Item 1.01 Entry into a Material Definitive Agreement.
On May 12, 2021, the Registrant entered into a material definitive agreement not
made in the ordinary course of its business. The parties to the material
definitive agreement are the Registrant and Marijuana Company of America, Inc.,
a Utah corporation ("MCOA").
Prior Relationship
Previously, on September 30, 2020, the Registrant and MCOA entered into a Share
Exchange Agreement whereby the Registrant acquired that number of shares of
MCOA's common stock, par value $0.001, equal in value to $650,000 based on the
closing price for the trading day immediately preceding the effective date, in
exchange for the number of shares of the Registrant's common stock, par value
$0.001, equal in value to $650,000 based on the closing price for the trading
day immediately preceding the effective date. For both parties, the Share
Exchange Agreement contained a "true-up" provision requiring the issuance of
additional common stock in the event that a decline in the market value of the
parties' common stock should cause the aggregate value of the stock acquired
pursuant to the Share Exchange Agreement to fall below $650,000.
Complementary to the Share Exchange Agreement, Registrant and MCOA entered into
a Lock-Up Agreement dated September 30, 2020 (the "Lock-Up Agreement"),
providing that the shares of common stock acquired pursuant to the Share
Exchange Agreement shall be subject to a lock-up period preventing its sale for
a period of 12 months following issuance, and limiting the subsequent sale to
aggregate maximum sale value of $20,000 per week, or $80,000 per month.
Summary of the May 12, 2021 Material Definitive Agreement
The parties agreed to operate a joint venture through a new Nevada corporation
named MCOA Lynwood Services, Inc. The parties agreed to finance a regulated and
licensed laboratory to produce various cannabis products under the legal
framework outlined by the City of Lynwood, California, Los Angeles County and
the State of California. The Registrant owns a controlling interest in Natural
Plant Extract of California, Inc., which operates a licensed cannabis
manufacturing operation in Lynwood, California.
As its contribution the joint venture, MCOA agreed to purchase and install
equipment for joint venture operations, which will then be rented to the joint
venture, and also provide funding relating to marketing the products produced by
the capital equipment. The Registrant agreed to provide use of its manufacturing
and distribution licenses; access to its Lynwood, California facility; use of
the specific areas within the Lynwood Facility suitable for the types of
manufacturing selected by the joint venture; and, management expertise require
to carry on the joint venture's operations.
Ownership of the joint venture was agreed to be 60% in the Registrant and 40%
with MCOA. Royalties from profits realized as the result of sales of products
from the joint venture was also agreed to be distributed as 60% to the
Registrant and 40% to MCOA.
Item 9.01 Financial Statements and Exhibits
Exhibit No. Description Location
10.1 Joint Venture Agreement Filed Herewith
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