Note 14 – Subsequent Events

On December 4, 2017, the Company and Alternative Solutions, LLC (“Alternative Solutions”) entered into a Membership Interest Purchase Agreement (the “Acquisition Agreement”) for the Company to acquire (the “Oasis Acquisition”) the outstanding equity interests in three subsidiaries of Alternative Solutions (collectively, the “Oasis LLCs”).  Pursuant to the Acquisition Agreement, the Company paid a non-refundable deposit of $250,000 upon signing, which will be followed by an additional payment of $1,800,000 within 45 days (75 days if an extension fee of $200,000 is paid by the Company) for an initial 10% of each of the Oasis LLCs.  At that time, the Company will apply for state regulatory approval to own an interest in the Oasis LLCs.  The 10% membership interest cannot be issued to the Company until it receives such approval.  If the Company does not receive such regulatory approvals within ninety (90) days, the Company may terminate the Acquisition Agreement and receive the return of its $1,800,000 deposit.  Within ninety (90) days after the Company makes the additional payment of $1,800,000, the Company must make the payments to acquire the remaining 90% of the Oasis LLCs, which are equal to cash in the amount of $6,200,000, a $4.0 million promissory note due in December 2018 (the “Oasis Note”), and $6,000,000 in shares (the “Purchase Price Shares”) of its common stock (collectively, the “Closing Consideration”).  At that time, the Company must apply for state regulatory approval to own the additional 90% in membership interests in the Oasis LLCs.  Upon receipt of such approval, the Company will close on the purchase of the membership interests pursuant to the Acquisition Agreement.

The number of Purchase Price Shares shall equal $6,000,000 divided by the lower of $1.00 or the conversion price to receive one share of the Company’s common stock in its next equity offering that commences in 2018, multiplied by 80%.  The Oasis Note will be secured by a first priority security interest over the assets of each of the Oasis LLCs and Alternative Solutions, including the Company’s 10% equity interest in the Oasis LLCs, and the Company shall deliver to Alternative Solutions a confession of judgment that will become effective in the event of any event of default under the Oasis Note.

Oasis currently owes certain amounts to a consultant known as 4Front Advisors, LLC.  If the Company makes any payments to this company post-closing, generally speaking, the Company will be entitled to deduct the present value of such payments from the principal amount due under the Oasis Note.

Assuming the Company closes on the Acquisition Agreement, in May 2019, Alternative Solutions will be entitled to a $1,000,000 payment from the Company if the existing dispensary operated by an Oasis LLC has maintained an average revenue of $20,000 per day during the 2018 calendar year.

The sale, assignment, transfer, pledge or other disposition of any interest in the Oasis LLCs or Alternative Solutions is ineffective unless approved in advance by the state of Nevada and any municipality in which the Oasis LLC’s operation is licensed.

In connection with the Oasis Acquisition, the Company plans to employ Mr. Ben Sillitoe as its COO.  The Company plans to issue him 500,000 shares of restricted common stock pursuant to his proposed employment agreement.  Upon the Company’s payment of the additional deposit of $1,800,000, it will also issue 500,000 shares of its restricted common stock to each of David Lamadrid, its President and Chief Financial Officer, and J.P. Barton, for introducing it to Alternative Solutions.

The closing of the Acquisition Agreement is subject to a number of conditions, including the Company’s  ability to raise the $8,000,000 in cash required to close the transaction.  As a result, there can be no assurance that the Company will be able to close the Oasis Acquisition.

On December 7, 2017, the Company commenced a private offering of its securities pursuant to Rule 506(c) promulgated under the Securities Act of 1933, as amended.  The Company is offering for sale a minimum of 1,800,000 units and a maximum of 4,000,000 units at a price of $1.25 per unit.  Each unit consists of four shares of common stock and one warrant to purchase common stock at $0.75 per share.  Assuming the Company sells the minimum units by January 17, 2018, which date may be extended by up to 60 days in the sole discretion of the Company, the common stock and warrants issued at closing will be restricted securities.

The Company intends to use the proceeds of the private offering primarily to make certain payments required under its definitive agreement to purchase the membership interests of the Oasis LLCs from Alternative Solutions.

On December 7, 2017, the board of directors of the Company appointed Andrew Glashow as a Class 1 director to fill a vacancy on its board of directors.  Mr. Glashow will initially serve for a one-year term expiring at the 2018 meeting of stockholders of the Company. Mr. Glashow is not a party to any arrangement with any other person pursuant to which he was selected as a director.

On January 3, 2018, the Company announced that it had received a Notice of Allowance from the U.S. Patent and Trademark Office with respect to its patent application for its proprietary extraction and conversion methodology.

On January 5, 2018, the Company issued a convertible promissory note to Newcan, an entity owned by Frank Koretsky, a director of the Company, in the amount of $115,000.00 (the “Koretsky Note”), and to Jeffrey Binder, an officer and director of the Company, in the amount of $165,360.19 (the “Binder Note” and, together with the Koretsky Note, the “Notes”), to finalize the terms of repayment with respect to certain loans made to the Company by Newcan and Mr. Binder between October, 13, 2017 and December 27, 2017, and certain compensation payable to Mr. Binder as of November 30, 2017. The Notes, which otherwise contain identical terms, are unsecured and bear interest at the rate of 10% per annum. No payments are required until April 1, 2019, at which time all accrued interest becomes due and payable. Principal will be paid in eight equal quarterly installments, together with interest accrued thereon, beginning on July 1, 2019. The Notes may be prepaid by the Company with no penalty at any time upon thirty days written notice.

The holder of each Note may, at any time prior to payment or prepayment in full, convert all principal and accrued interest thereunder, in whole or in part, into securities of the Company. For each $0.3125 converted, the holder will receive one share of the Company’s common stock.

On January 10, 2018, effective December 1, 2017, the Company amended the terms of all of its outstanding convertible promissory notes owed to Mr. Binder and Newcan to increase the conversion price from $0.25 to $0.3125 per share of common stock.