|9 Months Ended|
Sep. 30, 2018
|Debt Disclosure [Abstract]|
NOTE 5 – NOTES RECEIVABLE
In September 2018, the Company purchased $6.75M of subordinated secured convertible debentures (the “GC Debentures”) of GenCanna Global, Inc., a producer and distributor of agricultural hemp, cannabidiol (CBD) formulations, hemp genetics, and hemp products (“GenCanna”). The GC Debentures bear interest at a compounded rate of 9% per annum and mature three years from issuance.
The GC Debentures are convertible into the common stock of GenCanna, at the Company’s option, (i) upon the occurrence of a Liquidity Event, as defined in the GC Debentures, or (ii) after December 31, 2018, upon ten days prior written notice to GenCanna. The conversion price is equal to the lesser of a 20% discount to the price of the Liquidity Event, or the price based on a defined post-money valuation of GenCanna. If a Liquidity Event does not occur on or before June 30, 2020, the Company shall have the option to be redeemed in cash for the principal amount of the GC Debenture plus all accrued and unpaid interest thereon.
Subsequent to September 30, 2018, the Company entered into a subscription agreement with GenCanna to purchase an aggregate of $30 million of GC Debentures, as disclosed in Note 14 below.
During the nine months ended September 30, 2018, the Company loaned an aggregate of $300,000 to two third-party companies in the cannabis industry. The loans plus accrued interest at the rate of 8% per annum are expected to be repaid by the end of fiscal year 2019.
The Company loaned approximately $700,000 to 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 September 30, 2018 and December 31, 2017, the current portion of this note comprised the Note Receivable, Current Portion amounts on the balance sheet, and the long-term portion of approximately $541,000 and $579,000, respectively, along with the aforementioned notes receivable in this Note 5, were reflected in the caption Notes Receivable, Less Current Portion.