Document:

cnjg_ex1020.htm

EXHIBIT 10.20
  
 English Translation
 Employment Agreement
  
 Party A: Kaifeng Jufeel Biotechnology Co., Ltd 
  
 Legal representative: Zhang Rongxuan
  
 Registered address: Free Trade Building A, Zhengkai Avenue No.296, Kaifeng District, Henan Free Trade Experimental Area.
  
 Party B: Ren Aizhen
  
 Gender: Female
  
 Age: 58
  
 Pursuant to General Principles of the Civil Law of the People's Republic of China, Contract Law of People's Republic of China and relevant provisions, Party A and Party B voluntarily sign this employment contract and abide by the items listed herein, after the consultant of both parties. 
 This contract is made in two copies, each party holds one copy.
  
 I. Term of the contract
  
 The contract is of fixed contract term, from December 13, 2016 to December 13, 2019 (probation period is terminated on x ).
  
 II. Job duty and requirement
  
 Party B is hired as vice president of sales according the demand of Party A. 
 The job of Party B shall meet the standards of Relevant Company Management Provisions and Regulations.
  
  	 
	  1

	 
 
	 

  
 III. Working hours and vacation
  
 The working hours for Party B are Eight hours work schedule per day.
  
 If Party A implements standard work schedule system, Party B shall work 8 hours per day, 40 hours per week.
  
 If Party A implements Comprehensive work schedule system, Party B shall work at most 8 hours per day, the average work hours of each week at most 40 hours.
  
 If Party A implements flexible working hour system, Party B could arrange the working hours by himself as long as the tasks from Party A can be finished.
  
 Party A shall arrange Party B annual paid vacation and China's official holidays according to relevant state regulations.
  
 IV. Salary
  
 Party A shall Party B salary before the 15th of each month.
  
 Party A shall pay Party B salary according to work performance system.
  
 The standard salary of Party B is RMB x each month, of which the basic salary is RMB 4000.
  
 The salary of Party B is RMB x during probation period.
  
 Other agreements on salary: beside the basic salary, overtime pay and compensation shall be paid according to actual condition.
  
 During the down time that are not caused by Party B, Party A shall pay RMB x to Party B as living expenses or according to the relevant regulations of local labor department.
  
 V. Insurance and welfare
  
 Both parties shall pay social insurance premiums on schedule and in full amount (pension insurance, unemployment insurance, medical insurance, employment injury insurance, maternity insurance etc.) according to the relevant regulations of regional government and state.
  
  	 
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 The compensation of Party B shall be implemented with the relevant regulations of regional government and state, as if Party B is in the medical treatment period because of illness, work-related injuries, non-work injuries, or Party B is dead because of work or accident.
  
 The compensation of female employees who are in gestation, perinatal period and lactation period shall be implemented with the relevant regulations of regional government and state.
  
 VI. Company regulation
  
 Party A shall start the training plan to employees according to company regulations, including: salary regulation, punishment and award regulation, safety production regulation, job training regulation etc.
  
 Party B shall abide by the labor discipline and regulations; Party A have the rights to give punishment to Party B until the rescission of Employment Agreement, if Party B violates the regulations.
  
 VII. Work protection and condition
  
 Party A must provide Party B the working condition and safety equipment that meet the standard of the work safe and health condition listed in the relevant state regulations.
  
 Party A must provide regular health examination for Party B according to relevant state regulations.
  
 Party A must provide the special protections for female employees and underage workers according to relevant state regulations. 
  
 Party B shall abide by the safe operation regulations during the production process, and have the rights to refuse the unreasonable requirements and forcible risk task orders from the management officers of Party A.
  
  	 
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 Party A shall arrange the professional training for Party B, make sure that Party B have corresponding professional certificate, if Party A asks the Party B to start special operation.
  
 VIII. Modification of the Employment Agreement
  
 Party A could modify the content of the contract according to the actual job needs, after communication with Party B and filing the Modification of Employment Agreement.
  
 The Modification of Employment Agreement is made in two copies, each party holds one copy.
  
 IX. Termination of the Employment Agreement and relevant compensation
  
 The termination of the Employment Agreement and relevant compensation shall be implemented with the Chapter IV of the labor contract law of the People's Republic of China.
  
 X. Liability of damage
  
 Both parties agree to implement the liability of damage according to the Chapter VII of the labor contract law of the People's Republic of China.
  
 XI. Other matters made by both Parties
  
 XII. Dispute settlement
  
 In the event of a dispute between Party A and Party B due to the performance of this contract, the parties may apply for labor arbitration in accordance with relevant laws and regulations.
  
 XIII. If the unfinished matters or agreed terms of this contract are contrary to the relevant provisions of the state, the relevant state provisions shall be implemented.
  
  
  	 Party A (seal):
	  
	 Party B (seal):

	  
	  
	  

	 Legal representative/entrusted agent(seal)
	  
	 Date of signing contract: 

	  
	  
	  

	  
	  
	 December 13, 2016

  
  	 
	  4Exhibit

Exhibit 10.194

FIFTH AMENDMENT TO
ERIE INSURANCE GROUP
RETIREMENT PLAN FOR EMPLOYEES
(As Amended and Restated Effective December 31, 2014)

WHEREAS, Erie Indemnity Company (the “Company”) maintains the Erie Insurance Group Retirement Plan for Employees (the “Plan”) under an amendment and restatement effective December 31, 2014;

WHEREAS, the Plan provides that the Company may amend the Plan; and

WHEREAS, the Company wishes to amend the Plan effective December 31, 2017 to clarify the determination of Total and Permanent Disability under the Plan.  

NOW, THEREFORE, the Company hereby amends the Plan as follows:

		
	1.
	Section 2.36 of the Plan is amended and restated in its entirety to read as follows, effective December 31, 2017:

		
	2.36
	“Total and Permanent Disability” shall mean such condition of disability which results in a Covered Employee being eligible for disability benefits under the Erie Insurance Group Long Term Disability Income Benefits Program.

		
	2.
	Section 5.3 of the Plan is amended and restated in its entirety to read as follows, effective December 31, 2017:

		
	5.3
	Disability Retirement

A Participant whose status as a Covered Employee is terminated due to his Total and Permanent Disability after 15 or more years of Credited Service, and who is receiving disability benefits under the Erie Insurance Group Long Term Disability Income Benefits Program, shall be eligible for a disability retirement pension in an amount as provided in Section 6.3 hereof beginning at his Normal Retirement Date or later disability retirement date providing he remains subject to a Total and Permanent Disability and receives said disability income benefits continuously through his Normal Retirement Age or later disability retirement date.

* * * * * * *

 

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed this 20th day of December, 2018.

	
			
	 
	 
	ERIE INDEMNITY COMPANY

	 
	 
	 

	ATTEST:
	 
	 

	 
	 
	 

	/s/ William D. Gheres                                  
	 
	By: /s/ Gregory Gutting                                                  

	 
	 
	           Gregory Gutting

	 
	 
	 

	 
	 
	 

	 
	 
	Title: Executive Vice President &

	 
	 
	         Chief Financial Officer

	 
	 
	 

	 
	 
	 

	 
	 
	 

2Exhibit 10.1

 

 
Exhibit 10.1

 

SUBSCRIPTION AGREEMENT

EXACTUS, INC.

 

Exactus,
Inc., a Nevada corporation (hereinafter the "Company") and the
undersigned (hereinafter the “Subscriber”) agree as
follows:

 

WHEREAS:

 

A. The
Company desires to issue a maximum of 80,000,000 shares of common
stock of the Company, par value $0.0001 per share, at a price of
$0.025 per share ($2,000,000); and

 

 

B.
Subscriber desires to acquire that number of shares as is set forth
on the signature page hereof (hereinafter the "Shares") at the
purchase price set forth herein.

 

NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set-forth, the parties hereto do
hereby agree as follows:

 

SUBSCRIPTION

 

1.1          

Subject to the
terms and conditions hereinafter set forth, the Subscriber hereby
subscribes for and agrees to purchase the Shares from the Company
at a price equal to $0.025 per share, and the Company agrees to
sell the Shares to Subscriber in consideration of said purchase
price. Upon execution, this subscription shall be irrevocable by
Subscriber.

 

1.2          

The purchase price
for the Shares subscribed to hereunder is payable by the Subscriber
contemporaneously with the execution and e-mail delivery of this
Subscription Agreement to the Company at tryan@exactusinc.com.
Payment shall be made by wire transfer of the purchase price in the
amount of $0.025 per Share to the Company as follows:

 

Bank: Wells Fargo
Bank, N.A.

 

Address: 420
Montgomery Street,

San
Francisco, CA 94104

 

SWIFT:
WFBIOS6S

 

ABA#:
121000248

 

A/C#:
9898122511

 

A/C Name: Exactus
Inc.

 

REPRESENTATIONS AND WARRANTIES BY SUBSCRIBER

 

2.1          

Subscriber hereby
acknowledges, represents and warrants to the Company the
following:

 

(A)

Subscriber
acknowledges that the purchase of the Shares involves a high degree
of risk and that the Company may require substantial additional
funds;

 

(B)

Subscriber
recognizes that an investment in the Company is highly speculative
and only investors who can afford the loss of their entire
investment should consider investing in the Company and the
Shares;

 

 

 

-1-

 

 

 

(C)

Subscriber has such
knowledge and experience in finance, securities, investments,
including investment in unregistered securities, and other business
matters so as to be able to protect its interests in connection
with this transaction;

 

(D)

Unless allowed to
participated in this offering as a non-accredited investor by
permission of the Board of Directors of the Company, the Subscriber
is an "Accredited Investor" as defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as
amended;

 

(E)

Subscriber
acknowledges that the shares are subject to significant
restrictions on transfer as imposed by state and federal securities
laws, including but not limited to a minimum holding period of at
least six (6) months;

 

(F)

Subscriber hereby
acknowledges (i) that this offering of Shares has not been reviewed
by the United States Securities and Exchange Commission ("SEC") or
by the securities regulator of any state; (ii) that the Shares are
being issued by the Company pursuant to an exemption from
registration provided by Section 4(2) of the Securities Act of
1933; and (iii) that any certificate evidencing the Shares received
by Subscriber will bear a legend in substantially the following
form:

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS.
WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER UNLESS IN THE OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY REGISTRATION IS NOT REQUIRED
FOR SUCH TRANSFER AND THAT SUCH TRANSFER WILL NOT BE IN VIOLATION
OF THE APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR ANY RULE OR
REGULATION PROMULGATED THEREUNDER.

 

(G)

Subscriber is
acquiring the Shares as principal for Subscriber's own
benefit;

 

(H)

Subscriber is not
aware of any advertisement of the Shares or any general
solicitation in connection with any offering of the
Shares;

 

(I)

Subscriber
acknowledges receipt and review of the Company’s filings with
the Securities and Exchange Commission, of both the Articles of
Incorporation and bylaws of the Company, and of the Risk Factors
pertaining to the Company attached as Exhibit A hereto, together with
the opportunity and the Company’s encouragement to seek the
advice and consultation of independent investment, legal and tax
counsel; and

 

(J)

Subscriber
acknowledges and agrees that the Company has previously made
available to Subscriber the opportunity to ask questions of and to
receive answers from representatives of the Company concerning the
Company and the Shares, as well as to conduct whatever due
diligence the Subscriber, in its discretion, deems advisable.
Subscriber is not relying on any information communicated by any
representatives of the Company and is relying solely upon
information obtained during Subscriber’s due diligence
investigation in making a decision to invest in the Shares and the
Company.

 

Additional representation and warranties of non-U.S. persons
only

 

 

 

-2-

 

 

 

If the
Subscriber has indicated on the signature page to this Agreement
that the Subscriber is not a “U.S. Person” as defined
by Regulation S, then the Subscriber further acknowledges,
represents and warrants to the Company the following:

 

(K)

The Subscriber is
not a “U.S. Person” as defined by Regulation S as
promulgated by the United States Securities and Exchange
Commission, and is not acquiring the Shares for the account or
benefit of a U.S. Person. A “U.S. Person” is defined by
Regulation S as:

 

(i) Any
natural person resident in the United States;

 

(ii)
Any partnership or corporation organized or incorporated under the
laws of the United States;

 

(iii)
Any estate of which any executor or administrator is a U.S.
person;

 

(iv)
Any trust of which any trustee is a U.S. person;

 

(v) Any
agency or branch of a foreign entity located in the United
States;

 

(vi)
Any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;

 

(vii)
Any discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States;
and

 

(viii)
Any partnership or corporation if:

 

(A)
Organized or incorporated under the laws of any foreign
jurisdiction; and

 

(B)
Formed by a U.S. person principally for the purpose of investing in
securities not registered under the Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in
§230.501(a)) who are not natural persons, estates or
trusts;

 

(L)

Subscriber
acknowledges that the offer and sale of the Shares has taken place,
and is taking place in an “offshore transaction,” as
such term is defined in Regulation S;

 

(M)

Subscriber
acknowledges and agrees that, pursuant to the provisions of
Regulation S, the Shares cannot be sold, assigned, transferred,
conveyed, pledged or otherwise disposed of to any U.S. Person or
within the United States of America or its territories or
possessions for a period of six months from and after the closing
date of this offering, unless such securities are registered for
sale in the United States pursuant to an effective registration
statement under the Securities Act or another exemption from such
registration is available. Subscriber acknowledges that it has not
engaged in any hedging transactions with regard to the
Shares;

 

(N)

Subscriber is not a
“distributor” of securities, as that term is defined in
Regulation S, nor a dealer in securities;

 

(O)

Subscriber
acknowledges that the Shares may only be sold offshore in
compliance with Regulation S or pursuant to an effective
registration statement under the Securities Act or another
exemption from such registration, if available. In connection with
any resale of the Shares pursuant to Regulation S, the Company will
not register a transfer not made in accordance with Regulation S,
pursuant to an effective registration statement under the
Securities Act or in accordance with another exemption from the
Securities Act.

 

 

 

-3-

 

 

 

(P)

Subscriber has not
acquired the Shares as a result of, and will not itself engage in,
any “directed selling efforts” (as defined in
Regulation S under the Securities Act) in the United States in
respect of the Shares which would include any activities undertaken
for the purpose of, or that could reasonably be expected to have
the effect of, conditioning the market in the United States for the
resale of the Shares; provided, however, that the Subscriber may
sell or otherwise dispose of the Shares pursuant to registration
thereof under the Securities Act and any applicable state and
provincial securities laws or under an exemption from such
registration requirements;

 

REPRESENTATIONS BY THE COMPANY

 

3.1          

The Company
represents and warrants to the Subscriber that:

 

(A) 

The Company is a
corporation duly organized, existing and in good standing under the
laws of the State of Nevada and has the corporate power to conduct
the business which it conducts and proposes to
conduct.

 

(B) 

Upon issue, the
Shares will be duly and validly issued, fully paid and
non-assessable common stock in the capital of the
Company.

 

TERMS
OF SUBSCRIPTION

 

4.1            

Upon acceptance of
this subscription by the Company, all funds paid hereunder shall be
immediately available to the Company for its use.

 

4.2            

The Company
reserves the right to pay up to a 10% commission to any licensed
broker/dealers that may be engaged on a “best efforts”
basis to assist the Company in selling the Shares to qualified
investors. In addition, the Company reserves the right to issue, as
additional compensation to such licensed broker/dealers, warrants
to purchase common stock of the Company in an amount equal to 10%
of the total Shares sold.

 

4.3            

Subscriber hereby
authorizes and directs the Company to deliver the securities to be
issued to such Subscriber pursuant to this Subscription Agreement
to Subscriber’s address indicated herein.

 

4.4            

Notwithstanding the
place where this Subscription Agreement may be executed by any of
the parties hereto, the parties expressly agree that all the terms
and provisions hereof shall be construed in accordance with and
governed by the laws of the State of Nevada. Exclusive venue for
any dispute arising out of this Subscription Agreement or the
Shares shall be the state or federal courts sited in Washoe County,
Nevada.

4.5            

The parties agree
to execute and deliver all such further documents, agreements and
instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of
this Subscription Agreement.

 

 

[remainder of this page intentionally blank, signature page to
follow]

 

 

 

 

-4-

 

ACCREDITED INVESTOR STATUS

5.1            

☐ By checking this box, Subscriber represents
and warrants to the Company that the Subscriber is an "Accredited
Investor" as such term is defined in Rule 501 of Regulation D
promulgated under the United States Securities Act of 1933, as
amended (the "Act"). The Subscriber acknowledges having reviewed
and considered the definition of “Accredited Investor”
attached to this Subscription Agreement.

 

In addition, for non-U.S. persons only:

5.2            

☐ By checking this box, Subscriber represents
and warrants to the Company that the Subscriber is not a
“U.S. Person” as defined by Regulation S promulgated
under the United States Securities Act of 1933, as amended (the
"Act"), and is not acquiring the Shares for the account or benefit
of a U.S. Person,. The Subscriber acknowledges having reviewed and
considered the definition of “U.S. Person” set forth
above in this Subscription Agreement.

 

 

IN WITNESS WHEREOF, this Subscription Agreement is executed
as of the ___ day of _____________, 2019.

 

	

 

Number
of Shares Subscribed For:

 

	
 

	

 

Total
Purchase Price:

 

	
 

	

 

Signature of
Subscriber:

 

	
 

	

 

 

Name of
Subscriber:

 

	
 

	

 

 

Address
of Subscriber:

 

	
 

	

 

 

Subscriber’s
SS# or tax ID#:

 

	
 

 

 

ACCEPTED BY: EXACTUS, INC.

 

 

 

Signature of
Authorized Signatory: _______________________________

 

 

Name of Authorized
Signatory: _____________________________

 

 

Date of
Acceptance:  ___________________________

 

 

 

 

-5-

 

 

 

Accredited Investor Definition

 

The
Subscriber will be an "Accredited Investor" as such term is defined
in Rule 501 of Regulation D promulgated under the United States
Securities Act of 1933, as amended (the "Act") if the Subscriber is
any of the following:

 

(1) Any
bank as defined in section 3(a)(2) of the Act, or any savings and
loan association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; any broker or dealer registered pursuant to section 15 of
the Securities Exchange Act of 1934; any insurance company as
defined in section 2(a)(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as defined in section 2(a)(48) of that Act; any
Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess
of $5,000,000; any employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in section 3(21)
of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;

 

(2) Any
private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;

 

(3) Any
organization described in section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of
$5,000,000;

 

(4) Any
director, executive officer, or general partner of the issuer of
the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that
issuer;

 

(5) Any
natural person whose individual net worth, or joint net worth with
that person's spouse, exceeds $1,000,000.

 

(i)
Except as provided in paragraph (a)(5)(ii) of this section, for
purposes of calculating net worth under this paragraph
(a)(5):

 

(A) The
person's primary residence shall not be included as an
asset;

 

(B)
Indebtedness that is secured by the person's primary residence, up
to the estimated fair market value of the primary residence at the
time of the sale of securities, shall not be included as a
liability (except that if the amount of such indebtedness
outstanding at the time of sale of securities exceeds the amount
outstanding 60 days before such time, other than as a result of the
acquisition of the primary residence, the amount of such excess
shall be included as a liability); and

 

(C)
Indebtedness that is secured by the person's primary residence in
excess of the estimated fair market value of the primary residence
at the time of the sale of securities shall be included as a
liability;

 

(ii)
Paragraph (a)(5)(i) of this section will not apply to any
calculation of a person's net worth made in connection with a
purchase of securities in accordance with a right to purchase such
securities, provided that:

 

(A)
Such right was held by the person on July 20, 2010;

 

(B) The
person qualified as an accredited investor on the basis of net
worth at the time the person acquired such right; and

 

(C) The
person held securities of the same issuer, other than such right,
on July 20, 2010.

 

(6)
Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level
in the current year;

 

(7) Any
trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in
§230.506(b)(2)(ii); and

 

(8) Any
entity in which all of the equity owners are accredited
investors.

 

 

 

 

 

-6-

 

 

 

EXHIBIT A

 

Risk Factors

 

An investment in the Company’s common stock involves a high
degree of risk. In determining whether to purchase the
Company’s common stock, an investor should carefully consider
all of the material risks described below, together with the other
information contained the Company’s SEC filings before making
a decision to purchase the Company’s securities. An investor
should only purchase the Company’s securities if he or she
can afford to suffer the loss of his or her entire
investment.

 

 The following risk factors are intended to
supplement and should be read along with the “Risk
Factors” Under Item 1A contained in our Annual Report
on Form 10-K filed with the SEC on April 2, 2018,
and our other filings and reports with the SEC, which risk factors
are incorporated herein by reference.

 

Risks Related to Our Business

 

We may need additional capital in the future, which could dilute
the ownership of current shareholders or we may be unable to secure
additional funding in the future or to obtain such funding on
favorable terms.

 

Historically, we have raised equity capital to support and expand
our operations. To the extent that we raise additional equity
capital, existing shareholders will experience a dilution in the
voting power and ownership of their common stock, and earnings per
share, if any, would be negatively impacted. Our inability to use
our equity securities to finance our operations could materially
limit our growth. Any borrowings made to finance operations could
make us more vulnerable to a downturn in our operating results, a
downturn in economic conditions, or increases in interest rates on
borrowings that are subject to interest rate fluctuations. The
amount and timing of such additional financing needs will vary
principally depending on the timing of new product launches,
investments and/or acquisitions, and the amount of cash flow from
our operations. If our resources are insufficient to satisfy our
cash requirements, we may seek to issue additional equity or debt
securities or obtain a credit facility. If our cash flow from
operations is insufficient to meet our debt service requirements,
we could be required to sell additional equity securities,
refinance our obligations, or dispose of assets in order to meet
debt service requirements. There can be no assurance that any
financing will be available to us when needed or will be available
on terms acceptable to us. Our failure to obtain sufficient
financing on favorable terms and conditions could have a material
adverse effect on the business, prospects results of operations or
financial condition of the Company.

 

Even if we obtain customers, there is no assurance that we will
continue to make a profit.

 

Even if we obtain customers, there is no guarantee that we will be
able to generate a profit. Because we are a small company and have
limited capital, we must limit our products and services. Further,
we are subject to raw material pricing which can erode the
profitability of our products and put additional negative pressure
on profitability.  If we cannot operate profitably, we may
have to suspend or cease operations.

 

FDA regulation could negatively affect the hemp industry, which
would directly affect our financial condition.

 

The U.S. Food and Drug Administration ("FDA") may seek expanded
regulation of hemp under the Food, Drug and Cosmetics Act of 1938.
Additionally, the FDA may issue rules and regulations including
certified good manufacturing practices, or cGMPs, related to the
growth, cultivation, harvesting and processing of hemp. Clinical
trials may be needed to verify efficacy and safety. It is also
possible that the FDA would require that facilities where hemp is
grown register with the FDA and comply with certain federally
prescribed regulations. In the event that some or all of these
regulations are imposed, we do not know what the impact would be on
the hemp industry, including what costs, requirements and possible
prohibitions may be enforced. If we or our partners are unable to
comply with the regulations or registration as prescribed by the
FDA, we and or our partners (including C2M) may be unable to
continue to operate their and our business in its current or
planned form or at all.

  

Changes in the Law and Development Programs

 

For the first time since 1937, industrial hemp has been
decriminalized at the federal level and can be grown legally in the
United States, but on a limited basis. A landmark provision passed
in the Agricultural Act of 2014 recognizes hemp as distinct from
its genetic cousin, marijuana. Federal law now exempts industrial
hemp from U.S. drug laws to allow for crop research by
universities, colleges and state agriculture departments. The new
Federal law allows for agricultural programs for industrial hemp
“in states that permit the growth or cultivation of
hemp.”

 

 

 

A-1

 

 

 

Cannabis remains illegal under federal law, and therefore, strict
enforcement of federal laws regarding cannabis would likely result
in our inability and the inability of our customers to execute our
respective business plans.

 

Although we intend to conduct our business in a manner intended to
comply with federal law by utilizing low THC industrial hemp (less
than 0.3%), cannabis has historically been a Schedule I controlled
substance under the Controlled Substances Act of 1970 (the
“CSA”). On December 20, 2018 President Trump signed the
2018 Farm Bill which removed low THC hemp from Schedule I
controlled substance listing.

 

Even in those jurisdictions in which the manufacture and use of
medical cannabis has been legalized at the state level, the
possession, use and cultivation of cannabis all remain violations
of federal law that are punishable by imprisonment, substantial
fines and forfeiture. Moreover, individuals and entities may
violate federal law if they intentionally aid and abet another in
violating these federal controlled substance laws, or conspire with
another to violate them. The U.S. Supreme Court has ruled
in United States v. Oakland
Cannabis Buyers' Coop. and Gonzales v.
Raich that it is the
federal government that has the right to regulate and criminalize
the sale, possession and use of cannabis, even for medical
purposes. We would likely be unable to execute our business plan if
the federal government were to enforce federal law regarding
cannabis and applied such laws to low THC containing hemp, or other
federal or state laws were to be extended to our business. For this
reason, we continue to believe cannabis legislation and the
enforcement of laws should be considered a significant risk factor
to our business. Confusion surrounding the nature of our products,
inaccurate or incomplete testing, farming practices and law
enforcement vigilance or lack of education could result in
confusion and our products could be intercepted and our business
interrupted, or we could be required to undertake processes that
could delay shipments, impede sales or result in seizures, proper
or not, that would be costly to rectify or remove and which could
have a material adverse effect on the business, prospects, results
of operations or financial condition of the
Company.

 

In January 2018, the Department of Justice (the “DOJ”)
rescinded certain memoranda, including the so-called “Cole
Memo” issued on August 29, 2013 under the Obama
Administration, which had characterized enforcement of federal
cannabis prohibitions under the CSA to prosecute those complying
with state regulatory systems allowing the use, manufacture and
distribution of medical cannabis as an inefficient use of federal
investigative and prosecutorial resources when state regulatory and
enforcement efforts are effective with respect to enumerated
federal enforcement priorities under the CSA. The impact of the
DOJ's rescission of the Cole Memo and related memoranda is unclear,
but may result in the DOJ increasing its enforcement actions
against the state-regulated cannabis industry
generally.

 

Congress previously enacted an omnibus spending bill that includes
a provision prohibiting the DOJ (which includes the Drug
Enforcement Agency (the “DEA”)) from using funds
appropriated by that bill to prevent states from implementing their
medical-use cannabis laws. This provision, however, expired on
December 7, 2018, and must be renewed by Congress.
In USA
vs. McIntosh, the U.S. Court of
Appeals for the Ninth Circuit held that this provision prohibits
the DOJ from spending funds from relevant appropriations acts to
prosecute individuals who engage in conduct permitted by state
medical-use cannabis laws and who strictly comply with such laws.
However, the Ninth Circuit's opinion, which only applies to the
states of Alaska, Arizona, California, Hawaii, and Idaho, also held
that persons who do not strictly comply with all state laws and
regulations regarding the distribution, possession and cultivation
of medical-use cannabis have engaged in conduct that is
unauthorized, and in such instances the DOJ may prosecute those
individuals. 

 

Additionally, financial transactions involving proceeds generated
by cannabis-related conduct can form the basis for prosecution
under the federal money laundering statutes, unlicensed money
transmitter statutes and the Bank Secrecy Act. The penalties for
violation of these laws include imprisonment, substantial fines and
forfeiture. Prior to the DOJ's rescission of the “Cole
Memo”, supplemental guidance from the DOJ issued under the
Obama administration directed federal prosecutors to consider the
federal enforcement priorities enumerated in the “Cole
Memo” when determining whether to charge institutions or
individuals with any of the financial crimes described above based
upon cannabis-related activity. With the rescission of the
“Cole Memo,” there is increased uncertainty and added
risk that federal law enforcement authorities could seek to pursue
money laundering charges against entities or individuals engaged in
supporting the cannabis industry.

  

Federal prosecutors have significant discretion and no assurance
can be given that the federal prosecutor in each judicial district
where we operate will not choose to strictly enforce the federal
laws governing cannabis production or distribution. Any change in
the federal government's enforcement posture with respect to
state-licensed cultivation of cannabis, including the enforcement
postures of individual federal prosecutors in judicial districts
where we operate, would result in our inability to execute our
business plan, and we would likely suffer significant losses, which
would adversely affect the trading price of our securities. We have
not requested or obtained any opinion of counsel or ruling from any
authority to determine if our operations are in compliance with or
violate any state or federal laws or whether we are assisting
others to violate a state or federal law. In the event that our
operations are deemed to violate any laws or if we are deemed to be
assisting others to violate a state or federal law, any resulting
liability could cause us to modify or cease our
operations.

 

 

 

A-2

 

 

 

Although we believe the foregoing will be applicable to business
other than hemp-based CBD businesses there is risk that confusion
or uncertainty surrounding our products with regulated cannabis
could occur on the state or federal level and impact us. We may
have difficulty with establishing banking relationships, working
with investment banks and brokers who would be willing to offer and
sell our securities or accept deposits from shareholders, and
auditors willing to certify our financial statements if we are
confused with businesses that are in the cannabis business. Any of
these additional factors, should they occur, could also affect our
business, prospects, assets or results of operation could have a
material adverse effect on the business, prospects, results of
operations or financial condition of the Company.

 

Our inability to effectively manage our growth could harm our
business and materially and adversely affect our operating results
and financial condition.

 

Our strategy envisions growing our business. We are actively
launching and expect to expand our product, sales, administrative
and marketing operations. Any growth in or expansion of our
business is likely to continue to place a strain on our management
and administrative resources, infrastructure and systems. As with
other growing businesses, we expect that we will need to further
refine and expand our business development capabilities, our
systems and processes and our access to financing sources. We also
continue to hire, train, supervise, and manage a significant number
of new employees. These processes are time consuming and expensive,
will increase management responsibilities and will divert
management attention. We cannot assure that we will be able
to:

 

	

 ☐

	

expand
our products effectively or efficiently or in a timely
manner;

 

	

 ☐

	

allocate
our human resources optimally;

 

	

 ☐

	

meet
our capital needs;

 

	

 ☐

	

identify
and hire qualified employees or retain valued employees;
or

 

	

 ☐

	

effectively
incorporate the components of any business or product line that we
may acquire in our effort to achieve growth.

 

Our inability or failure to manage our growth and expansion
effectively could harm our business and materially and adversely
affect our operating results and financial condition.

 

If we do not successfully generate additional products and
services, or if such products and services are developed but not
successfully commercialized, we could lose revenue
opportunities.

 

Our future success depends, in part, on our ability to expand our
product and service offerings. To that end we have engaged in the
process of identifying new product opportunities to provide
additional products and related services to our customers. The
processes of identifying and commercializing new products is
complex and uncertain, and if we fail to accurately predict
customers’ changing needs and emerging trends, our business
could be harmed. We have already and may have to continue to commit
significant resources to commercializing new products before
knowing whether our investments will result in products the market
will accept. Furthermore, we may not execute successfully on
commercializing those products because of errors in product
planning or timing, technical hurdles that we fail to overcome in a
timely fashion, or a lack of appropriate resources. This could
result in competitors providing those solutions before we do and a
reduction in net sales and earnings. 

 

The success of new products depends on several factors, including
proper new product definition, timely completion, and introduction
of these products, differentiation of new products from those of
our competitors, and market acceptance of these products. There can
be no assurance that we will successfully identify additional new
product opportunities, develop and bring new products to market in
a timely manner, or achieve market acceptance of our products or
that products and technologies developed by others will not render
our products or technologies obsolete or
noncompetitive.

 

Our future success depends on our ability to grow and expand our
customer base. Our failure to achieve such growth or expansion
could materially harm our business.

 

To date, our revenue growth plans have been derived from projected
sales of our products, not actual sales or historical experience.
Our success and the planned growth and expansion of our business
depends on us achieving greater and broader acceptance of our
products and expanding our customer base. There can be no assurance
that customers will purchase our products or that we will continue
to expand our customer base. If we are unable to effectively market
or expand our product offerings, we will be unable to grow and
expand our business or implement our business strategy. This could
materially impair our ability to increase sales and revenue and
materially and adversely affect our margins, which could harm our
business and cause our stock price to decline.

 

 

 

A-3

 

 

 

Our suppliers could fail to fulfill our orders for parts used to
assemble our products, which would disrupt our business, increase
our costs, harm our reputation, and potentially cause us to lose
our market.

 

We depend on third party suppliers for materials used to assemble
our products. These suppliers could fail to produce products to our
specifications or in a workmanlike manner and may not deliver the
material or products on a timely basis. Our suppliers may also have
to obtain inventories of the necessary parts and tools for
production. Any change in our suppliers’ approach to
resolving production issues could disrupt our ability to fulfill
orders and could also disrupt our business due to delays in finding
new suppliers, providing specifications and testing initial
production. Such disruptions in our business and/or delays in
fulfilling orders could harm our reputation and could potentially
cause us to lose our market.

 

Our inability to effectively protect our intellectual property
would adversely affect our ability to compete effectively, our
revenue, our financial condition, and our results of
operations.

 

We may be unable to obtain intellectual property rights to
effectively protect our branding, products, and other intangible
assets. Our ability to compete effectively may be affected by the
nature and breadth of our intellectual property rights. While we
intend to defend against any threats to our intellectual property
rights, there can be no assurance that any such actions will
adequately protect our interests. If we are unable to secure
intellectual property rights to effectively protect our branding,
products, and other intangible assets, our revenue and earnings,
financial condition, or results of operations could be adversely
affected.

 

We also rely on non-disclosure and non-competition agreements to
protect portions of our intellectual property portfolio. There can
be no assurance that these agreements will not be breached, that we
will have adequate remedies for any breach, that third parties will
not otherwise gain access to our trade secrets or proprietary
knowledge, or that third parties will not independently develop
competitive products with similar intellectual
property.

 

We will be required to attract and retain top quality talent to
compete in the marketplace.

 

We believe our future growth and success will depend in part on our
ability to attract and retain highly skilled managerial, product
development, sales and marketing, and finance personnel. There can
be no assurance of success in attracting and retaining such
personnel. Shortages in qualified personnel could limit our ability
to increase sales of existing products and services and launch new
product and service offerings. 

 

If we fail to retain key personnel and hire, train and retain
qualified employees, we may not be able to compete effectively,
which could result in reduced revenue or increased
costs.

 

Our success is highly dependent on the continued services of key
management and technical personnel. Our management and other
employees may voluntarily terminate their employment at any time
upon short notice. The loss of the services of any member of the
senior management team or any of the managerial or technical staff
or members of our Advisory Board on which we principally rely for
expertise on our CBD segment may significantly delay or prevent the
achievement of product development, our growth strategies and other
business objectives. Our future success will also depend on our
ability to identify, recruit and retain additional qualified
technical and managerial personnel. We operate in several
geographic locations where labor markets are particularly
competitive, where demand for personnel with these skills is
extremely high and is likely to remain high. As a result,
competition for qualified personnel is intense, particularly in the
areas of general management, finance, engineering and science, and
the process of hiring suitably qualified personnel is often lengthy
and expensive, and may become more expensive in the future. If we
are unable to hire and retain a sufficient number of qualified
employees, our ability to conduct and expand our business could be
seriously reduced.

 

We face risks associated with strategic acquisitions.

 

As an important part of our business strategy, we have
strategically acquired several businesses, and plan to continue
strategic acquisitions, some of which may be material. These
acquisitions may involve a number of financial, accounting,
managerial, operational, legal, compliance and other risks and
challenges, including the following, any of which could adversely
affect our results of operations:

 

	

 ☐

	

Any
acquired business could under-perform relative to our expectations
and the price that we paid for it, or not perform in accordance
with our anticipated timetable;

 

	

 ☐

	

We may
incur or assume significant debt in connection with our
acquisitions;

 

	

 ☐

	

Acquisitions
could cause our results of operations to differ from our own or the
investment community’s expectations in any given period, or
over the long term; and

 

	

 ☐

	

Acquisitions
could create demands on our management that we may be unable to
effectively address, or for which we may incur additional
costs.

 

 

 

A-4

 

 

 

Additionally, following any business acquisition, we could
experience difficulty in integrating personnel, operations,
financial and other systems, and in retaining key employees and
customers.

 

We may record goodwill and other intangible assets on our
consolidated balance sheet in connection with our acquisitions. If
we are not able to realize the value of these assets, we may be
required to incur charges relating to the impairment of these
assets, which could materially impact our results of
operations. 

  

If product liability lawsuits are successfully brought against us,
we will incur substantial liabilities.

 

We face an inherent risk of product liability. For example, we may
be sued if any product we sell allegedly causes injury or is found
to be otherwise unsuitable during product testing, manufacturing,
marketing or sale. Any such product liability claims may include
allegations of defects in manufacturing, defects in design, a
failure to warn of dangers inherent in the product, negligence,
strict liability and a breach of warranties. Claims could also be
asserted under state consumer protection acts. If we cannot
successfully defend ourselves against product liability claims, we
may incur substantial liabilities or be required to limit sales of
our products. Even successful defense would require significant
financial and management resources. Regardless of the merits or
eventual outcome, liability claims may result in:

 

	

 ☐

	

decreased
demand for our products;

 

	

 ☐

	

injury
to our reputation;

 

	

 ☐

	

costs
to defend the related litigation;

 

	

 ☐

	

a
diversion of management's time and our resources;

 

	

 ☐

	

substantial
monetary awards to users of our products;

 

	

 ☐

	

product
recalls or withdrawals;

 

	

 ☐

	

loss of
revenue; and

 

	

 ☐

	

a
decline in our stock price.

 

In addition, while we continue to take what we believe are
appropriate precautions, we may be unable to avoid significant
liability if any product liability lawsuit is brought against
us. 

 

We are subject to cyber-security risks, including those related to
customer, employee, vendor or other company data and including in
connection with integration of acquired businesses and
operations.

 

We use information technologies to securely manage operations and
various business functions. We rely on various technologies, some
of which are managed by third parties, to process, transmit and
store electronic information, and to manage or support a variety of
business processes and activities, including reporting on our
business and interacting with customers, vendors and employees. In
addition, we collect and store certain data, including proprietary
business information, and may have access to confidential or
personal information that is subject to privacy and security laws,
regulations and customer-imposed controls. Our systems are subject
to repeated attempts by third parties to access information or to
disrupt our systems. Despite our security design and controls, and
those of our third-party providers, we may become subject to system
damage, disruptions or shutdowns due to any number of causes,
including cyber-attacks, breaches, employee error or malfeasance,
power outages, computer viruses, telecommunication or utility
failures, systems failures, service providers, natural disasters or
other catastrophic events. It is possible for such vulnerabilities
to remain undetected for an extended period. We may face other
challenges and risks as we upgrade and standardize our information
technology systems as part of our integration of acquired
businesses and operations. We do not have contingency plans in
place to prevent or mitigate the impact of these events, and these
events could result in operational disruptions or the
misappropriation of sensitive data, and depending on their nature
and scope, could lead to the compromise of confidential
information, improper use of our systems and networks, manipulation
and destruction of data, defective products, production downtimes
and operational disruptions and exposure to liability. Such
disruptions or misappropriations and the resulting repercussions,
including reputational damage and legal claims or proceedings, may
adversely affect our results of operations, cash flows and
financial condition, and the trading price of our common
stock.

 

 

 

A-5

 

 

 

Our operating results, including net sales, gross margin and net
income (loss), as well as our stock price have varied in the past,
and our future operating results will continue to be subject to
quarterly and annual fluctuations based upon numerous factors,
including those discussed in this Item 1A and throughout this
report. Our stock price will continue to be subject to daily
variations as well. Our future operating results and stock price
may not follow any past trends or meet our guidance and
expectations.

 

Our net sales and operating results, net income (loss) and
operating expenses, and our stock price have varied in the past and
may vary significantly from quarter to quarter and from year to
year in the future. We believe a number of factors, many of which
are outside of our control, could cause these variations and make
them difficult to predict, including:

 

	

 ☐

	

fluctuations
in demand for our products or downturns in the industries that we
serve;

 

	

 ☐

	

the
ability of our suppliers, both internal and external, to produce
and deliver products including sole or limited source components,
in a timely manner, in the quantity, quality and prices
desired;

 

	

 ☐

	

the
timing of receipt of bookings and the timing of and our ability to
ultimately convert bookings to net sales;

 

	

 ☐

	

rescheduling
of shipments or cancellation of orders by our
customers;

 

	

 ☐

	

fluctuations
in our product mix;

 

	

  ☐

	

the
ability of our customers' other suppliers to provide sufficient
material to support our customers' products;

 

	

 ☐

	

currency
fluctuations and stability, in particular the U.S. dollar as
compared to ,other currencies;

 

	

 ☐

	

introductions
of new products and product enhancements by our competitors, entry
of new competitors into our markets, pricing pressures and other
competitive factors;

 

	

 ☐

	

our
ability to develop, introduce, manufacture and ship new and
enhanced products in a timely manner without defects;

 

	

 ☐

	

our
ability to manage our manufacturing capacity across our diverse
product lines and that of our suppliers, including our ability to
successfully expand our manufacturing capacity in various locations
around the world;

 

	

 ☐

	

our
ability to successfully and fully integrate acquisitions, into our
operations and management;

 

	

 ☐

	

our
ability to successfully internally transfer products as part of our
integration efforts;

 

	

 ☐

	

our
reliance on contract manufacturing;

 

	

 ☐

	

our
customers' ability to manage their susceptibility to adverse
economic conditions;

 

	

 ☐

	

the
rate of market acceptance of our new products;

 

	

 ☐

	

the
ability of our customers to pay for our products;

 

	

 ☐

	

expenses
associated with acquisition-related activities;

 

	

 ☐

	

access
to applicable credit markets by us and our customers;

 

	

 ☐

	

our
ability to control expenses;

 

	

 ☐

	

potential
excess and/or obsolescence of our inventory;

 

	

 ☐

	

impairment
of goodwill, intangible assets and other long-lived
assets;

 

	

 ☐

	

our
ability to meet our expectations and forecasts and those of public
market analysts and investors;

 

 

 

A-6

 

 

 

	

 ☐

	

our
ability and the ability of our contractual counterparts to comply
with the terms of our contracts;

 

	

 ☐

	

damage
to our reputation as a result of coverage in social media, Internet
blogs or other media outlets;

 

	

 ☐

	

managing
our internal and third party sales representatives and
distributors, including compliance with all applicable
laws;

 

	

 ☐

	

costs,
expenses and damages arising from litigation;

 

	

 ☐

	

individual
employees intentionally or negligently failing to comply with our
internal controls; and

 

	

 ☐

	

distraction
of management related to acquisition, integration or divestment
activities.

 

Our expenses for any given quarter are typically based on expected
sales and if sales are below expectations in any given quarter, the
adverse impact of the shortfall on our operating results may be
magnified by our inability to adjust spending quickly enough to
compensate for the shortfall. We also base our inventory levels on
our forecasted product mix for the quarter. If the actual product
mix varies significantly from our forecast, we may not be able to
fill some orders during that quarter, which would result in delays
in the shipment of our products. Accordingly, variations in timing
of sales, particularly for our higher priced, higher margin
products, can cause significant fluctuations in quarterly operating
results.

 

Due to these and other factors, such as varying product mix,
quarter-to-quarter and year-to-year comparisons of our historical
operating results may not be meaningful. You should not rely on our
results for any quarter or year as an indication of our future
performance. Our operating results in future quarters and years may
be below public market analysts' or investors' expectations, which
would likely cause the price of our stock to fall. In addition,
over the past several years, U.S. and global equity markets have
experienced significant price and volume fluctuations that have
affected the stock prices of many companies involved in the
cannabis industry as well as in and outside our industry. There has
not always been a direct correlation between this volatility and
the performance of particular companies subject to these stock
price fluctuations. These factors, as well as general economic and
political conditions may have a material adverse effect on the
market price of our stock in the future.

  

Reliance on C2M and other Manufacturers.

 

The ability of the Company to compete and grow will be dependent on
it having access, at a reasonable cost and in a timely manner, to
skilled labor, equipment, parts and CBD components. No assurances
can be given that the Company will be successful in maintaining its
required supply of skilled labor, equipment, parts and
components.

 

The Company relies on third parties to supply the materials for and
manufacturer the research and development of the product
candidates, principally C2M. The Company cannot provide assurance
that access to C2M for supply or expertise materials will not be
limited, interrupted, restricted in certain geographic regions, be
of satisfactory quality or be delivered in a timely manner. In this
regard, C2M will require continued access to Good Manufacturing
Practices (“GMP”) manufacturer facilities. If the Company
is unable to obtain access to a GMP manufacturer, the Company may
be restricted from operations which would have a materially adverse
effect on the business and operations of the
Company.

Transportation Risks

 

The Company’s shipments, and the active ingredients used to
manufacture, requires transportation, principally across state
lines. The process may require the issuance of bills of lading or.
The issuance of bills of lading and granting and maintenance of
licenses is uncertain. Any failure in the ability to transport
product or ship finished goods via overnight delivery service or
the mail would have a material adverse effect on the business,
results of operations or financial condition of the
Company.

 

In the event licenses are granted, the Company may depend on fast
and efficient courier services to distribute its product, and
specific restrictions might be placed on distribution methods and
logistics due to the regulated nature of cannabinoid based products
or confusion that could occur with high THC containing products.
Any prolonged disruption of this courier service may result in the
product batches being stored outside required temperature ranges.
Inappropriate storage may damage the product shipment resulting in
delays, upon commercialization, a partial or total loss of revenue
from one or more shipments or product delays. A partial or total
loss of revenue from delays in shipment could have a material adverse effect on the
business, results of operations or financial condition of the
Company. Rising costs associated with the courier services used by
the Company to ship its products may also adversely impact the
business of the Company and its ability to operate
profitably.

 

The Company’s success may also be impacted by interstate
trade barriers to the transportation and marketing of products. If
the Company is unsuccessful in obtaining authorization to transport
or market the product candidates across interstate lines it will
materially adversely affect the Company’s business and
operations.

 

 

 

 

 

A-7

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