COMMITMENTS
On March 10, 2015, Harris Lee signed a 9-year licensing agreement with Steep Hill Labs, LLC, with options to renew for an additional 9 years. The purpose of the agreement is to take the Steep Hill licensing to additional states to test medical marijuana above and beyond the State of Nevada, namely Oregon and Colorado. Under the license agreement for the first two states (Oregon and Colorado), if certain gross revenue thresholds are met, the Company is obligated to pay an additional $250,000. In addition, the Company is obligated to pay certain royalties over the life of the license agreement to Steep Hill Labs, LLC, based on the greater of the number of tests ($5 dollars a test) or an escalating royalty rate (7% to 15%) of the initial purchase price. The Company has the option to enter into additional states with similar commitments and royalties.
In 2015, MA and Associates, LLC entered into various capital lease agreements to finance fixed asset purchases for approximately $615,000. Total monthly payments over the 36 month terms are approximately $17,000.
12
Table of Contents
The Company rents office space in New Jersey with a term ending on February of 2016 and monthly payments of approximately $1,500. The Company’s MA and Associates, LLC subsidiary rents space in Nevada with a 60 month term ending in May of 2019, with monthly rent expense of $1,632. The Company’s Harris Lee, LLC subsidiary rents space in Portland, Oregon under a 96 month lease, ending October of 2023 with escalating monthly rental payments from $1,650 to $2,322.
As of March 31, 2016 the Company was still obligated to pay the remaining portion under the original 2014 40% investment agreement with MA and Associates, LLC, consisting of $678,000 of cash and 50,000 shares of Series C Preferred Stock (valued at $35,000 as of March 31, 2016), totaling $713,581 and included in contingent consideration liability on the accompanying consolidated balance sheet and will be issued in the future after the testing laboratory is operational.
As of March 31, 2016 the Company was obligated to pay Blue Moon Advisors, Inc., per the November 2015 Incubation Agreement. The Company is obligated to pay $17,000 per month starting on January 1, 2016, throughout the year of 2016, totaling $204,000.
