Some people may be hesitant to take a position or

Some people may be hesitant to take a position or add to their position till the site permit is issued to the company, fearing the merger might become null and void.

NO DILUTION !!!! Conversion rate of the preferred B stock to be reduced to offset the 325 million shares from preferred D stock conversion !

Item 1.01

Entry Into A Material Definitive Agreement

 

On October 29, 2013 The PAWS Pet Company Inc. (the “Company”) entered into a Securities Exchange Agreement (the “Agreement”) with Pharmacy Development Corp. (“PDC”) to acquire from PDC, 100% of the issued and outstanding shares of Mesa Pharmacy, Inc. (“MESA”), in exchange for five hundred thousand (500,000) shares of the Company’s Series D Convertible Preferred Stock (the “D Preferred”).

 

The closing of this transaction will take place, subject to the prior approval of respective boards of directors of both the Company and PDC, automatically on the earlier of the issuance, by the California State Board of Pharmacy, of a permanent Community Pharmacy Site Permit approving the Company as the new owner of MESA or earlier by mutual agreement of the parties. If a site permit is not issued to the Company within a specified period, the Agreement will be null and void.

 

The Company is also entering into a royalty agreement, by which the Company will pay 5% of MESA’s net revenue, as defined, until the earlier of the company acquires and cancels notes for $6 million issued by PDC through a cash payment or other transaction acceptable to the note holders, or twenty (20) years.

 

MESA focuses on providing custom compounded non-narcotic, transdermal topical pain medications that are marketed to industrial health physicians and clinics. MESA has developed a series of topical ointments, in different strengths, that provide the pain relief doctors seek.

 

Upon closing of the transaction, PDC will have the right to appoint three (3) individuals to the Company’s Board of Directors, which will increase the number of board members to seven (7).

 

The 500,000 shares of D Preferred are convertible into 325 million shares of the Company’s common stock. The holders of a majority of the Company’s Series B Convertible Preferred Stock shares have agreed to vote to reduce the maximum conversion rate thereunder, in order to offset the new D Preferred, on a fully diluted basis.

 

The above description of the Agreement and the D Preferred are qualified by reference in their entirety to the copies of the Agreement and the Certificate of Designation for the D Preferred annexed as exhibits to this report.