INVESTMENTS IN UNCONSOLIDATED AFFILIATES
|9 Months Ended|
Sep. 30, 2018
|Notes to Financial Statements|
|NOTE 6 – INVESTMENTS IN UNCONSOLIDATED AFFILIATES||
On October 26, 2017, the Company entered into joint venture agreements with NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively “NuLeaf”) to build and operate cultivation and production facilities for our IVXX brand of cannabis products in Nevada. The agreements were subject to approval by the State of Nevada, the City of Sparks and the City of Reno in Nevada. Under the terms of the agreements, the Company remitted to NuLeaf an upfront investment of $4,500,000 in the form of convertible loans bearing an interest rate of 6% per annum. On June 28, 2018, the Company received approval from the State of Nevada. The remaining required approvals from local authorities were received in July 2018. As a result, the notes receivable balance was converted into a 50% ownership interest in NuLeaf. The investment in NuLeaf was recorded at cost and accounted for using the equity method. As of September 30, 2018, the $7.13 million investment in NuLeaf was recorded in other assets on the unaudited consolidated balance sheet. For the three and nine month period ended September 30, 2018, the Company recorded $0.44 million loss in earnings in the unaudited consolidated statement of operations.
On August 28, 2018, the Company entered into a Subscription Agreement with Hydrofarm Holdings Group, Inc. (“Hydrofarm”), one of the leading independent providers of hydroponic products in North America, pursuant to which the Company agreed to purchase from Hydrofarm and Hydrofarm agreed to sell to the Company 2,000,000 Units, each Unit consisting of one share of common stock and one warrant to purchase one-half of a share of common stock for an initial exercise price of $5.00 per share, for $2.50 per Unit for an aggregate purchase price of $5,000,000. The $5,000,000 investment in Hydrofarm was recorded at cost and is included in other assets on the unaudited consolidated balance sheet as of September 30, 2018.