Boy my head hurts from reading that 10-Q. You guys zero'd in on the relevants facts and posted almost what I was going post.
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Pueblo Farm – Management Services Agreement
On May 31, 2017, we, and two of our subsidiaries, EWSD I, LLC (“EWSD”) and Pueblo Agriculture Supply and Equipment LLC, and Trava LLC, a Florida limited liability company that has lent various sums to us (“Trava”; referenced above as the “PCH Lender”), entered into a Management Services Agreement (the “MS Agreement”) in respect of our hemp grow-and-extraction operations located in Pueblo, Colorado (the “Pueblo Farm”). The MS Agreement has a 36-month term with two consecutive 12-month unilateral options exercisable in the sole discretion of Trava. Pursuant to the provisions of the MS Agreement, Trava shall collect all revenue generated by the Pueblo Farm operations. Further, Trava is to satisfy all of our Pueblo Farm-related past due expenses and, subject to certain limitations, to pay all current and future operational expenses of the Pueblo Farm operations. Finally, commencing October 2017, Trava is obligated to make the monthly mortgage payments on the Pueblo Farm, although we remain responsible for any and all “balloon payments” due under the mortgage. On a cumulative calendar monthly cash-on-cash basis, Trava is obligated to tender to us or, at our option, to either or both of our subsidiaries, an amount equivalent to 51% of the net cash for each such calendar month. Such monthly payments are on the 10 th calendar day following the end of a calendar month for which such tender is required. At the end of the five-year term (assuming the exercise by Trava of each of the two above-referenced options), Trava has the unilateral right to purchase the Pueblo Farm operation at a four times multiple of its EBITDA (calculated at the mean average thereof for each of the two option years).
Commencing in September 2017 in connection with Trava monthly lending to us of funds sufficient for the Pueblo Farm’s monthly operational expenses of the Pueblo Farm operations, we amended the MA Agreement to provide that, from time to time, Trava may exercise its rights to convert some or all of the notes that evidence its lending of funds into shares of our common stock at a fixed conversion price of $.0001 pre-share. If Trava converts, in whole or in part, any one or more of such notes, then (unless (i) thereafter, we are unable to accommodate any future such conversions because of a lack of authorized, but unissued or unreserved, shares or (ii) the public market price for a share of our common stock become “no bid”), Trava shall continue to exercise its conversion rights in respect of all of such notes (to the 4.9% limitations set forth therein) and shall diligently sell the shares of common stock into which any or all of such notes may be converted (collectively, the “Underlying Shares”) in open market or other transactions (subject to any limitations imposed by the Federal securities laws and set forth in any “leak-out” type of arrangements in respect of the “underlying shares” to which Trava is a party).
Trava acknowledged that any proceeds derived by it from such sales of the underlying shares shall, on a dollar-for-dollar basis, reduce our financial obligations under the notes. Once Trava has received sufficient proceeds from such sales to reduce our aggregate obligations thereunder to nil (which reductions shall include any and all funds that Trava may have otherwise received in connection with the respective rights and obligations of the parties to the MSA), then the MSA shall be deemed to have been cancelled without any further economic obligations between Trava and us and Trava’s purchase right shall, accordingly, be extinguished.
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In other words Trava is going to receive all the revenue for minimum the next three years. Whether or not they decide to pay anything to Notis is up in the air as the current trend in Colorado is for tenants not to pay their landlords because the landlords don't have iron clad lease agreements.
There are going to eventually have to increase the A/S or do a reverse split since there was several references to the max A/S shares being hit.
