Note 15 – Subsequent Events

On April 2, 2018, the Company and Alternative Solutions entered into a Third Amendment to the Membership Interest Purchase Agreement (the “Third Amendment”) and extended the date upon which the Company is to pay the “Oasis Note” by approximately one (1) year to December 31, 2019.  The Third Amendment also provides that the time period to determine average daily net revenue for the “Bonus Purchase Price”, is amended to be the calendar year ending December 31, 2019 with the payment due thereunder extended to May 30, 2020.

On April 2, 2018, the Company and Alternative Solutions also entered into a Fourth Amendment to the Membership Interest Purchase Agreement (the “Fourth Amendment”) and extended the date upon which the Company is to pay the “Closing Consideration,” to May 21, 2018.

The Closing Consideration that the Company must pay to acquire the remaining 90% of the Oasis LLCs, is equal to cash in the amount of $6,200,000, a $4.0 million promissory note due in December 2019 (the “Oasis Note”), and $6,000,000 in shares (the “Purchase Price Shares”) of the Company’s common stock (collectively, the “Closing Consideration”).

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 2020, Alternative Solutions will be entitled to a $1,000,000 payment from the Company (the “Bonus Purchase Price”) if the existing dispensary operated by an Oasis LLC has maintained an average revenue of $20,000 per day during the 2019 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 closing consideration, it will also be obligated to 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 the Company 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 March 2, 2018, the Company entered into a consulting agreement with Starcity Capital, LLC to assist in its investor relations for a period of three months.  Pursuant to the terms of the consulting agreement, the Company issued 117,000 shares of common stock and issued a three-year warrant to purchase up to 412,500 share of common stock at an exercise price of $0.75 per share.  The stock and warrants vest over the term of the agreement.

On March 12, 2018, the Company received conversion notices for the related party notes payable to CLS CO 2016, LLC, Newcan and Jeffery Binder.  Frank Koretsky, the holder of the CLS CO 2016, LLC note, converted accrued interest in the amount of $9,308 into 29,786 shares of common stock.  Jeffery Binder converted notes with an aggregate principal amount of $464,698 and accrued interest in the amount of $507,756 into 1,624,819 shares of common stock.  Newcan, an entity owned by Mr. Koretsky, converted notes with an aggregate principal amount of $956,658 and accrued interest in the amount of $3,375,220 into 3,375,220 shares of common stock. Frank Koretsky also converted accrued interest on notes issued to him in the amount of $46,626 into 149,203 shares of common stock.

On March 30, 2018, the Company conducted its final closing of the WestPark Offering.  At such closing, the Company sold 441,563 units (1,413,000 shares of common stock and three-year common stock purchase warrants to purchase 353,250 shares of common stock)  for gross proceeds of $441,563.  These shares were not yet issued as of April 3, 2018.

On March 30, 2018, the Company issued a five-year warrants to purchase 205,238 units at an exercise price of $1.25 per unit to the placement agent of the WestPark Offering.  Each unit consists of four shares of common stock and a warrant to purchase one share of common stock for $0.75 per share.

On April 6, 2018, the Company issued a convertible promissory note to Jeffrey Binder, an officer and director of the Company, in the amount of $37,500.00 (the “Binder Convertible  Note 8”), with respect to certain compensation payable to Mr. Binder as of February 28, 2018. The Note is unsecured and bears 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 Binder Convertible Note 8 may be prepaid by the Company with no penalty at any time upon thirty days written notice. Mr. Binder 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, Mr. Binder will receive one share of the Company’s common stock.