Notes Receivable

6 Months Ended

Jun. 30, 2020

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTES RECEIVABLE

Notes receivable as of June 30, 2020 and December 31, 2019 consisted of the following:



	June 30, 2020		December 31, 2019
Notes receivable	$	92,344	$	75,851
Interest receivable	4,052		5,774
Total notes receivable	$	96,396	$	81,625
Less: Notes receivable, current	2,094		2,146
Notes receivable, non-current	$	94,302	$	79,479

Interest income on notes receivable during the three and six months ended June 30, 2020 totaled $1,830 and $3,477, respectively. Interest income on notes receivable during the three and six months ended June 30, 2019 totaled $1,001 and $1,731, respectively.

On March 6, 2020, the Company closed on a refinancing, transaction and conversion related to Northeast Patients Group, operating as WCM, a medical cannabis business in Maine, resulting in ownership of WCM by three individuals. In connection with the

transaction, WCM converted from a non-profit corporation to a for-profit corporation. WCM previously had a series of agreements with Wellness Pain & Management Connection LLC (“WPMC”), which resulted in an outstanding balance of $18,800 due to WPMC as of closing of this transaction. A restated consulting agreement was put in place, whereby WCM agrees to pay a fixed annual fee of $120, payable monthly, in exchange for a suite of consulting services. In addition, a promissory note payable to WPMC was signed in the amount of $18,800 to convert the existing payment due into a fixed, secured debt obligation.

In order to fund the transaction of WCM, the Company created a new Maine corporation, named Maine HSCP, Inc. (“Maine HSCP”). At closing, the Company contributed $5,700 to Maine HSCP, and then sold 900 shares of Maine HSCP, constituting all of the outstanding equity interests of Maine HSCP, to three qualifying individuals in exchange for promissory notes of $1,900 each. Each note is secured by a pledge of the shares in Maine HSCP, and payment of the note is to be made solely from dividends paid to the shareholder by Maine HSCP, except for amounts to be paid to the shareholder to cover tax obligations. As of June 30, 2020, the Company recorded a holdback reserve of $917 for the State of Maine as a result of finalization of valuation by the State. The Company has the option, exercisable at any time, to buy back the shares, at the higher of fair market value or the remaining balance under the promissory notes. The individuals also have the right at any time to put the shares to the Company on the same terms. The net equity impact to the Company was nil, and the option described above is only redeemable if permissible pursuant to Maine regulations.

On July 1, 2019, the Company entered into $8,000 convertible note receivable with a west coast social equity program. Upon certain conditions related to a subsequent capital raise, the Company will obtain the right to convert its financing receivable to an ownership interest. The line of credit matures in June 2022 and bears interest at a rate of 8% per annum. During the six months ended June 30, 2020, the Company wrote off the note receivable and the accrued interest of $8,000 and $161, respectively, as the Company determined that the note was not collectible and recorded a loss on notes receivable of $8,161.

The Company provides revolving lines of credit to several entities under management services agreements which are included in notes receivable. The relevant terms and balances are detailed below.



Lines of Credit				Balance as of
Counterparty	Maximum Obligation		Interest Rate	June 30, 2020		December 31, 2019
Greenleaf ⁽¹⁾	$	29,286	3.25% - 4.75%	$	28,336	$	22,569
CWG Botanicals, Inc. ("CWG") ⁽²⁾	12,000		8%	9,767		9,152
Compassionate Care Foundation, Inc. (“CCF”) ⁽³⁾	12,500		18%	—		7,152
Prime Alternative Treatment Center, Inc. ("PATC") ⁽⁴⁾	4,650		15%	4,650		4,650
Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”) ⁽⁵⁾	9,000		15%	6,069		5,758
Health Circle, Inc. ⁽⁶⁾	8,000		15%	4,331		3,988
Total	$	75,436		$	53,153	$	53,269

(1) During the year ended December 31, 2018, the Company extended lines of credit to Greenleaf Apothecaries, LLC, Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC (together “Greenleaf”), which mature in June 2023.

(2) The revolving line of credit due from CWG matures in December 2021.

(3) In September 2018, the Company entered into a management agreement to provide certain advisory and consulting services to CCF for a monthly fee based on product sales.

On November 15, 2019, certain changes in New Jersey state laws occurred to allow for-profit entities to hold cannabis licenses and certain regulatory approvals. Accordingly, the Company entered into a Reorganization Agreement with CCF, whereby the management agreement will terminate and any outstanding obligations on the line of credit will convert to a direct ownership interest in CCF, which will convert to a for-profit entity. On June 26, 2020, the transactions contemplated by the Reorganization Agreement closed and the line of credit converted into equity in CCF’s successor entity. Please see Note 3 for additional details.

(4) Prime Alternative Treatment Center, Inc. (“PATC”) is a non-profit license holder in New Hampshire to which the Company’s consolidated subsidiary PATCC provides management or other consulting services. The line of credit matures in August 2022.

(5) In November 2018, the Company entered into a services agreement with Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”). The line of credit matures in November 2023. The services agreement was terminated in February 2020.

(6) Health Circle, Inc. is a non-profit license holder in Massachusetts that formerly had a services agreement with the Company’s consolidated subsidiary MA RMDS SVCS, LCC. The line of credit matures in November 2032. The services agreement was terminated in February 2020.