should be considered an embedded derivative, it then assesses the guidance in ASC 815-40 to determine if the embedded derivative is considered indexed to the Company’s stock. If the embedded derivative is not considered indexed to the Company’s stock, Yerbaé would separate the embedded derivative from its debt host (based on its estimated fair value) and recognize it as a derivate liability to be re-measured to fair value at the end of each reporting period. For convertible debt issued during the fiscal year ended December 31, 2023 and December 31, 2022, Yerbaé determined that the embedded conversion option was indexed to the Company’s stock and should therefore not be bi-furcated from the debt host and recognized as a derivative liability.

 

Detachable Warrants

 

In addition to convertible debt, the Company may also issue detachable warrants in connection with future financings. In accounting for the warrants, the Company will first determine whether they are in the scope of ASC 480 and therefore whether they are to be recognized as a liability and re-measured to fair value at the end of each reporting period. If the warrants are not within the scope of ASC 480, the Company will then determine if they satisfy the derivative criteria outlined in ASC 815-10. If the warrants satisfy the criteria outlined in in the ASC subtopic, Yerbaé will then determine if they are indexed to the Company’s Common Shares. If the warrants are not considered indexed to the Company’s Common Shares, they will be recognized as a derivative liability and re-measured to fair value at the end of each reporting period. For warrants issued during either the year ended December 31, 2023 or December 31, 2022, the Company determined that they are indexed to the Company’s Common Shares and should therefore be classified in equity.

 

Allocation of Proceeds

 

In situations where the Company issues convertible debt with detachable warrants, Yerbaé determines the allocation of proceeds based on the guidance in ASC 470-20 (assuming the conversion option is not bi-furcated from the debt host and the warrants are equity classified). Specifically, the Company allocates the proceeds between the convertible debt and detachable warrants based on their relative fair value. The portion allocated to the detachable warrants is then recognized as a debt discount and amortized to interest expense over the estimated life of the debt. If the debt is either paid down or converted to equity prior to its maturity date the Company will immediately recognize the remaining debt discount to interest expense.

 

 

Recent Accounting Pronouncements

 

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures-In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. Yerbaé expects this ASU to only impact its disclosures with no impacts to the Company’s results of operations, cash flows and financial condition.

 

Income Taxes (Topic 740): Improvements to Income Tax Disclosures-In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. Yerbaé expects this ASU to only impact its disclosures with no impacts to the Company’s results of operations, cash flows, and financial condition.

 

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS

 

The Company is in the business of manufacturing plant-based beverages and derives its revenues from one primary source-product sales. Revenue from contracts with customers is recognized when control of the goods are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods.

 

The Company recognizes revenue in accordance with the five-step model outlined in ASC 606-Revenue from Contracts with Customers. Specifically, the Company recognizes revenue from the sale of Yerbaé product to the customers by applying the following steps:

 

	1.	Identify the contract(s) with a customer
	2.	Identify the performance obligations in the contract
	3.	Determine the transaction price
	4.	Allocate the transaction price to the performance obligations in the contract
	5.	Recognize revenue when (or as) the entity satisfies a performance obligation

 

The Company’s contracts with customers contain a single performance obligation consisting of providing Yerbaé energy drinks. As it pertains to the single performance obligation, the Company does not recognize any contract assets or contract liabilities as it: (1) does not have a right to consideration in exchange for goods or services that the entity has transferred to a customer when the right is conditioned on something other than the passage of ; or ( 2) receive payment prior to performing.

 

 

The Company typically satisfies its performance obligations at a point time upon the occurrence of delivery of the product to the customer. Further, payment is typically received within 60 days after product delivery and does not include a significant financing component. Also, the Company’s contracts with customers include variable consideration including customer rebates and quick pay discounts. The Company estimates variable consideration, which it does not consider to be constrained, using either the most likely amount or expected value methods depending on the type of variable consideration. The Company only provides refunds for products that are damaged during delivery to the customer. However, instances of refunds are rare and have not historically had a material impact on the Company’s results of operations. Finally, Yerbaé has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

 

In addition to variable consideration, the Company also provides payments to certain customers for slotting fees. In accordance with the guidance in ASC 606-10-32, the Company determined that the payment is not in exchange for a distinct good or service and it is therefore recognized as a reduction to the transaction price. As the slotting fee payment covers the life of the contract with a customer, the initial payment is recognized as an asset and is amortized as a reduction to revenue on a rational and reasonable basis over the estimated life of the contract.

 

Costs to Obtain a Contract with a Customer

 

The Company does not recognize any assets related to either costs to obtain or fulfill a contract with a customer. We incur certain delivery costs prior to transferring control of Yerbaé product to the customers (i.e. outbound freight). In accordance with the guidance in ASC 606-10-25, those costs are recognized as a fulfillment cost as they are provided prior to transferring control of the Yerbaé product to the customer (i.e. akin to shipping and handling). Further, the costs are classified in general and administrative within the consolidated statement of operations and comprehensive loss.

 

Customer Concentration

 

Revenues from two customers represented $7,069,600 or 59% of total revenues and $1,338,081 or 11% of total revenues for the year ended December 31, 2023. In addition, revenues from two customers represented $1,325,581 or 19% of total revenues and $920,959 or 13% of total revenues for the year ended December 31, 2022.

 

NOTE 4 - REVERSE RECAPITALIZATION

 

On February 8, 2023, Yerbaé completed the Transaction with Yerbaé USA by way of a reverse merger conducted pursuant to: (i) the provisions of the Delaware General Corporations Law (“DGCL”) in which Merger Sub merged with and into Yerbaé USA, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA, which resulted in the amalgamation of Kona Bay with FinCo. In connection with the Closing, Yerbaé (formerly, Kona Bay Technologies Inc.) consolidated its issued and outstanding common shares (each, a “Common Share”) on the basis of 5.8 pre-consolidation Common Shares for every one post-consolidation Common Share and changed its name from “Kona Bay Technologies Inc.” to “Yerbaé Brands Corp.”. In accounting for the Transaction, the Company determined that Kona Bay was a shell company (as that term has been defined in Rule 405 of the United States Securities Act of 1933) as prior to the merger they had no operations and assets consisting solely of cash and cash equivalents. Thus, pursuant to section 12100 of the United States Securities and Exchange Commission’s (“SEC”) financial reporting manual, the Company concluded that: (1) the Transaction should be accounted for as “a reverse takeover equivalent to the issuance of Common Shares by the Company for the net monetary assets of Kona Bay”; and (2) the Company should be considered the accounting acquirer/legal acquiree in the Transaction. As the Company concluded that Yerbaé USA was the accounting acquirer/legal acquiree in the transaction, the historical results of the combined company (prior the merger) represent the historical results of Yerbaé USA.

 

The recognition and measurement for the acquisition of Kona Bay, was analogized to the guidance in ASC 805-40 Reverse Acquisitions which requires that the accounting acquirer measure the fair value of the consideration transferred based on the number of common shares the legal target would have had to issue in order to retain a specified ownership in the combined Company (the “deemed issuance”). Yerbaé intended to retain and 85% ownership interest in the combined company, and therefore, based on 30.2 million Common Shares outstanding immediately prior to the merger, would have had to issue approximately 5.3 million Common Shares to the owners of the legal parent (to retain an 85% ownership). In addition, based on an equity financing by the Company which occurred immediately before the transaction, the Company determined that the common shares had a fair value of $1.23 per Common Share. This resulted in the determination of the fair value of the consideration transferred in the transaction was approximately $6.5 million (5.2 million shares x $1.23 per Common Share) and that of the $6.5 million transferred approximately $0.6 million should be allocated to the cash acquired from Kona Bay (i.e., the “net assets” acquired) and the remaining $5.9 million should be recognized as a charge to equity as follows:

 

		Allocation Table
		($ in millions)
Fair value of consideration paid		$	6.5
Net assets acquired (cash)		$	(0.6	)
Charge to additional paid in capital		$	5.9

 

 

In addition the Company presented the acquisition of Kona Bay as a “recapitalization” line item in our statement of changes in shareholders equity reflecting: (1) the number of Kona Bay’s outstanding common shares immediately prior to the transaction; and (2) the approximately $6.5 million in fair value of consideration transferred (calculated pursuant to the paragraph above). Further, while the guidance in ASC 805-40 also requires a revision to historical equity (of the combined company) to reflect the legal capital of the legal acquirer, the Company concluded that this was not required in our scenario as the conversion ratio, which reflects the number of common shares issued by the legal acquirer to effectuate the transaction compared to the number of common shares in the capital of Yerbaé outstanding immediately prior to the transaction, was 1:1.

 

NOTE 5 - INVENTORY

 

Inventory consist of the following for the fiscal years presented:

 

		December 31,
		2023				2022
Raw material		$	54,954			$	55,462
Finished goods			908,433				867,601
Reserve for shrinkage			(1,099	)			(1,109	)
TOTAL		$	962,288			$	921,954

 

NOTE 6 – PROPERTY AND EQUIPMENT

 

Property and equipment are recorded at cost and consist only of vehicles. Depreciation is computed on a straight-line method over an estimated useful life of the asset of five years.

 

		Property & Equipment
December 31, 2022
Vehicles, gross		$	253,454
Vehicles, accumulated depreciation			(62,254	)
Vehicles, net		$	191,200
December 31, 2023
Vehicles, gross		$	109,915
Vehicles, accumulated depreciation			(49,462	)
Vehicles, net		$	60,453

 

Depreciation expense totaled $34,579 and $50,691 for the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the Company disposed of equipment with a book value of $96,167 for proceeds of $96,944, and gain of $777 recorded within the consolidated statement of operations and comprehensive loss.

 

 

NOTE 7 – ACCRUED EXPENSES

 

Accrued expenses and other current liabilities consist of the following for the fiscal years presented:

 

		December 31,
		2023				2022
Accrued employee bonuses		$	358,154			$	301,674
Accrued credit card expenses			259,144				295,038
Accrued interest			133,353				46,895
Other current liabilities			89,775				10,850
TOTAL		$	840,426			$	654,457

 

NOTE 8 – LEASES

 

The Company entered into an office lease during December 2022, which it uses in its day-to-day operations. The Company recognizes operating lease expense on a straight-line basis over the lease term.

 

Management determines if an arrangement is a lease at contract inception. Lease and non-lease components are accounted for as a single component for all leases. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term, which includes optional renewal periods if the Company determines it is reasonably certain that the option will be exercised.

 

As the Company’s leases do not provide an implicit rate, the discount rate used in the present value calculation represents our incremental borrowing rate determined using information available at the commencement date. Operating lease expense is included as a component of selling, general and administrative expenses in the statements of operations. For the years ended December 31, 2023, and 2022, the Company recorded operating lease expense of $116,322 and $9,694, respectively, which is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. Cash payments on lease liabilities during the years ended December 31, 2023 and 2022 totaled $77,881 and $0, respectively. At December 31, 2023 and 2022, weighted-average remaining lease term and discount rate were as follows:

 

		December 31,
		2023				2022
Weighted-average remaining lease term			2.06 years				3.06 years
Weighted-average discount rate			8.6	%			8.6	%

 

The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of December 31, 2023:

 

Years Ended December 31,
2024		$	136,562
2025			139,807
2026			23,797
Less imputed interest			(27,400	)
Remaining operating lease liability -December 31, 2023		$	272,767

 

 

NOTE 9 – LINE OF CREDIT

 

On May 16, 2023, Yerbaé’s Delaware subsidiary, Yerbaé LLC, replaced its line of credit provider Ampla LLC (“Ampla”) and secured a new accounts receivable and inventory revolving line of credit of $2,500,000 from Oxford Commercial Finance, a Michigan banking corporation. The Company can draw down funds as needed, and only pay interest on the amount borrowed. The debt facility is secured by a security interest in all assets of Yerbaé, including a first security interest in Yerbaé’s accounts receivable and inventory. The outstanding balance due to Oxford Commercial Finance was $0 at December 31, 2023 and the outstanding balance due to Ampla was $879,555 at December 31, 2022.

 

NOTE 10 – NOTES PAYABLE

 

Notes payable consisted of the following at the fiscal years presented:

 

		December 31,
		2023				2022
Note payable to the Small Business Administration, secured by all assets of the Company, due October 2050, payable in monthly principal and interest payments of $731. Interest on the note is at 3.75%. The first monthly installment was due in October 2022 and the note was paid in full during 2022.		$	-			$	150,000
Notes payable due in a lump payment at maturity, including interest at 8%, due February 8, 2023. The notes are secured by certain assets of the Company. The note was paid in full on February 15, 2023.			-			$	500,000
Notes payable to two investors in the amount of $4,500,000 in total were issued throughout 2022. The loans accrued interest at 8.00%. All accrued interest was waived on conversion of the notes. The notes were secured by substantially all the assets of the Company and were due on the earlier of 12 months from issue date or upon completion of a liquidation event as defined in the agreements. These notes also contained certain conversion rights as described in the agreement. There are two conversion options: (a) automatic conversion upon liquidation event; and (b) upon maturity of the notes. On February 8, 2023, all the notes converted into common shares of the Company. (See ‘2022 Convertible Notes’)		$	-			$	3,257,051
Short term note payable due to Amazon Lending originated December 26, 2023 maturing December 26, 2024 at an interest rate of 14.49%, secured by inventories.		$	317,000			$	-
Notes payable in monthly installments ranging from $543 to $652, including interest ranging from 2.90% to 5.49%, due October 2026. The notes are secured by vehicles.		$	60,914			$	184,229
Notes payable to multiple investors in the amount of $3,802,000 in total. The loans accrue interest at 6.00%. The notes are unsecured and are due 24 months from issue date. These notes also contain certain conversion rights. There are two conversion options: (a) automatic conversion upon Change in Control event; and (b) upon maturity of the notes. (See ‘2023 Convertible Notes’)		$	2,196,302			$	-
Subtotal			2,574,216				4,091,280
Less current maturities			-340,178				-3,810,084
TOTAL		$	2,234,038			$	281,196

 

 

2022 Convertible Notes

 

During 2022, convertible notes payable to two investors in the amount of $4,500,000 in total were issued. The notes accrued interest at 8.00%. All accrued interest was waived on conversion of the notes. The notes were secured by substantially all the assets of the Company and were due on the earlier of 12 months from issue date or upon completion of a liquidation event as defined in the agreements. These notes also contained certain conversion rights as described in the agreement. There are two conversion options: (a) automatic conversion upon liquidation event; and (b) upon maturity of the notes. On February 8, 2023, all the notes converted into common shares of the Company in connection with the Closing of the Transaction.

 

Pursuant to ASC 815-40, the conversion option was considered indexed to the Company’s stock and was therefore not bi-furcated from the debt host and separately recognized as a derivative liability. In addition, the notes payable were also issued with detachable share purchase warrants. Similar to the conversion option, the detachable warrants were considered indexed to the Company’s stock in accordance with ASC 815-40 and were therefore equity classified. The relative fair value of the warrants was recognized as a debt discount to be amortized to interest expense over the life of the notes payable. During February 2023, in conjunction with the merger transaction, the principal amount of the notes was converted into Common Shares and the remaining debt discount of $1,242,949 (stemming from the purchase warrants) was recorded as an offset to additional paid in capital.

 

2023 Convertible Notes

 

On April 13, 2023, Yerbaé closed the first tranche (the “First Tranche”) of its brokered debenture unit (each, a “Debenture Unit”) offering which consisted of 1,650 Debenture Units for gross proceeds of $1,650,000. On May 5, 2023, Yerbaé closed the second tranche (the “Second Tranche”) pursuant to which it issued an additional 2,152 Debenture Units for gross proceeds of $2,152,000, and for aggregate gross proceeds, together with the closing of the First Tranche, of $3,802,000.

 

Each Debenture Unit consisted of: (i) one (1) convertible debenture (each, a “Debenture”) in the principal amount of $1,000; and (ii) 714 share purchase warrants. The Debentures mature on April 30, 2025 (the “Maturity Date”), and bear interest at a rate of 6.0% per annum, payable on the earlier of the Maturity Date or the date of conversion of the Debentures. The interest will be payable in Common Shares to be determined at the Market Price (as that term is defined in the Policies of the TSXV). The principal amount of the Debentures will be convertible at the holder’s option into Common Shares at any time prior to the close of business on the earlier of: (i) the last business day immediately preceding the Maturity Date, and (ii) the date fixed for redemption in the case of a change of control, at a conversion price of $1.40 per Common Share, subject to adjustment in certain customary events. Each warrant entitles the holder thereof to acquire one Common Share at a price per Common Share of $1.70 at any time prior to the Maturity Date, subject to an acceleration right whereby, if, in the event the Common Shares have a daily volume weighted average trading price on the TSXV (or such other recognized North American securities exchange) of $3.00 or greater per Common Share for any ten (10) consecutive trading day period at any time after the date that is four (4) months following the issuance of the warrants, Yerbaé may accelerate the expiry of the warrants by giving notice to the holders by disseminating a news release advising of the acceleration) and, in such case, the warrants will be deemed to have expired on the day which is thirty (30) days after the date of such notice.

 

In accounting for the Debentures, the Company concluded the conversion option should not be bi-furcated from the debt host as it was considered indexed to the Company’s stock in accordance with ASC 815-40. Further, the Company also concluded that the detachable warrants should be classified in equity as they: (1) were not within the scope of ASC 480-10; and (2) should be considered indexed to the Company’s Common Shares. In accordance with ASC 470-20, the Company recognized both the Debentures and detachable warrants at their relative fair values. This resulted in the recognition of a debt discount that is being amortized to interest expense over the life of the Debenture Units. During the year ended December 31, 2023, the Company recorded accretion expense of $373,956. Further, during the year ended December 31, 2023, $525,000 in principal and $14,606 in accrued interest was converted into an aggregate of 385,432 Common Shares. The remaining unamortized debt discount balance as of December 31, 2023 was $1,080,698.

 

 

Future principal maturities of notes payable at December 31, 2023 were as follows:

 

2024		$	340,178
2025			2,219,480
2026			14,558
2027			-
2028			-
Thereafter			-
TOTAL		$	2,574,216

 

NOTE 11 – SHARE CAPITAL

 

Yerbaé is authorized to issue an unlimited number of Common Shares without par value and 100,000,000 preferred shares (each, a “Preferred Share”) without par value.

 

		As of December 31,
Issued and outstanding		2023				2022
Common shares(1)			58,822,126				30,217,566
Preferred shares			-				-
Warrants(2)			14,805,080				5,950,268
Stock options(3)			2,141,526				1,052,669
RSUs(4)			938,206				-
PSUs(5)			934,623				-
Fully-diluted share total			77,641,561				37,220,503

 

(1)	The outstanding Common Shares total is inclusive of the 8,000,000 Performance Shares.
(2)	The weighted average strike price of outstanding share purchase warrants is $1.44.
(3)	The weighted average strike price of outstanding stock options is $1.10.
(4)	The RSUs vest after 12 months. 802,492 vest in March 2024. The remaining 135,714 vest in May 2024.
(5)	During the year ended December 31, 2023, the Company granted an aggregate of 1,032,449 PSU’s of which 97,826 were forfeited during the period. 685,867 of the PSUs vest contingent upon and at the time the Company reaches $12,500,000 in net sales for 2023. 248,756 vest contingent upon and at the time of completion of 12 consecutive months of consulting services ending September 2024.

 

For the year ended December 31, 2022, the Company had the following transactions:

 

	●	In February 2022, Kona Bay (now renamed Yerbaé Brands Corp.) issued 29,535 Common Shares at a price of CAD$0.68 per Common Share for gross aggregate proceeds of CAD$20,000.
	●	Throughout September 2022, Kona Bay (now renamed Yerbaé Brands Corp.) issued 726,650 Common Shares at an average price of CAD$1.23 per Common Share for gross aggregate proceeds of CAD$893,533.
	●	On September 30, 2022, the Company issued 107,752 Common Shares at an average price of CAD$1.28 per Common Share for gross aggregate proceeds of CAD$137,923.

 

 

For the year ended December 31, 2023, the Company had the following transactions:

 

On May 19, 2022, Yerbaé (formerly Kona Bay) entered into the Arrangement Agreement with Yerbaé USA, Merger Sub, FinCo, Todd Gibson and Karrie Gibson, with respect to the Transaction. On February 8, 2023, Yerbae completed its Transaction with Yerbaé USA by way of a reverse takeover. conducted pursuant to: (i) the provisions of the DGCL in which Merger Sub merged with and into Yerbaé USA, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA. In connection with the Closing, Yerbaé (formerly, Kona Bay) consolidated its outstanding Common Shares on the basis of 5.8 pre-consolidation Common Shares for every one post-consolidation Common Share prior to the completion of the Amalgamation and changed its name from “Kona Bay Technologies Inc.” to “Yerbaé Brands Corp.”. Total Common Shares issued relating to the reverse takeover that were issued to former Kona Bay shareholders was 8,239,215 Common Shares with a fair value of $7,526,000.

 

At the time of Closing, an aggregate of 54,493,953 Common Shares were issued and outstanding of which: 35,848,290 Common Shares were issued to the former Yerbaé shareholders (inclusive of an aggregate of 5,631,276 Common Shares issued to former holders of an aggregate of $4,500,000 in convertible promissory notes of Yerbaé USA converted immediately prior to closing of the Transaction), 8,000,000 performance Common Shares (each, a “Performance Share”) were issued with a fair value of $11,360,000 of which $2,433,404 was recognized as a reduction of equity related to the current financing proceeds received and $2,840,000 has been included as deferred offering costs initially, and as of December 31, 2023, the deferred offering costs balance was Nil. The Performance Shares are held in escrow and are to be released upon the completion of certain performance-based incentives related to the listing of the Common Shares on the TSX Venture Exchange (“TSXV”), future equity financings, and certain trailing gross revenue targets, and 2,015,163 Shares were issued to former holders of subscription receipts of FinCo issuable in connection to a concurrent financing of $2,433,404 to the Transaction.

 

In addition, the 1,087,752 options to purchase shares of common stock (each, a “Yerbaé USA Share”) of Yerbaé USA which were outstanding immediately prior to closing of the Transaction were cancelled and the holders thereof were granted an aggregate of 1,087,752 options to purchase Common Shares (each, an “Option”), 1,754,464 warrants to purchase Yerbaé USA Shares which were outstanding immediately prior to Closing were cancelled and the holders thereof were granted an aggregate of 1,754,464 replacement warrants of Yerbaé, and 2,015,163 warrants to purchase shares of FinCo which were outstanding immediately prior to closing of the Transaction were cancelled and the holders thereof were granted an aggregate of 2,015,163 replacement warrants. 5,631,276 warrants were also issued as part of the conversion of the $4,500,000 convertible promissory notes.

 

In connection with the closing of the Transaction, the parties paid customary advisory fees to an eligible arm’s length third party finder (the “Finder”), in consideration for the Finder’s services in facilitating the identification, negotiation and implementation of the Transaction which consisted of the issuance of 507,662 Common Shares with a fair value of $720,880, as well as a cash payment of $200,000.

 

On July 17 2023, Yerbaé announced a non-brokered private placement of units (each, a “Unit”) of the Company at a price of $1.83 per Unit for aggregate gross proceeds of up to $5,000,000 (the “Offering”), with each Unit consisting of one Common Share and one warrant entitling the holder thereof to acquire one additional Common Share at a price per warrant share of $2.15 for a period of 24 months from the date of issuance. On August 18, 2023, Yerbaé closed the initial tranche of the Offering which consisted of the issuance by the Company of 2,219,629 Units for aggregate gross proceeds of $4,061,921. In connection with the closing of the initial tranche, the Company paid eligible finders cash fees of $33,243. On August 31, 2023, Yerbaé closed the second tranche of the Offering which consisted of the issuance by the Company of 225,329 Units for aggregate gross proceeds of $412,352.

 

Yerbae entered into an agreement, as amended on June 19, 2023 (the “FORCE Family Agreement”) with FORCE Family Office Inc. (“FORCE”). Under the terms of the FORCE agreement, FORCE will provide certain business development and corporate strategies services to enhance the Company’s growth and market positioning. In consideration for the services to be provided by FORCE, the Company agreed to pay FORCE an aggregate consulting fee of $150,000 payable in Common Shares as to $25,000 in Common Shares on the date that is one month from the date of execution of the FORCE agreement at a deemed price per Common Share equal to the prevailing market price of the Common Shares on the date of such payment and $125,000 in Common Shares on the date of expiration of the six month term at a deemed price per Common Share equal to the prevailing market price of the Common Shares on the date of such payment. Accordingly, on July 21, 2023 the Company issued 11,363 Common Shares to FORCE at a deemed price of $2.20 per Common Share in satisfaction of the initial $25,000 payment.

 

On November 16, 2023, Yerbaé issued 159,496 Common Shares upon the exercise of 159,496 warrants. On November 24, 2023, Yerbaé issued 66,489 Common Shares at a deemed price of US$1.88 per Common Share to FORCE pursuant to the terms of the FORCE Family Agreement.

 

 

On December 29, 2023, Yerbaé granted, effective January 1, 2024, an aggregate of 531,250 Options, 1,666,665 RSUs and 1,002,775 PSUs. Each Option, once vested, is exercisable into one Common Share at a price of $0.96 per Common Share for a period of 7 years. Each RSU representing the right to receive, once vested twelve (12) months from the date of grant, in accordance with corresponding the RSU award agreements, one Common Share. Each PSU representing the right to receive, once vested, in accordance with the correspondence PSU award agreements and achievement of the performance criteria, one Common Share.

 

During the year ended December 31, 2023, $525,000 in principal amount of Debentures and $14,606 in accrued interest was converted into an aggregate of 375,000 Common Shares. The principal amount was converted using a Common Share price of $1.40 and the accrued interest was converted using a weighted average Common Share price of $1.81.

 

During the year ending December 31, 2023, the Company received proceeds of $1,040,212 in relation to the exercise of an aggregate of 1,094,968 Warrants at $0.95 per Common Share resulting in the issuance of 1,094,968 Common Shares. At December 31, 2023, there were 58,822,126 common shares issued and outstanding.

 

Performance Shares

 

During the year ended December 31, 2023, the Company issued 5 million Performance Shares to the CEO and COO upon consummation of the Transaction. These Performance Shares were to be held in escrow and released upon the completion of certain performance-based incentives related to the listing of the Common Shares on the TSXV, future equity financings, and certain trailing gross revenue targets. An aggregate of 2.5 million of these Performance Shares were released from escrow upon certain performance criteria being met during the year ended December 31, 2023.

 

During the year ended December 31, 2023, the Company issued 3 million Performance Shares to an non-related party in connection with the Transaction. One million of these Performance Shares were to be released upon completion of the Transaction. The remaining 2 million Performance Shares were subject to escrow until completion, within twelve months of the Listing Date, by the Parent of a financing of a minimum aggregate of $7,000,000 (excluding the proceeds from the Concurrent Financing) at a valuation of the Company equal to a minimum of $50,000,000. These performance criteria were met during the year ended December 31, 2023.

 

NOTE 12 - EMPLOYEE SHARE-BASED PAYMENT ARRANGEMENTS

 

Equity Appreciation Rights Plan

 

During 2018, the Company entered into an Equity Appreciation Rights Plan with certain employees. Under the plan, individuals earned compensation based on the excess of the current fair market values per share of the Company over the fair market values per share of the Company in the year the rights were awarded. These fair value estimates have been based on an agreed upon Company valuation model, as detailed in the Equity Appreciation Rights Plan. Effective July 1, 2022, the Company converted the equity appreciation rights plan into a stock option plan. All existing options in the equity appreciation rights plan were transferred into the stock option plan. In connection with the Closing of the Transaction, all rights and stock options granted under the Equity Appreciation Rights Plan were cancelled and replaced by corresponding securities under the Company’s Equity Incentive Plan (the “Plan”).

 

Equity Incentive Plan

 

The Plan is a rolling plan for stock options and a fixed 10% plan for performance-based awards like restricted share units (each, a “RSU”), performance share units (each, a “PSU”), and deferred share unit (collectively with the RSUs and PSUs, the “Performance-Based Awards”), such that the aggregate number of common shares that: (i) may be issued upon the exercise or settlement of options granted under the Plan, shall not exceed 10% of the Company’s issued and outstanding common shares from time to time, and (ii) may be issued in respect of Performance-Based Awards shall not exceed 5,455,121. Under the Plan, settled or terminated common shares shall be available for subsequent grants under the Plan and the number of awards available to grant increases as the number of issued and outstanding common shares increases.

 

 

The following table summarizes the activity for stock options granted under the Plan for the fiscal years presented:

 

 

Share-based compensation expense related to stock options recorded for the year ended December 31, 2023 and 2022 was $800,418 and $502,551, respectively, and is recorded in general and administrative on the statement of operations and comprehensive loss.

 

The following table summarizes the activity for RSUs and PSUs granted under the Plan for our most recent fiscal year:

 

 

Share-based compensation expense recorded for the year ended December 31, 2023 and 2022 was $1,867,003 and Nil, respectively, and is recorded in general and administrative on the statement of operations and comprehensive loss.

 

The fair value of issued RSUs and PSUs are based on the fair value of the underlying shares as of the grant date. Further, we determine the fair value of granted options using the Black-Scholes-Merton valuation model with the following inputs:

 

Risk-Free Interest Rate			3.99	%
Expected Term			5 Years
Expected Volatility			75.34	%

 

 

The following table summarizes the activity for performance shares granted under the Plan for our most recent fiscal year:

 

 

During the year ended December 31, 2023, 5 million Performance Shares were granted to the CEO and COO in connection with the Transaction. The grant included certain performance conditions which had not yet been met as of December 31, 2023. These shares are issued and outstanding and held in escrow until the performance conditions are met. Total expense related to this grant was $6.1 million for the year ended December 31, 2023 and is recorded in general and administrative on the statement of operations and comprehensive loss.

 

During the year ended December 31, 2023, 3 million Performance Shares were granted to a party for services provided in connection with the Transaction. This grant included certain performance conditions which were met during 2023 and therefore the shares were issued to the party and are outstanding, resulting in an amount of $3.7 million include as an offset to additional paid-in capital.

 

NOTE 13 - WARRANTS

 

At December 31, 2023, the Company had outstanding share purchase warrants to purchase 14,805,080 Common Shares at prices ranging from $0.85 to $2.15 per Common Share. The warrants expire at various dates through February 8, 2026. At December 31, 2023, Yerbaé had an aggregate of 14,805,080 Common Shares reserved for the due exercise of the outstanding warrants.

 

As discussed, management uses the Black-Scholes-Merton valuation model to determine the fair value of the issued warrants. In using the Black-Scholes-Merton option pricing model, management has determined that the warrants have a weighted average value ranging from $0.12 to $0.96 per warrant.

 

The assumptions used in the calculated fair value of warrants are as follows:

 

Risk-free interest rate			3.99	%
Expected life in years at date of issuance			2-5 years
Expected volatility			75.34	%

 

The following table summarizes the activity for warrants for the fiscal years presented:

 

 

 

NOTE 14 – LOSS PER SHARE

 

Basic loss per share is calculated by dividing the net loss by the weighted average number of Common Shares issued during the years ended December 31, 2023 and 2022. The following table reflects the loss and share data used in the basic loss per share calculations:

 

		For the Year Ended December 31,
		2023				2022
Net loss		$	(20,824,039	)		$	(8,319,702	)
Basic and diluted weighted average number of Common Shares in issue			53,850,285				29,693,146
Basic and diluted loss per share		$	(0.39	)		$	(0.28	)

 

Diluted loss per share did not include the effect of outstanding stock options, PSUs, RSUs, performance shares, warrants and convertible debentures as the effect would be anti-dilutive. The Company excluded the following securities from its computation of diluted shares outstanding, as their effect would have been anti-dilutive:

 

		Years Ended December 31,
		2023				2022
Restricted stock units outstanding			938,206				-
Performance share units outstanding			934,623				-
Performance shares outstanding			5,000,000				-
Stock options outstanding			2,141,526				1,052,665
Warrants outstanding			14,805,080				5,950,268

 

NOTE 15 – RELATED PARTIES

 

On January 30, 2023, the Company entered into a loan agreement with a director of the Company. An aggregate of $100,000 was advanced by the related party pursuant to the loan agreement. The loan was fully repaid during 2023.

 

NOTE 16 - INCOME TAXES

 

The Company did not recognize any current or deferred taxes for either its year ended December 31, 2023 or December 31, 2022 as follows:

 

		December 31,
		2023				2022
Current (expense) benefit:
United States federal			-				-
State			-				-
Total current (expense) benefit			-				-
Deferred (expense) benefit:
United States federal			-				-
State			-				-
Total deferred (expense) benefit			-				-
Total income tax (expense) benefit		$	-			$	-

 

 

Income tax expense attributable to income before income taxes differs from the amounts computed by applying the combined federal and state tax rate of 25.8% to pre-tax income as a result of the following:

 

		December 31,
		2023				2022
Income Tax (provision) benefit at the federal statutory rate of 21%		$	(4,373,048	)		$	(1,747,137	)
State income (tax) benefit, net of federal taxes			(994,205	)			(397,209	)
True up deferred opening balances Federal			585				(941,854	)
Interest expense			73,609				36,995
Accretion interest			96,385				59,974
Officer life insurance			-				78,531
True up deferred opening balances			-				(204,163	)
Update for other differences			27,863				(64,676	)
Change in valuation allowance			5,168,811				3,179,539
		$	-			$	-

 

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year’s income taxable for federal and state income tax reporting purposes. Total tax provision differs from the statutory tax rates applied to income before provision for income taxes due principally to amounts that are not taxable and expenses charged which are not tax deductible.

 

The net deferred tax assets in the accompanying statement of financial position as of December 31, 2023 and 2022 included the following components:

 

		December 31,
		2023				2022
Net deferred tax asset		$	8,348,350			$	3,179,539
Valuation allowance			(8,348,350	)			(3,179,539	)
Net deferred tax asset			-				-

 

 

The deferred tax asset as of December 31, 2023 and 2022 was comprised of the tax effect of cumulative temporary differences as follows:

 

 

After weighing all available evidence for the periods ended December 31, 2023 and 2022, the Company has recorded a full valuation allowance against the net deferred tax assets. In addition, the Company had available at December 31, 2023 and 2022 unused operating loss carryforwards of $23,922,378 and $6,660,697, respectively, which can be carried forward indefinitely and may provide future tax benefits.

 

The Company continuously monitors its current and prior filing positions in order to determine if any unrecognized tax positions should be recorded. The analysis involves considerable judgement and is based on the best information available. For the periods ended December 31, 2023 and 2022, the Company is not aware of any positions which require an uncertain tax position liability.

 

NOTE 17 - COST OF GOODS SOLD

 

Cost of goods sold is primarily comprised of materials, including in-bound freight, and rent related to the Company’s manufacturing facilities. The breakdown for the items within costs of sales was the following for the fiscal years presented:

 

		For the Years Ended December 31,
		2023				2022
Materials		$	5,832,752			$	2,732,495
Warehouse rent (non-lease)			143,325				219,778
Cost of goods sold		$	5,976,077			$	2,952,273

 

 

NOTE 18 - GENERAL AND ADMINISTRATIVE

 

General and administrative consisted of the following expenses during the fiscal years presented:

 

		For the Years Ended December 31,
		2023				2022
Share-based compensation			2,667,466				586,945
Performance shares granted in connection with the Transaction			6,086,596				-
Outbound freight			2,505,189				2,073,629
Employee benefits			2,858,062				2,507,338
Professional fees			3,185,400				735,270
Office expenses			1,150,530				843,387
Other			846,248				327,429
Total general and administrative expenses		$	19,299,491			$	7,073,998

 

Share-based compensation expenses relate to share grants in the form of RSUs, PSUs and stock options. Performance Shares were granted in connection with the successful consummation of the Transaction. See Note 12 for further information.

 

NOTE 19 – MARKET RISK

 

Credit Risk

 

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily accounts receivable) and from its financing activities, including deposits with banks and financial institutions. The Company places its cash with high quality credit institutions. From time to time, the Company maintains cash balances at certain institutions in excess of the Federal Deposit Insurance Corporation (“FDIC”) limit. As of December 31, 2023 and 2022, the Company had cash balances that exceeded the FDIC limit with four financial institutions. Management believes that the risk of loss is not significant and has not experienced any losses in such accounts.

 

Interest Rate Fluctuation Risk

 

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2022, we did not have any cash equivalents.

 

The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because we only hold cash and, our portfolio’s fair value is insensitive to interest rate changes. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on our financial results.

 

Price Risk

 

In the normal course of business our financial position is routinely subject to a variety of risks. The principal market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which we are exposed are fluctuations in commodity and other input prices affecting the costs of our raw materials (including, but not limited to, increases in the costs of aluminum cans, as well as certain sweeteners), fluctuations in energy and fuel prices, as well as limitations in the availability of aluminum cans and certain other raw materials and packaging materials. We generally do not use hedging agreements or alternative instruments to manage the risks associated with securing sufficient ingredients or raw materials. We are also subject to market risks with respect to the cost of commodities and other inputs because our ability to recover increased costs through higher pricing is limited by the competitive environment in which we operate.

 

We do not use derivative financial instruments to protect ourselves from fluctuations in interest rates and, except for aluminum, generally do not hedge against fluctuations in commodity prices.

 

 

Capital Management

 

The Company’s policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Company consists of the aggregate of short-term and long-term debt (including convertible debt) additional capital and deficit.

 

The Company manages its capital structure and makes adjustments to it in light of economic conditions and externally imposed capital requirements. The Company, upon approval from its Board of Directors, will make changes to its capital structure as deemed appropriate under the specific circumstances. The current objectives are to safeguard the Company’s ability to continue as a going concern, provide financial capacity and flexibility to meet its strategic objectives and provide an adequate return to unitholders commensurate with the level of risk.

 

There were no changes in the Company’s approach to capital management during the year.

 

NOTE 20 - COMMITMENTS & CONTINGENCIES

 

Litigation

 

During the ordinary course of the Company’s business, it is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash flow.

 

Commitments

 

The Company has unconditional purchase obligations for certain raw materials, such as ingredients and bottles. However, none of the contracts related to the purchase obligations are entered into for a period greater than one year.

 

NOTE 21 - SUBSEQUENT EVENTS

 

In accordance with the guidance in ASC 855 Subsequent Events, the Company evaluated subsequent events through the date the financial statements were issued.

 

Effective January 1, 2024, the Company granted an aggregate of 609,375 Options, 1,666,665 RSUs and 1,069,441 PSUs. Each Option, once vested, is exercisable into one common share at a price of $0.96 per common share for a period of 7 years and vest as to: (i) 25% 15 months following the date of grant; (ii) 25% 18 months following the date of grant; (iii) 25% 21 months following the date of grant; and (iv) 25% 24 months following the date of grant. Each RSU representing the right to receive, once vested twelve (12) months from the date of grant, in accordance with corresponding the RSU award agreements, one common share. Each PSU representing the right to receive, once vested, in accordance with the correspondence PSU award agreements and achievement of the performance criteria, one common share.

 

On January 16, 2024, the Company issued, in connection with the exercised by one eligible warrant holder (the “Eligible Holder”) who participated in the Company’s warrant exercise incentive program and exercised an aggregate of 835,000 Warrants for aggregate proceeds to the Company of $1,002,000, and aggregate of 835,000 warrants (each, an “Incentive Warrant”) to the Eligible Holder. The Incentive Warrants are exercisable into the same number of common shares of the Company at an exercise price of $1.50 per common share until December 14, 2025, subject to an acceleration provision whereby, if for any thirty (30) consecutive trading days (the “Premium Trading Days”) following the repricing the closing price of the common shares exceeds $2.50 per common share, the Incentive Warrants’ expiry date will be accelerated such that holders will have thirty (30) calendar days to exercise the Incentive Warrants (if they have not first expired in the normal course) (the “Acceleration Clause”). The activation of the Acceleration Clause will be announced by press release and the 30-day period will commence no later than seven (7) days after the last Premium Trading Day.

 

On April 1, 2024, the Company granted an aggregate of 376,100 Options to purchase up to 376,100 common shares as well as the award of an aggregate of 891,664 RSUs and 346,666 PSUs. The Options are exercisable for a period of 7 years from the date of grant at a price of $0.52 per common share and vest as to: (i) 25% 15 months following the date of grant; (ii) 25% 18 months following the date of grant; (iii) 25% 21 months following the date of grant; and (iv) 25% 24 months following the date of grant. Each RSU represents the right to receive, once vested, one common share in the capital of the Company. The RSUs vest 12 months from the date of the RSU Award. Each PSU represents the right to receive, once vested and the requisite performance criteria is met, one common share in the capital of the Company.

 

 

Exhibit 99.8

 

YERBAÉ BRANDS CORP.

UNAUDITED CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

(In United States dollars, except share data)

 

		September 30,				December 31,
		2024				2023
CURRENT ASSETS
Cash		$	269,148			$	977,373
Accounts receivable			710,417				1,020,056
Inventory			725,243				962,288
Prepaid expenses			501,884				721,432
Other current assets			150,000				150,000
Total current assets		$	2,356,692			$	3,831,149
NONCURRENT ASSETS
Property, plant and equipment, net			30,129				60,453
Right of use asset			143,086				210,208
Total noncurrent assets		$	173,215			$	270,661
Total assets		$	2,529,907			$	4,101,810
CURRENT LIABILITIES
Accounts payable		$	1,777,981			$	1,689,407
Accrued expenses			1,160,276				840,426
Notes payable, current portion			4,082,962				340,178
Note payable, related party			328,167				-
Note payable			328,167				-
Lease liability, current portion			127,975				117,660
Total current liabilities		$	7,477,361			$	2,987,671
NONCURRENT LIABILITIES
Notes payable, non-current portion			15,484				2,234,038
Lease liability, non-current portion			57,699				155,107
Total noncurrent liabilities		$	73,183			$	2,389,145
Total liabilities		$	7,550,544			$	5,376,816
SHAREHOLDERS’ DEFICIENCY
Preferred shares - 100,000,000 authorized, zero issued and outstanding as of both September 30, 2024 and December 31, 2023		$	-			$	-
Common shares - without par value, 62,870,943 and 58,822,126 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively.			-				-
Additional paid-in capital			36,499,551				33,212,631
Accumulated deficit			(41,520,188	)			(34,487,637	)
Total deficiency		$	(5,020,637	)		$	(1,275,006	)
Total Liabilities & shareholders’ deficiency		$	2,529,907			$	4,101,810

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

 

YERBAÉ BRANDS CORP.

UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS 

(In United States dollars, except share data)

 

		2024				2023				2024				2023
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2024				2023				2024				2023
Revenues		$	1,631,615			$	2,986,734			$	4,628,830			$	9,991,758
Cost of sales			599,845				1,417,603				2,122,316				4,968,058
Gross profit		$	1,031,770			$	1,569,131			$	2,506,514			$	5,023,700
General and administrative		$	1,792,423			$	3,589,314			$	7,469,589			$	15,735,214
Sales, advertising and marketing			311,915				1,886,414				1,136,839				5,542,848
Total expenses		$	2,104,338			$	5,475,728			$	8,606,428			$	21,278,062
Net loss before other income (expense)			(1,072,568	)			(3,906,597	)			(6,099,914	)			(16,254,362	)
Interest expense			(406,926	)			(234,756	)			(932,637	)			(418,748	)
Net loss before income taxes			(1,479,494	)			(4,141,353	)			(7,032,551	)			(16,673,110	)
Income tax expense			-				-				-				-
Net loss and comprehensive loss		$	(1,479,494	)		$	(4,141,353	)		$	(7,032,551	)		$	(16,673,110	)
Basic and diluted loss per share		$	(0.02	)		$	(0.07	)		$	(0.11	)		$	(0.31	)
Basic and diluted weighted average shares outstanding			61,767,132				56,506,032				61,982,564				54,645,615

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

YERBAÉ BRANDS CORP.

UNAUDITED CONDENSED INTERIM STATEMENT OF SHAREHOLDERS’ DEFICIENCY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023

(In United States dollars, except share data)

 

		Shares				Amount				Paid-In Capital				Deficit				Total
		Common Stock								Additional				Accumulated
		Shares				Amount				Paid-In Capital				Deficit				Total
Balance, December 31, 2022			30,217,566			$	3,022			$	9,027,460			$	(13,663,598	)		$	(4,633,116	)
Recapitalization			8,239,215				(3,022	)			643,731				-				640,709
Convertible debt conversion into common shares			5,599,102				-				4,528,094				-				4,528,094
Shares issued as compensation in connection with financings			5,554,447				-				(481,574	)			-				(481,574	)
Warrant issuance			-				-				1,643,777				-				1,643,777
Performance shares issued in connection with Merger			5,000,000				-				6,086,596				-				6,086,596
Stock compensation expense			-				-				104,455				-				104,455
Stock compensation expense, shares
Exercise of warrants
Exercise of warrants, shares
Shares issued-Special Warrants
Shares issued-Special Warrants, shares
Net loss			-				-				-				(8,882,782	)			(8,882,782	)
Balance, March 31, 2023			54,610,330			$	-			$	21,552,539			$	(22,546,380	)		$	(993,841	)
Warrant issuance			-				-				1,250,603				-				1,250,603
Stock compensation expense			-				-				856,829				-				856,829
Net loss			-				-				-				(3,648,975	)			(3,648,975	)
Balance, June 30, 2023			54,610,330			$	-			$	23,659,971			$	(26,195,355	)		$	(2,535,384	)
Stock compensation expense			-				-				733,686				-				733,686
Convertible debt conversion into common shares			222,123				-				539,606				-				539,606
Shares issued for equity raise			2,476,321				-				3,615,023				-				3,615,023
Performance shares issued			-				-				413,841				-				413,841
Warrant issuance			1,094,968				-				1,225,613				-				1,225,613
Net loss			-				-				-				(4,141,353	)			(4,141,353	)
Balance, September 30, 2023			58,403,742			$	-			$	30,187,740			$	(30,336,708	)		$	(148,968	)
Balance, December 31, 2023			58,822,126			$	-			$	33,212,631			$	(34,487,637	)		$	(1,275,006	)
Exercise of warrants			1,451,098				-				1,551,979				-				1,551,979
Stock compensation expense			1,493,908				-				944,865				-				944,865
Net loss			-				-				-				(2,793,709	)			(2,793,709	)
Balance, March 31, 2024			61,767,132			$	-			$	35,709,475			$	(37,281,346	)		$	(1,571,871	)
Stock compensation expense			-				-				591,292				-				591,292
Shares issued-Special Warrants			1,103,811				-				-				-				-
Net loss			-				-				-				(2,759,348	)			(2,759,348	)
Balance, June 30, 2024			62,870,943			$	-			$	36,300,767			$	(40,040,694	)		$	(3,739,927	)
Balance			62,870,943			$	-			$	36,300,767			$	(40,040,694	)		$	(3,739,927	)
Stock compensation expense			-				-				198,784				-				198,784
Net loss			-				-				-				(1,479,494	)			(1,479,494	)
Balance, September 30, 2024			62,870,943			$	-			$	36,499,551			$	(41,520,188	)		$	(5,020,637	)
Balance			62,870,943			$	-			$	36,499,551			$	(41,520,188	)		$	(5,020,637	)

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

YERBAÉ BRANDS CORP. 

UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

(In United States dollars)

 

		2024				2023
		For the Nine Months Ended September 30,
		2024				2023
Cash flows from operating activities:
Net loss		$	(7,032,551	)		$	(16,673,110	)
Adjustment to reconcile net loss to net cash used in operating activities:
Share-based compensation			1,734,941				1,694,970
Performance shares granted upon consummation of RTO			-				6,086,596
Depreciation and amortization			23,260				29,083
Gain on sale of equipment			-				(70,647	)
Lease expense			(19,971	)			37,899
Accretion expense			538,634				215,412
Change in operating assets and liabilities:
Accounts receivable			309,639				11,559
Inventory			237,045				(65,100	)
Prepaid expenses			219,547				(261,142	)
Accounts payable			70,972				(1,104,076	)
Accrued interest			148,486				43,047
Accrued expenses			171,364				70,497
Net cash used in operating activities			(3,598,634	)			(9,985,012	)
Cash flows from investing activities:
Proceeds from the sale of equipment			-				96,168
Recapitalization			-				640,709
Net cash flows provided by investing activities:			-				736,877
Cash flows from financing activities:
Proceeds from debt instruments and notes payable			3,057,477				5,973,613
Payments on debt instruments and notes payable			(2,039,047	)			(4,004,143	)
Proceeds from note - related party			320,000				-
Warrants exercised			1,551,979				-
Fees on Convertible note			-				(204,050	)
Proceeds from issuance of common stock and warrants			-				8,226,909
Net cash flows provided by (used in) financing activities:			2,890,409				9,992,329
Net change in cash			(708,225	)			744,194
Cash, beginning of period			977,373				857,710
Cash, end of period		$	269,148			$	1,601,904
Supplemental disclosure of cash flow information
Cash paid for interest		$	(160,290	)		$	(74,584	)
Conversion of notes payable to common stock		$	-			$	4,528,094
Reverse takeover transaction		$	-			$	(569,115	)

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

YERBAÉ BRANDS CORP.

NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

(Unaudited)

 

NOTE 1 - NATURE AND DESCRIPTION OF BUSINESS

 

Yerbaé Brands Corp. (“Yerbaé” and, together with its subsidiary, the “Company”. “we”, or “us”) is a corporation existing under the Business Corporations Act (British Columbia) (“BCBCA”). Yerbaé’s principal subsidiaries are Yerbaé Brands Co. (“Yerbaé USA”) and Yerbaé LLC of which Yerbaé owns 100% interests in. Yerbaé is a beverage manufacturer focusing on the development and distribution of plant-based energy drinks and seltzers.

 

On May 19, 2022, Yerbaé (formerly Kona Bay Technologies Inc. (“Kona Bay”)) entered into a definitive arrangement agreement and plan of merger, as amended on August 31, 2022 and February 8, 2023, with Yerbaé USA, Kona Bay Technologies (Delaware) Inc. (“Merger Sub”), a wholly-owned Delaware subsidiary of the Company, 1362283 B.C. Ltd. (“FinCo”), a wholly-owned British Columbia subsidiary of Kona Bay, Todd Gibson and Karrie Gibson, pursuant to which Kona Bay proposed to complete a business combination with Yerbaé USA via the acquisition of all of the issued and outstanding securities of Yerbaé USA from the securityholders (collectively, the “Original Yerbaé Securityholders”) of Yerbaé USA (the “Transaction”). The Transaction was subject to the approval of the TSX Venture Exchange (“TSXV”) and constituted a reverse takeover of Kona Bay by Yerbaé USA as defined in TSXV Policy 5.2 – Change of Business and Reverse Takeovers.

 

On February 8, 2023, Yerbaé completed the Transaction with Yerbaé USA by way of a reverse merger conducted pursuant to: (i) the provisions of the Delaware General Corporations Law (“DGCL”) in which Merger Sub merged with and into Yerbaé USA, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA, which resulted in the amalgamation of Kona Bay with FinCo. In connection with the closing of the Transaction, Yerbaé (formerly, Kona Bay Technologies Inc.) consolidated its issued and outstanding common shares (each, a “Common Share”) on the basis of 5.8 pre-consolidation Common Shares for every one post-consolidation Common Share and changed its name from “Kona Bay Technologies Inc.” to “Yerbaé Brands Corp.”

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include Yerbaé and its subsidiaries and include the accounts of all majority owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation. The Company had the following wholly-owned consolidated subsidiaries as of September 30, 2024:

  SCHEDULE OF WHOLLY-OWNED CONSOLIDATED SUBSIDIARIES

Subsidiary		Date of Incorporation		Jurisdiction of Incorporation		Ownership Percentage		Direct or Indirect Ownership
Yerbaé Brands Co.		August 21, 2020		Delaware		100%		Direct
Yerbaé LLC(1)		May 18, 2016		Delaware		100%		Indirect

 

(1)	Yerbaé LLC is a wholly-owned subsidiary of Yerbaé Brands Co.

 

These unaudited condensed interim consolidated financial statements should be read in conjunction with the company’s latest consolidated annual financial statements for the period ended December 31, 2023 that was filed in our Form 10 filed with the SEC on July 19, 2024. In general, disclosure provided in these unaudited condensed interim consolidated financial statements do not repeat the disclosure provided in the Company’s most recent audited consolidated annual financial statements. However, these unaudited condensed interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented.

 

 

Going Concern

 

Yerbaé’s evaluation of its ability to continue as a going concern requires it to evaluate its future sources and uses of cash sufficient to fund its currently expected operations in conducting business activities one year from the date its unaudited condensed interim consolidated financial statements are issued. Yerbaé evaluates the probability associated with each source and use of cash resources in making its going concern determination.

 

Due to our recurring losses, the ongoing challenging market conditions for beverage companies and our limited cash balance as of September 30, 2024, management believes that it is probable that the Company will be unable to meet its obligations as they come due within one year after the date that the unaudited condensed interim consolidated financial statements are issued. While the Company is attempting to plan additional financings, including equity and debt, which are intended to mitigate the conditions or events that raise substantial doubt about our ability to continue as a going concern, those financings may not occur. If the financings do not occur, management will try and implement alternative arrangements, and such arrangements could have a potentially significant negative impact on the current net asset value of the Company. These alternatives include: (1) raising additional capital by means other than those planned through equity and/or debt financing; and/or (2) entering into new commercial relationships to help fund future expenses.

 

As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements within one year after the date that the financial statements are issued, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.

 

Management Estimates

 

The preparation of the unaudited condensed interim consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the unaudited condensed interim consolidated financial statements and accompanying notes. These estimates are based on historical experience and various other assumptions that management believes to be reasonable under the circumstances, including the potential future effects of macroeconomic trends and events, such as inflation and interest rate levels; supply chain disruptions; uncertainty from potential recessionary effects; climate-related matters; market, industry and regulatory factors, including permitting issues; global events, such as the ongoing military conflicts in Ukraine and the middle east; and public health matters. These estimates form the basis for making judgments about the Company’s operating results and the carrying values of assets and liabilities that are not readily apparent from other sources. While management believes that such estimates are reasonable when considered in conjunction with the Company’s unaudited condensed interim consolidated financial position and results of operations taken as a whole, actual results could differ from these estimates.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

General Note

 

In accordance with Rule 10-01(a)(5) of Regulation S-X, the Company has not provided summary of significant accounting policy disclosure which would substantially duplicate the disclosure contained in our most recent annual report included in our Form 10 filed with the Securities and Exchange Commission (the “SEC”) on July 19, 2024.

 

Inventory

 

Inventory is valued at the lower of cost or net realizable value with cost determined on a first-in/first-out basis. The cost of inventory includes material and manufacturing costs. Inventoriable costs are expensed to cost of goods sold on the unaudited condensed interim consolidated statement of operations in the same period as finished products are sold. The amount of any write-down of inventory to net realizable value and all losses of inventory are recognized as an expense in the period when the write-down or loss. No write downs were recognized during the three and nine month interim reporting periods ended September 30, 2024 or September 30, 2023. Further, we establish a reserve related to shrinkage. The reserve is adjusted at the end of each reporting period as needed.

 

 

Long-Lived Assets

 

Management regularly reviews property and equipment and other long-lived assets for possible impairment. This review occurs annually, or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If there is an indication of impairment, management then prepares an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. The fair value is estimated using the present value of the future cash flows discounted at a rate commensurate with management’s estimates of the business risks. Preparation of estimated expected future cash flows is inherently subjective and is based on management’s best estimate of assumptions concerning expected future conditions. No impairments were recognized during the three and nine month interim periods ended September 30, 2024 or September 30, 2023.

 

Fair Value Measurement

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in markets that are not active.

 

Level 3: Unobservable inputs that reflect the Company’s own assumptions. While the Company does not have any financial instruments that are measured to fair value on a recurring or non-recurring basis, it does have financial instruments, such as cash, notes payable, and the line of credit as of both September 30, 2024, and December 31, 2023.

 

The Company’s financial instruments as of September 30, 2024 included cash, accounts receivables, accounts payable, related party notes payable and notes payable. The stated amounts of cash, accounts receivables and accounts payable represent fair value due to the short-term nature of the instruments. Further, the stated amount of the related party notes payable and notes payable, which are classified as level 3 instruments, also represent fair value due the notes being issued at currently prevailing market rates.

 

Notes Payable

 

The Company recognizes its note payables in accordance with the guidance in ASC 470 Debt. When there is no stated interest rate on the note payable, or the note payable includes an original issue discount, the Company determines the interest rate utilizing the interest method outlined in ASC 835 Interest. In accordance with the ASC topic, original issue discounts are recognized as a debt discount and amortized to interest expense over the estimated life of the loan. Finally, note payables are classified as either current or non-current in accordance with the guidance in ASC 210 Balance Sheet and ASC 470 Debt.

 

 

Recent Accounting Pronouncements

 

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures-In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. Yerbaé expects this ASU to only impact its disclosures with no impact to the Company’s results of operations, cash flows and financial condition.

 

Income Taxes (Topic 740): Improvements to Income Tax Disclosures-In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025, and continuing to provide the pre-ASU disclosures for the prior periods or may apply the amendments retrospectively by providing the revised disclosures for all period presented. Yerbaé expects this ASU to only impact its disclosures with no impact to the Company’s results of operations, cash flows, and financial condition.

 

NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS

 

The Company is in the business of manufacturing plant-based beverages and derives its revenues from one primary source-product sales. Revenue from contracts with customers is recognized when control of the goods are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods.

 

The Company recognizes revenue in accordance with the five-step model outlined in ASC 606-Revenue from Contracts with Customers. Specifically, the Company recognizes revenue from the sale of Yerbaé product to our customers by applying the following steps:

 

	1.	Identify the contract(s) with a customer
	2.	Identify the performance obligations in the contract
	3.	Determine the transaction price
	4.	Allocate the transaction price to the performance obligations in the contract
	5.	Recognize revenue when (or as) the entity satisfies a performance obligation

 

The Company’s contracts with customers contain a single performance obligation consisting of providing Yerbaé energy drinks. As it pertains to the single performance obligation, the Company does not recognize any contract assets or contract liabilities as it does not: (1) have a right to consideration in exchange for goods or services that the entity has transferred to a customer when the right is conditioned on something other than the passage or (2) receive payment prior to performing.

 

The Company typically satisfies its performance obligations at a point time upon the occurrence of delivery of the product to the customer. Further, payment is typically received within 60 days after product delivery and does not include a significant financing component.

 

 

The Company’s contracts with customers include variable consideration including customer rebates and quick pay discounts. The Company estimates variable consideration, which it does not consider to be constrained, using either the most likely amount or expected value methods depending on the type of variable consideration.

 

The Company only provides refunds for products that are damaged during delivery to the customer. However, instances of refunds are rare and have not historically had a material impact on the Company’s results of operations. Finally, Yerbaé has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

 

In addition to variable consideration, the Company also provides payments to certain customers for slotting fees. In accordance with the guidance in ASC 606-10-32, the Company determined that the payment is not in exchange for a distinct good or service and it is therefore recognized as a reduction to the transaction price. As the slotting fee payment covers the life of the contract with a customer, the initial payment is recognized as an asset and is amortized as a reduction to revenue on a rational and reasonable basis over the estimated life of the contract.

 

Costs to Obtain a Contract with a Customer

 

The Company does not recognize any assets related to either costs to obtain or fulfil a contract with a customer. We incur certain delivery costs prior to transferring control of Yerbaé product to our customers (i.e. outbound freight). In accordance with the guidance in ASC 606-10-25, those costs are recognized as a fulfilment cost as they are provided prior to transferring control of the Yerbaé product to our customer (i.e. akin to shipping and handling). Further, the costs are classified in general and administrative within the unaudited condensed interim consolidated statement of operations.

 

NOTE 4 - REVERSE RECAPITALIZATION

 

On February 8, 2023, Yerbaé completed the Transaction with Yerbaé USA by way of a reverse merger conducted pursuant to: (i) the provisions of the Delaware General Corporations Law (“DGCL”) in which Merger Sub merged with and into Yerbaé USA, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA, which resulted in the amalgamation of Kona Bay with FinCo. In connection with the Closing, Yerbaé (formerly, Kona Bay Technologies Inc.) consolidated its issued and outstanding common shares (each, a “Common Share”) on the basis of 5.8 pre-consolidation Common Shares for each one post-consolidation Common Share and changed its name from “Kona Bay Technologies Inc.” to “Yerbaé Brands Corp.”. In accounting for the Transaction, the Company determined that Kona Bay was a shell company (as that term has been defined in Rule 405 of the United States Securities Act of 1933) as prior to the merger they had no operations and assets consisting solely of cash and cash equivalents. Thus, pursuant to section 12100 of the United States Securities and Exchange Commission’s (“SEC”) financial reporting manual, the Company concluded that: (1) the Transaction should be accounted for as “a reverse takeover equivalent to the issuance of Common Shares by the Company for the net monetary assets of Kona Bay”; and (2) the Company should be considered the accounting acquirer/legal acquiree in the Transaction. As the Company concluded that Yerbaé USA was the accounting acquirer/legal acquiree in the transaction, the historical results of the combined company (prior the merger) represent the historical results of Yerbaé USA.

 

The recognition and measurement for the acquisition of Kona Bay, was analogized to the guidance in ASC 805-40 Reverse Acquisitions which requires that the accounting acquirer measure the fair value of the consideration transferred based on the number of common shares the legal target would have had to issue in order to retain a specified ownership in the combined Company (the “deemed issuance”). Yerbaé intended to retain and 85% ownership interest in the combined company, and therefore, based on 30.2 million shares outstanding immediately prior to the merger, would have had to issue approximately 5.3 million shares to the owners of the legal parent (to retain an 85% ownership). In addition, based on an equity financing by the Company which occurred immediately before the transaction, the Company determined that the common shares had a fair value of $1.23 per share. This resulted in the determination of the fair value of the consideration transferred in the transaction was approximately $6.5 million (5.2 million shares x $1.23 per Common Share) and that of the $6.5 million transferred approximately $0.6 million should be allocated to the cash acquired from Kona Bay (i.e., the “net assets” acquired) and the remaining $5.9 million should be recognized as a charge to equity as follows:

 SCHEDULE OF RECOGNIZED AS A CHARGE TO EQUITY

		Allocation Table
		($ in millions)
Fair value of consideration paid		$	6.5
Net assets acquired (cash)			(0.6	)
Charge to additional paid in capital		$	5.9

 

 

In addition, the Company presented the acquisition of Kona Bay as a “recapitalization” line item in our statement of changes in shareholders equity reflecting: (1) the number of Kona Bay’s outstanding common shares immediately prior to the transaction; and (2) the approximately $6.5 million in fair value of consideration transferred (calculated pursuant to the paragraph above). Further, while the guidance in ASC 805-40 also requires a revision to historical equity (of the combined company) to reflect the legal capital of the legal acquirer, the Company concluded that this was not required in our scenario as the conversion ratio, which reflects the number of common shares issued by the legal acquirer to effectuate the transaction compared to the number of common shares in the capital of Yerbaé outstanding immediately prior to the transaction, was 1:1.

 

NOTE 5 - INVENTORY

 

Inventory consists of the following for the fiscal periods presented:

 SCHEDULE OF INVENTORY

		September 30, 2024				December 31, 2023
Raw material		$	151,550			$	54,954
Finished goods			576,621				908,433
Reserve for shrinkage			(2,928	)			(1,099	)
TOTAL		$	725,243			$	962,288

 

NOTE 6 – PROPERTY AND EQUIPMENT

 

Property and equipment are recorded at cost and consist primarily of vehicles. Depreciation is computed on a straight-line method over an estimated useful life of the asset of approximately five years.

 SCHEDULE OF PROPERTY AND EQUIPMENT

		September 30, 2024				December 31, 2023
Vehicles, gross		$	74,036			$	109,915
Vehicles, accumulated depreciation			(43,907	)			(49,462	)
Vehicles, net		$	30,129			$	60,453

 

Depreciation expense totalled $3,479 and $6,732 for the three months ended September 30, 2024 and 2023, respectively. Depreciation expense totalled $13,246 and $29,083 for the nine months ended September 30, 2024 and 2023, respectively, and is recorded in General and Administrative in the unaudited condensed interim consolidated statement of operations.

 

 

NOTE 7 – ACCRUED EXPENSES

 

Accrued expenses consist of the following as of the following dates:

 SCHEDULE OF ACCRUED EXPENSES

		September 30, 2024				December 31, 2023
Payroll and related costs		$	238,312			$	358,154
Credit card expenses			494,715				259,144
Interest			281,839				133,353
Other accrued expenses			145,410				89,775
TOTAL		$	1,160,276			$	840,426

  

 

NOTE 8 – NOTES PAYABLE

 

Notes payable consisted of the following:

 SCHEDULE OF NOTES PAYABLE

		September 30, 2024				December 31, 2023
Convertible notes payable to multiple investors in the amount of $3,802,000 in total. The loans mature during April 2025 and have a stated interest rate of 6.00%			2,734,936				2,196,302
Various notes payable in monthly instalments ranging from $543 to $652, including interest ranging from 2.90% to 5.49%, due October 2026. The notes are secured by vehicles.			30,968				60,914
Short term note payable due to Amazon Lending originated December 26, 2023 maturing December 26, 2024 at an interest rate of 14.49%, secured by inventories.		$	36,937			$	317,000
Note payable to MaximCash Solutions for $750,000 with an original issue discount of $97,500. The loan matures on July 5, 2025 and has an effective interest rate of 42%			584,801				-
Note payable to an unrelated third party for $540,000 with an original issue discount of $40,000. The loan matures on August 16, 2025 and has an effective interest rate of 8%			500,000				-
Note payable to an unrelated third party for $60,000 with an original issue discount of $10,000. The loan matures on February 26, 2025 and has an effective interest rate of 8.3%			51,667				-
Note payable to an unrelated third party for $230,000. The loan agreement includes a payment rate of 15% of the Company’s weekly sales plus an additional $30,000 fee.			159,137				-
Related party note payable to a director of the Company for $330,000 with an original issue discount of $30,000. The loan matures on June 15, 2025 and has an effective interest rate of 10%			307,500				-
Related party note payable to a director of the Company for $24,000 with an original issue discount of $4,000. The loan matures on June 15, 2025 and has an effective interest rate of 10%			20,667				-
Total notes payable			4,426,613				2,574,216
Less current maturities			(4,411,129	)			(340,178	)
Total notes payable, non-current portion		$	15,484			$	2,234,038

 

Loans Issued Prior to 2024

 

Convertible Notes

 

On April 13, 2023, Yerbaé closed the first tranche (the “First Tranche”) of its brokered debenture unit (each, a “Debenture Unit”) offering which consisted of 1,650 Debenture Units for gross proceeds of $1,650,000. On May 5, 2023, Yerbaé closed the second tranche (the “Second Tranche”) pursuant to which it issued an additional 2,152 Debenture Units for gross proceeds of $2,152,000, and for aggregate gross proceeds, together with the closing of the First Tranche, of $3,802,000.

 

 

Each Debenture Unit consisted of: (i) one (1) convertible debenture (each, a “Debenture”) in the principal amount of $1,000; and (ii) 714 share purchase warrants. The Debentures mature on April 30, 2025 (the “Maturity Date”), and bear interest at a rate of 6.0% per annum, payable on the earlier of the Maturity Date or the date of conversion of the Debentures. The interest will be payable in Common Shares to be determined at the Market Price (as that term is defined in the Policies of the TSXV). The principal amount of the Debentures will be convertible at the holder’s option into Common Shares at any time prior to the close of business on the earlier of: (i) the last business day immediately preceding the Maturity Date, and (ii) the date fixed for redemption in the case of a change of control, at a conversion price of $1.40 per Common Share, subject to adjustment in certain customary events. Each warrant entitles the holder thereof to acquire one Common Share at a price per Common Share of $1.70 at any time prior to the Maturity Date, subject to an acceleration right whereby, if, in the event the Common Shares have a daily volume weighted average trading price on the TSXV (or such other recognized North American securities exchange) of $3.00 or greater per Common Share for any ten (10) consecutive trading day period at any time after the date that is four (4) months following the issuance of the warrants, Yerbaé may accelerate the expiry of the warrants by giving notice to the holders by disseminating a news release advising of the acceleration) and, in such case, the warrants will be deemed to have expired on the day which is thirty (30) days after the date of such notice.

 

In accounting for the Debentures, the Company concluded the conversion option should not be bi-furcated from the debt host as it was considered indexed to the company’s stock in accordance with ASC 815-40. Further, the Company also concluded that the detachable warrants should be classified in equity as they: (1) were not within the scope of ASC 480-10; and (2) should be considered indexed to the Company’s Common Shares. In accordance with ASC 470-20, the Company recognized both the Debentures and detachable warrants at their relative fair values. This resulted in the recognition of a debt discount that is being amortized to interest expense over the life of the Debenture Units. During the three and nine months ended September 30, 2024, the Company recorded accretion expense of $190,270 and $538,634, respectively. The remaining unamortized debt discount balance as of September 30, 2024 was $542,063. Further, the remaining balance of the convertible debentures as of September 30, 2024 and December 31, 2023 was $2,734,936 and $2,196,302, respectively.

 

Motor Vehicle Loan

 

During 2023, the Company entered into various notes payable related to vehicles with monthly instalments ranging from $543 to $652, including interest ranging from 2.90% to 5.49%, due October 2026. The notes are secured by vehicles. There were no changes to the terms of these loans. All changes were a result of repayment.

 

Amazon Lending

 

During 2023, the Company entered into a financing arrangement with Amazon Lending, maturing December 26, 2024 at an interest rate of 14.49%, secured by inventories. There were no changes to the terms of these loans. All changes were a result of repayment.

 

Ampla and Oxford Financing

 

On May 16, 2023, Yerbaé replaced their finance provider Ampla LLC (“Ampla”) and secured a new accounts receivable and inventory of $2,500,000 with Oxford Commercial Finance, a Michigan banking corporation, through its Delaware subsidiary Yerbaé LLC. The Company can draw down funds as needed, and only pay interest on the amount borrowed. The debt facility was secured by a security interest in all assets of Yerbaé, including a first security interest in Yerbaé’s accounts receivable and inventory. The facility was repaid during 2023.

 

Loans Issued During the Nine Months Ended September 30, 2024

 

Unrelated Third-Party Loans

 

On September 16, 2024, the Company entered into an agreement with a private lender whereby the lender agreed to loan an aggregate of up to $540,000. The loan matures on August 16, 2025. The balance of the loan was $500,000 net of discounts and repayments as of September 30, 2024 and had an effective interest rate of approximately 8.0%.

 

On August 26, 2024, the Company entered into an agreement with a lender whereby the lender agreed to loan an aggregate of up to $60,000 The loan matures on February 26, 2025. The balance of the loan was $51,667 net of discount and repayments as of September 30, 2024 and had an effective interest rate of approximately 8.3%.

 

On July 5, 2024, the Company entered into a loan agreement with MaximCash solutions for $750,000. The loan included an origination cost of $22,500. In addition, the Company agreed to issue the lender $75,000 in common stock of the Company for a total discount of $97,500. The loan matures on July 5, 2025. The balance of the loan was $584,801 net of discounts and repayments as of September 30, 2024 and had an effective interest rate of 42%.

 

During June of 2024, the Company entered into a loan agreement with Parafin for $230,000 and stated fee of $30,000; of which $10,000 was paid during period. This stated fee is treated as an interest and amortized over the term of the loan. The loan agreement includes a payment rate of 15% of the Company’s weekly sales over an 8-month period. The balance of the loan was $159,137, net of discounts and repayments as of September 30, 2024.

 

Related Party Loans

 

These loans are described in Note 11.

 

 

NOTE 9 – SHARE CAPITAL

 

Yerbaé is authorized to issue an unlimited number of Common Shares without par value and 100,000,000 preferred shares (each, a “Preferred Share”) without par value.

 

For the interim period ended September 30, 2024, and annual period ended December 31, 2023, the Company had the following equity transactions:

 

On May 19, 2022, Yerbaé (formerly Kona Bay) entered into the Arrangement Agreement with Yerbaé USA, Merger Sub, FinCo, Todd Gibson and Karrie Gibson, with respect to the Transaction. On February 8, 2023, Yerbae completed its Transaction with Yerbaé USA by way of a reverse takeover. conducted pursuant to: (i) the provisions of the DGCL in which Merger Sub merged with and into Yerbaé USA, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA. In connection with the Closing, Yerbaé (formerly, Kona Bay) consolidated its outstanding Common Shares on the basis of 5.8 pre-consolidation Common Shares for each one post-consolidation Common Share prior to the completion of the Amalgamation and changed its name from “Kona Bay Technologies Inc.” to “Yerbaé Brands Corp.”. Total Common Shares issued relating to the reverse takeover that were issued to former Kona Bay shareholders was 8,239,215 Common Shares with a fair value of $7,526,000.

 

At the time of Closing, an aggregate of 54,493,953 Common Shares were issued and outstanding of which: 35,848,290 Common Shares were issued to the former Yerbaé shareholders (inclusive of an aggregate of 5,631,276 Common Shares issued to former holders of an aggregate of $4,500,000 in convertible promissory notes of Yerbaé USA converted immediately prior to closing of the Transaction), 8,000,000 performance Common Shares (each, a “Performance Share”) were issued with a fair value of $11,360,000 of which $2,433,404 was recognized as a reduction of equity related to the current financing proceeds received and $2,840,000 has been included as deferred offering costs initially, and as of December 31, 2023, the deferred offering costs balance was Nil. The Performance Shares are held in escrow and are to be released upon the completion of certain performance-based incentives related to the listing of the Common Shares on the TSX Venture Exchange (“TSXV”), future equity financings, and certain trailing gross revenue targets, and 2,015,163 Shares were issued to former holders of subscription receipts of FinCo issuable in connection to a concurrent financing of $2,433,404 to the Transaction.

 

In addition, the 1,087,752 options to purchase shares of common stock (each, a “Yerbaé USA Share”) of Yerbaé USA which were outstanding immediately prior to closing of the Transaction were cancelled and the holders thereof were granted an aggregate of 1,087,752 options to purchase Common Shares (each, an “Option”), 1,754,464 warrants to purchase Yerbaé USA Shares which were outstanding immediately prior to Closing were cancelled and the holders thereof were granted an aggregate of 1,754,464 replacement warrants of Yerbaé, and 2,015,163 warrants to purchase shares of FinCo which were outstanding immediately prior to closing of the Transaction were cancelled and the holders thereof were granted an aggregate of 2,015,163 replacement warrants. 5,631,276 warrants were also issued as part of the conversion of the $4,500,000 convertible promissory notes.

 

In connection with the closing of the Transaction, the parties paid customary advisory fees to an eligible arm’s length third party finder (the “Finder”), in consideration for the Finder’s services in facilitating the identification, negotiation and implementation of the Transaction which consisted of the issuance of 507,662 Common Shares with a fair value of $720,880, as well as a cash payment of $200,000.

 

On July 17 2023, Yerbaé announced a non-brokered private placement of units (each, a “Unit”) of the Company at a price of $1.83 per Unit for aggregate gross proceeds of up to $5,000,000 (the “Offering”), with each Unit consisting of one Common Share and one warrant entitling the holder thereof to acquire one additional Common Share at a price per warrant share of $2.15 for a period of 24 months from the date of issuance. On August 18, 2023, Yerbaé closed the initial tranche of the Offering which consisted of the issuance by the Company of 2,219,629 Units for aggregate gross proceeds of $4,061,921. In connection with the closing of the initial tranche, the Company paid eligible finders cash fees of $33,243. On August 31, 2023, Yerbaé closed the second tranche of the Offering which consisted of the issuance by the Company of 225,329 Units for aggregate gross proceeds of $412,352.

 

 

Yerbae entered into an agreement, as amended on June 19, 2023 (the “FORCE Family Agreement”) with FORCE Family Office Inc. (“FORCE”). Under the terms of the FORCE agreement, FORCE will provide certain business development and corporate strategies services to enhance the Company’s growth and market positioning. In consideration for the services to be provided by FORCE, the Company agreed to pay FORCE an aggregate consulting fee of $150,000 payable in Common Shares as to $25,000 in Common Shares on the date that is one month from the date of execution of the FORCE agreement at a deemed price per Common Share equal to the prevailing market price of the Common Shares on the date of such payment and $125,000 in Common Shares on the date of expiration of the six month term at a deemed price per Common Share equal to the prevailing market price of the Common Shares on the date of such payment. Accordingly, on July 21, 2023, the Company issued 11,363 Common Shares to FORCE at a deemed price of $2.20 per Common Share in satisfaction of the initial $25,000 payment.

 

On November 16, 2023, Yerbaé issued 159,496 Common Shares upon the exercise of 159,496 warrants. On November 24, 2023, Yerbaé issued 66,489 Common Shares at a deemed price of US$1.88 per Common Share to FORCE pursuant to the terms of the FORCE Family Agreement.

 

On December 29, 2023, Yerbaé granted, effective January 1, 2024, an aggregate of 531,250 Options, 1,666,665 RSUs and 1,002,775 PSUs. Each Option, once vested, is exercisable into one Common Share at a price of $0.96 per Common Share for a period of 7 years. Each RSU representing the right to receive, once vested twelve (12) months from the date of grant, in accordance with corresponding the RSU award agreements, one Common Share. Each PSU represents the right to receive, once vested, in accordance with the correspondence PSU award agreements and achievement of the performance criteria, one Common Share.

 

During the year ended December 31, 2023, $525,000 in principal amount of Debentures and $14,606 in accrued interest was converted into an aggregate of 375,000 Common Shares. The principal amount was converted using a Common Share price of $1.40 and the accrued interest was converted using a weighted average Common Share price of $1.81.

 

During the year ending December 31, 2023, the Company received proceeds of $1,040,212 in relation to the exercise of an aggregate of 1,094,968 Warrants at $0.95 per Common Share resulting in the issuance of 1,094,968 Common Shares. At December 31, 2023, there were 58,822,126 common shares issued and outstanding.

 

On January 16, 2024, the Company issued, in connection with the exercise by one eligible warrant holder (the “Eligible Holder”) who participated in the Company’s warrant exercise incentive program an aggregate of 835,000 Warrants for aggregate proceeds to the Company of $1,002,000, and an aggregate of 835,000 warrants (each, an “Incentive Warrant”) to the Eligible Holder. The Incentive Warrants are exercisable into the same number of common shares of the Company at an exercise price of $1.50 per common share until December 14, 2025, subject to an acceleration provision whereby, if for any thirty (30) consecutive trading days (the “Premium Trading Days”) following the repricing the closing price of the common shares exceeds $2.50 per common share, the Incentive Warrants’ expiry date will be accelerated such that holders will have thirty (30) calendar days to exercise the Incentive Warrants (if they have not first expired in the normal course) (the “Acceleration Clause”). In accordance with the guidance in ASC 815-40-35, the Company determined that the exchange was related to an equity financing (i.e. the inducement of the existing warrants) and therefore recognized the $133,600 excess in fair value of the exchanged instrument over the fair value of the instrument immediately before it was exchanged as an equity issuance cost.

 

On January 22, 2024, the Company issued, in connection with the exercise by one eligible warrant holder, an aggregate of 263,157 Common Shares for aggregate proceeds to the Company of $249,980.

 

On January 30, 2024, the Company issued, in connection with the exercise by one eligible warrant holder, an aggregate of 352,941 Common Shares for aggregate proceeds to the Company of $300,000.

 

On March 12, 2024, the Company issued an aggregate of 1,493,908 Common Shares at a deemed issue price of $0.74 pursuant to the vesting of certain performance share units (each, a “PSU”) and restricted share units (each, a “RSU”), as to 685,867 PSUs and 808,041 RSUs.

 

On April 8, 2024, the Company issued an aggregate of 1,103,811 common shares and 1,103,811 share purchase warrants pursuant to the exercise and terms of 1,003,468 special warrants originally issued pursuant to the closing of a special warrants offering which closed on December 6, 2023. The proceeds of the special warrants of approximately $1.5 million were received on December 6, 2023 and no proceeds were received upon the exercise of the special warrants.

 

During the three months ended September 30, 2024, there was a total of 3,208,498 warrants expired unexercised.

 

  

Performance Shares

 

During the three months ended March 31, 2023, the Company granted an aggregate 5 million Performance Shares to the CEO and COO upon consummation of the Transaction. These Performance Shares are held in escrow and are to be released upon the completion of certain performance-based incentives related to the listing of the Common Shares on the TSX Venture Exchange (“TSXV”), future equity financings, and certain trailing gross revenue targets. As of September 30, 2024, 2.5 million performance shares have been released and the remainder are still in escrow as not all of the performance criteria have been achieved.

 

During the three months ended March 31, 2023, the Company granted an aggregate 3 million Performance Shares to external parties in connection with the Transaction. One million of these Performance Shares were released upon completion of the Transaction. The remaining two million Performance Shares were subject to escrow until completion, within twelve months of the Listing Date, by the Company of a financing of a minimum aggregate of $7,000,000 (excluding the proceeds from the Concurrent Financing) at a valuation of the Company equal to a minimum of $50,000,000. These performance criteria were met during the year ended December 31, 2023, and, as such, all of the performance shares were released from escrow as of December 31, 2023.

 

NOTE 10 – LOSS PER SHARE

 

Basic loss per share is calculated by dividing the net loss by the weighted average number of Common Shares issued during the three and nine months ended September 30, 2024, and 2023. The following table reflects the loss and share data used in the basic loss per share calculations:

 

SCHEDULE OF NET LOSS PER SHARE

		2024				2023				2024				2023
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2024				2023				2024				2023
Net loss		$	(1,479,494	)		$	(4,141,353	)		$	(7,032,551	)		$	(16,673,110	)
Basic and diluted weighted average number of Common Shares in issue			61,767,132				56,506,032				61,982,564				54,645,615
Basic and diluted loss per share		$	(0.02	)		$	(0.07	)		$	(0.11	)		$	(0.31	)

 

Diluted loss per share did not include the effect of outstanding stock options, PSUs, RSUs, performance shares, warrants and convertible debentures as the effect would be anti-dilutive. The Company excluded the following securities from its computation of diluted shares outstanding, as their effect would have been anti-dilutive:

 

SCHEDULE OF ANTI DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION EARNINGS PER SHARE

		As At
		September 30, 2024
Restricted stock units(1)			1,027,378
Performance share units(1)			595,422
Performance shares			2,500,000
Stock options			2,338,380
Warrants			10,145,484
Convertible debt			2,715,714

 

(1)

These amounts represent shares granted but not yet issued

 

NOTE 11 – RELATED PARTIES

 

On January 30, 2023, the Company entered into a loan agreement with a director of the Company. An aggregate of $100,000 was advanced by the related party pursuant to the loan agreement. The loan was fully repaid during 2023.

 

On July 1, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $330,000. The loan matures on June 15, 2025 and had an effective interest rate 10%. The net balance of the loan as of September 30, 2024, was $307,500 which includes accrued interest to the end of the period.

 

On August 26, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $24,000 with an effective rate of 8.3%. The loan matures on February 26, 2024. The net balance of the loan as of September 30, 2024, was $20,667 net of discount and repayments.

 

 

NOTE 12 - INCOME TAXES

 

The Company recognized pre-tax accounting losses for the three and nine months ended September 30, 2024 and 2023. As of September 30, 2024, any deferred tax assets, which have been recognized primarily as a result of loss carry forwards, have been fully offset by a valuation allowance. As such, for both the three and nine months ended September 30, 2024 and September 30, 2023, there were no significant variations in the relationship between income tax expense and pretax accounting income.

 

NOTE 13 - COST OF SALES

 

Cost of sales is primarily comprised of materials, including in-bound freight, and rent related to the Company’s manufacturing facilities. The breakdown for the items within costs of sales was the following for the periods presented:

 

SCHEDULE OF COST OF SALES

		2024				2023				2024				2023
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2024				2023				2024				2023
Materials		$	558,360			$	1,378,422			$	1,972,902			$	4,854,156
Warehouse rent (non-lease)			41,485				39,181				149,414				113,902
Cost of goods sold		$	599,845			$	1,417,603			$	2,122,316			$	4,968,058

 

NOTE 14 – GENERAL AND ADMINISTRATIVE

 

General and administrative consisted of the following expenses during the periods presented:

 

SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES

		2024				2023				2024				2023
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2024				2023				2024				2023
Share-based compensation		$	198,784			$	733,686			$	1,734,941			$	1,694,970
Outbound freight			442,380				575,560				1,333,707				1,956,911
Employee benefits			471,508				756,147				1,788,796				2,272,388
Professional fees			420,757				1,030,786				1,314,551				2,197,653
Office expenses			222,801				254,353				838,652				889,376
Performance shares granted upon consummation of RTO			-				-				-				6,086,596
Other			36,193				238,782				458,942				637,320
Total general and administrative expenses		$	1,792,423			$	3,589,314			$	7,469,589			$	15,735,214

 

NOTE 15 - COMMITMENTS & CONTINGENCIES

 

Litigation

 

During the ordinary course of the Company’s business, it is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will not have a material adverse effect on the Company’s unaudited condensed interim consolidated financial position, results of operations or cash flow.

 

Commitments

 

The Company has unconditional purchase obligations for certain raw materials, such as ingredients and bottles. However, none of the contracts related to the purchase obligations are entered into for a period greater than one year.

 

NOTE 16 - SUBSEQUENT EVENTS  

 

As discussed in Note 9, the Company entered into a loan agreement with MaximCash Solutions during July of 2024 to borrow $750,000. In consideration for the loan, the Company agreed to issue $75,000 of shares to the lender at $0.35 per share, or 214,285 shares. While the loan was entered into during July, the Company issued the shares upon approval from the TSXV during October of 2024.

 

 

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