Commitments and Contingencies
|3 Months Ended|
Mar. 31, 2018
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||
8. Commitments and Contingencies
Term Sheet – Mythic Cuts, Inc.
On October 27, 2017, the Company entered into a Term Sheet with Mythic Cuts, Inc. (“Mythic”) to form a limited liability company (“LLC”) for the purpose of operating within the cannabis industry. The LLC will be named Mythic Cuts Oakland, LLC (“Mythic Oakland”), which the Company and Mythic intend to operate as a cannabis cloning company. It is contemplated that Mythic Oakland will enter into a lease or sub-lease agreement with the Company in Oakland, California. The Company will own 51% of the Membership Interests for a purchase price of $1,600,000. Closing was be subject to satisfactory completion by GSRX of due diligence and upon the delivery of certain corporate and financial information reasonably requested by GSRX from Mythic.
As of February 3, 2018, the Company determined not to proceed with the Mythic transaction.
Long Term Supply Agreement
On April 18, 2017 the Company entered into a long term supply agreement (“Supply Agreement”) to purchase flower and manufactured products for the dispensaries upon approval of the appropriate licensing by the Puerto Rico Department of Health. Pursuant to the terms of the Supply Agreement, the Company agreed to purchase at least 50% of all flower and manufactured products to be sold in the dispensaries owned by the Company or its affiliates. The Supply Agreement has a term of ten years from the moment of its coming into effect. If neither party announces termination of the Supply Agreement at least thirty (30) days before its stated expiration, the Supply Agreement shall automatically extend for a period of one year, and renewing until such time as either party provides notice of termination in accordance with the terms and conditions of the Supply Agreement.
Option to Purchase Building
On February 27, 2018, Project 1493, LLC remitted $50,000 in the form of an option to purchase a building located at 51 McLeary Street in San Juan, Puerto Rico. The option gives the Company an exclusive ninety day option to purchase the building for $1,150,000, which can be executed by written consent, specifying the closing date. The cost of the building was placed in escrow as of March 31, 2018 in anticipation of the purchase, which closed on May 2, 2018. The Company will continue to lease the property to the current tenant, a medical cannabis dispensary under the current lease which expires January 31, 2021.
On March 14, 2018, Project 1493, LLC entered into an operating lease for the building located at A-15 Acacia Street, Avenida Lomas Verdes, Bayomon, Puerto Rico for five years beginning March 12, 2018 and ending March 11, 2023; with an initial term of ninety days to obtain all of the permits required to operate a medical cannabis dispensary. The initial three months lease obligation will be $2,099 per month and $3,000 for the next nine months. Subsequently, the monthly lease obligation will increase $100 per month for the remaining four years. The lease is triple net, as all utilities, insurance and taxes will be paid by Project 1493.
138 Main Street PA, LLC and lease
On March 19, 2018, the Company organized 138 Main Street PA, LLC (“138”) to hold certain real property, located at 138 Main Street, Point Arena, California. On March 7, 2018 the Company entered into an agreement to purchase the building at 138 Main Street, Point Arena, California. On March 28, 2018 the Company deposited $19,500 into escrow per the requirements of the contract to purchase the building. The Company entered into a sixty day lease until the purchase transaction can be completed.
Risk of Prosecution for Cannabis-Related Companies
A company that is connected to the marijuana industry must be aware that cannabis-related companies may be at risk of federal, and perhaps state, criminal prosecution. The Department of Treasury recently issued guidance noting: “The Controlled Substances Act” (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense cannabis. Many states impose and enforce similar prohibitions. As of March 31, 2018 and May 21, 2018, the Company has not been notified of any pending investigations regarding its planned business activities, and is not currently involved in any such investigations with any regulators.
The entire disclosure for commitments and contingencies.
Reference 1: http://www.xbrl.org/2003/role/presentationRef