|6 Months Ended|
Jun. 30, 2019
NOTE 7 – NOTES RECEIVABLE
At June 30, 2019 and December 31, 2018, notes receivable were comprised of the following:
The Company loaned approximately $700,000 to First State Compassion Center, its Delaware cannabis-licensee client, during the period of October 2015 to April 2016. In May 2016, this client issued a 10-year promissory note, as amended, to the Company bearing interest at a compounded rate of 12.5% per annum. The monthly payments of approximately $10,100 will continue through April 2026, at which time the note will be fully paid down. At June 30, 2019 and December 31, 2018, the current portion of this note was approximately $55,000 and $51,000, respectively, and included in Note Receivable, Current Portion on the balance sheets.
In May 2019, the Company loaned $750,000 to Atalo Holdings Inc., an agriculture and biotechnology firm specializing in research, development, and production of industrial hemp and hemp-based CBD products (“Atalo”). The loans bear interest at 6% per annum, with principal and interest payable on the earlier of April 3, 2020 or the date on which the Company acquires at least 25% of Atalo’s outstanding capital stock, in which case the principal and interest due shall be credited toward Company’s purchase price for such capital stock. In July 2019, the Company loaned an additional $230,000 to Atalo under the same terms as the initial loans.
During the period August to October 2018, the Company loaned $300,000 to Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak, an integrative medicine physician and nationally renowned cannabis practitioner. In 2019, the Company loaned Healer an additional $500,000. The loans bear interest at 6% per annum, with principal and interest payable on the maturity dates which are three years from the loan date.
In January 2019, KPG of Anna LLC and KPG of Harrisburg LLC each issued a promissory note to the Company in the amount of approximately $451,000 and $405,000, respectively, representing the advances made by the Company to these entities through December 31, 2018. The notes bear interest at 12% per annum, with monthly principal and interest payments due through December 2038. At June 30, 2019, the current portion of these notes approximated $12,000 in the aggregate.
In January 2019, the Company entered into an agreement with Maryland Health & Wellness Center Inc. (“MHWC”), an entity that has been pre-approved for a cannabis dispensing license, to provide MHWC with a construction loan in connection with the buildout of MHWC’s proposed dispensary. The Company also entered into a consulting services agreement to provide MHWC with advisory and oversight services over a three-year period relating to the development, administration, operation, and management of MHWC’s proposed dispensary in Maryland. The construction loan bears interest at 8% per annum, with principal and interest payable in January 2020, provided however, upon the two-year anniversary of final state approval of MHWC’s dispensing license, the Company shall have the right, subject to state approval, to convert the promissory note underlying the construction loan into a 20% ownership interest of MHWC. This conversion right of the Company shall be terminated if the consulting services agreement is terminated.
During the period from May to October 2018, the Company loaned $250,000 to Chooze Corp. bearing interest at 8% per annum and maturing in 2021. In January 2019, the entire principal and accrued interest balance of approximately $258,000 was converted into a 2.7% ownership interest in Chooze.
The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.
Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef