Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.8.0.1
Commitments and Contingencies
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

6. Commitments and Contingencies

 

Share Exchange Agreement

 

On May 11, 2017, Cyberspace Vita, Inc., a Nevada corporation (the “Company”) entered into a share exchange agreement (the “Exchange Agreement”) with Peter Zachariou, the majority shareholder of the Company (the “Shareholder”), Project 1493, LLC, a limited liability company organized under the laws of the Commonwealth of Puerto Rico (“1493”), and the sole member of 1493 (the “Member”), pursuant to which the Member transferred all of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912 restricted shares of common stock of the Company (the “Exchange Shares”), warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share for a period of three (3) years from the date of issuance (the “Exchange Warrants”) and 1,000 shares of Series A Preferred Stock that grants the holders thereof fifty-one percent (51%) voting power (the “Preferred Shares” and together with the Exchange Shares, and the Exchange Warrants, the “Exchange Securities”). The transaction closed on May 11, 2017 (the “Closing Date”).

 

Debt Exchange Agreement

 

On May 11, 2017, the Company also entered into a debt exchange agreement (the “Debt Exchange”) with Fountainhead Capital Management Limited (“Fountainhead”), a related party, whereby Fountainhead agreed to cancel a promissory note in the aggregate amount of $510,652 plus accrued interest of $129,265. As consideration, Fountainhead received an aggregate of 1,800,000 shares of the Common Stock, of which 200,000 shares of Common Stock have already been issued.

 

Escrow Agreement

 

On April 18, 2017, the Company entered into an escrow agreement with PRIHBC with the intention of purchasing three pre-qualified medicinal cannabis licenses for $300,000. The agreement states the funds will be held by the escrow agent, Sichenzia Ross Ference Kesner LLP (“Sichenzia”). The Company deposited $150,000 into the escrow account as of June 30, 2017. The escrow agreement expired June 2, 2017. As of June 30, 2017, the Company had not paid PRIHBC towards the purchase of the dispensaries. The Company paid $200,000 and $100,000 on July 7, 2017 and August 1, 2017, respectively, paying the obligation in full.

 

Memorandum of Understanding and Final Purchasing Agreement - PRIHBC

 

On April 19, 2017, the Company entered into a Memorandum of Understanding (“MOU”) with PRIHBC to purchase three pre-qualified medical marijuana licenses in Puerto Rico for $300,000. The Company deposited $150,000 into escrow with Sichenzia for a deposit towards the purchase price. The agreement sells all legal rights, permits, licenses, leasing contracts and assets of the three dispensaries from PRIHBC to the Company. As of June 30, 2017 the funds had not been disbursed from escrow. During the due diligence period, the Company has exclusive negotiation rights regarding the proposed acquisition.

 

On July 7, 2017, the Company entered into a final purchasing agreement (the “PRIHBC Agreement”) with Puerto Rico Industrial Holdings Biotech Corporation, a corporation formed under the laws of the Commonwealth of Puerto Rico (“PRIHBC”), pursuant to which we acquired all of the legal rights, permits, licenses, leasing contracts and assets pertaining to three dispensaries located in Carolina, Dorado and Fajardo, in exchange for $300,000, $150,000 of which shall be deposited into an escrow account until the closing of the PRIHBC Agreement. The Company paid $200,000 and $100,000 on July 7, 2017 and August 1, 2017, paying the obligation in full.

 

In connection with the PRIHBC Agreement, 1493, PRIHBC and Heras P.M. & I, Corp., a corporation formed under the laws of the Commonwealth of Puerto Rico (“Heras”), entered into an assignment of lease on June 15, 2017, (the “Carolina Lease Assignment”) which transfers and/or assigns the rights under the lease agreement for the location of the Carolina Dispensary to 1493. PRIHBC entered into such lease agreement, dated August 26, 2016, with Heras to lease approximately 2,500 rentable square feet for a term of five (5) years, commencing on September 1, 2016. The lease payments for such location will be $4,500 per month, with an annual increase of 5%.

 

1493, PRIHBC and Efron Dorado, S.E., a corporation formed under the laws of the Commonwealth of Puerto Rico (“Efron”), entered into an assignment of lease on June 7, 2017, (the “Dorado Lease Assignment”) which transfers and/or assigns the rights under the lease agreement for the location of the dispensary in Dorado to 1493. PRIHBC entered into such lease agreement, dated August 30, 2016, with Efron to lease approximately 1,900 rentable square feet for a term of three (3) years, commencing on December 1, 2016. The lease payments for such location will be an annual amount of $57,000, with an additional monthly marketing fee of $158.33.

 

Pursuant to a non-compete clause set forth in the PRIHBC Agreement, PRIHBC has agreed not to establish a medical cannabis dispensary within a two-mile radius from any of the three dispensaries. Each of the parties to the PRIH Agreement has made customary representations and considerations in the PRIH Agreement.

 

Memorandum of Understanding and Final Purchasing Agreement – Good Vibes Distributors, LLC (“GVD”)

 

On April 6, 2017, the Company entered into a MOU with Good Vibes Distributors, LLC (“GVD”) to purchase one medicinal cannabis dispensary in Puerto Rico for $75,000 (the “San Juan Dispensary”). The MOU called for $7,500 funded into escrow with Sichenzia for a deposit towards the purchase price. The agreement sells all assets, rights and licenses from GVD to the Company.

 

On July 7, 2017, the Company entered into a final purchasing agreement (the “GVD Agreement”) with Good Vibes Distributors, LLC, a corporation formed under the laws of the Commonwealth of Puerto Rico (“GVD”), pursuant to which it acquired the dispensary prequalification license for the San Juan Dispensary, in exchange for $75,000. Pursuant to the GVD Agreement, the Company agreed to deposit the $7,500 to an escrow account until the closing of the GVD Agreement. The Company paid $75,000 on July 7, 2017, paying the obligation in full

 

Pursuant to non-compete clause set forth in the GVD Agreement, GVD has agreed not to establish a Medical Cannabis dispensary within a two-mile radius from the San Juan Dispensary. Each of parties to the GVD Agreement has made customary representations and considerations in the GVD Agreement.

 

On July 11, 2017, the Company entered into a lease agreement (the “Lease Agreement”) with Olympic Properties, Inc., a corporation formed under the laws of the Commonwealth of Puerto Rico, to lease approximately 1,500 square feet and 8 parking spaces on the first floor of 509-511 Andalucia Street in San Juan, Puerto Rico, for the location of the San Juan Dispensary. The lease payments pursuant to the Lease Agreement shall be $1,600 per month for the initial three (3) years commencing on August 1, 2017, after which the lease payment shall increase each year by 5% commencing on July 31, 2020.

 

Long Term Supply Agreement

 

On April 18, 2017, the Company entered into a long term supply agreement (“supply agreement”) to purchase flower and manufactured products for the dispensaries upon approval of the appropriate licensing by the Puerto Rico Department of Health. The Company will purchase at least 50% of all flower and manufactured products to be sold in the dispensaries owned by the Company or its affiliates. The supply agreement is valid for ten years from the moment of its coming into effect. If neither party announces termination of the supply agreement thirty days before its stated expiration, the supply agreement shall be automatically extended for each subsequent year with no limit of years.

 

Risk of Prosecution for Marijuana-Related Companies

 

A company that is connected to the marijuana industry must be aware that marijuana-related companies may be at risk of federal, and perhaps state, criminal prosecution. The Department of Treasury recently issued guidance noting: “The Controlled Substances Act” (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense marijuana. Many states impose and enforce similar prohibitions. As of September 30, 2017, the Company has not been notified of any pending investigations regarding its planned business activities, and is not currently involved in any such investigations with any regulators.

 

Effect of Hurricanes Irma and Maria

 

On September 5, 2017 Hurricane Irma landed in Puerto Rico, causing severe flooding and wind-related damage to the island. Power losses, lack of water and fuel were prevalent throughout the island. On September 20, 2017, approximately two weeks later, Hurricane Maria landed in Puerto Rico, causing more flooding, wind-related damage, water contamination and power losses.

 

Although a large portion of the island suffered tangible damage, the Company’s construction sites did not suffer any substantial damage. While construction was delayed due to power loss construction commenced again in mid-October. The Company estimates completion of the dispensaries during the first quarter of 2018.