11. Commitments and contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

11. Commitments and contingencies

11. Commitments and contingencies

a. Operating leases

The future minimum annual rental payments under the operating lease are estimated as follows, using the quarter end exchange rate of CAD $1 equals US $0.7624:

		Amount
2016	$	99,292
2017		432,102
2018		478,483
2019		122,642
	$	1,132,520

b. Contingency related to outstanding tax liabilities

The Company is delinquent in paying harmonized sales tax, filing and paying payroll taxes and may also be subject to US taxation and penalties.

As of September 30, 2016, the Company had estimated Canadian tax liabilities outstanding of $2,530,946, which may result in the Canadian tax authorities placing liens on the Company bank accounts which would impact on the Company’s ability to operate. The Company has also provided for US penalties of $200,000 due to noncompliance with the filing of certain required returns. The actual liability may be higher due to interest and penalties assessed by these taxing authorities.

c. Material Agreements

On May 17, 2016, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”), a Management Services Agreement (the “Management Agreement” and a Commercial Real Estate Contract to acquire the business and substantially all of the assets of Seastone of Delray, LLC (“Seastone”).

Seastone’s business is primarily the practice of providing addiction treatment health care services.

Pursuant to the terms of the Management Agreement, the Company began operating Seastone’s Business for a 90 day period commencing on July 1, 2016. During the Management Period, the Company is entitled to the revenues from the Business and will pay Seastone $20,000 per month to cover certain costs related to the Business, which shall increase to $28,000 per month if the Management Agreement is extended beyond 90 days. The Management Agreement may be terminated by either party if the Purchase Agreement does not close by September 15, 2016. The purchase agreement is expected to close in November 2016.

The Company entered into a commercial real estate contract with Seastone Condominiums of Delray, LLC and 810 Andrews, LLC, both Florida limited liability companies to acquire certain real property.

The purchase price for the Transaction is $6,150,000, will be funded by a purchase money first mortgage in the amount of $3,750,000 at 5% per annum payable at $15,000 per month for three years; and $3,150,000 in cash. The Company has deposited $110,000 in escrow.

The closing of the Transaction is anticipated to be during November, 2016 and is contingent upon (i) the Company obtaining the requisite licenses from the appropriate governmental agencies for the operation of Seastone’s Business.

d. Other

From time to time, the Company and its subsidiaries enter into legal disputes in the ordinary course of business. The Company believes there are no material legal or administrative matters pending that are likely to have, individually or in the aggregate, a material adverse effect on its business or results of operations.