Note 12 - Contractual interest in legal recovery
|12 Months Ended|
Dec. 31, 2018
|Note 12 - Contractual interest in legal recovery||
Note 12 - Contractual interests in legal recoveries
Interest in G FarmaLabs Limited legal recovery
On March 22, 2017, G Farma purchased 222,223 restricted shares of the Companys Common Stock in a private placement at a price of $2.25 per share, for an aggregate purchase price of $500,002. Pursuant to Addendum II entered into on April 28, 2017, G Farma purchased an additional 66,667 shares of the Companys Common Stock at $1.50 per share for an aggregate purchase price of $100,000. The combined total purchase of $600,002 is to be paid as follows: (i) Assignment to the Company of an interest, equal to the amount of the purchase price, in any and all civil forfeiture or similar recoveries received by, or due to, G Farma including a $10 million claim filed March 29, 2017, against the County of Calaveras, or (ii) at any time before payment of the full purchase price from recovery, the Company may elect to have G Farma pay all or some of the purchase price on the date of the maturity of the promissory notes, described above under the Notes Purchase Agreement, or (iii) the Company may elect to have G Farma pay all or some of the purchase price by issuance to the Company of G Farma securities in aggregate amount equal to the purchase price as are offered to any other person (other than stock options offered to employees).
Interest in Electrum Partners, LLC legal recovery
Electrum is the plaintiff in that certain legal action captioned Electrum Partners, LLC, Plaintiff, and Aurora Cannabis Inc., Defendant, pending in the Supreme Court of British Columbia (Litigation). On October 23, 2018, Mentor entered into a Joint Prosecution Agreement among Mentor, Mentors corporate legal counsel, Electrum, and Electrums legal counsel.
Interest in Electrum Partners, LLC legal recovery (continued)
On October 30, 2018, Mentor entered into a Recovery Purchase Agreement (Recovery Agreement) with Electrum under which the Mentor purchased a portion of Electrums potential recovery in the Litigation. Mentor agreed to pay $100,000 of costs incurred in the Litigation, in consideration for ten percent (10%) of anything of value received by Electrum as a result of the Litigation (Recovery) in addition to repayment of its initial investment. At December 31, 2018, the Recovery Agreement investment is reported in the consolidated balance sheets at our cost of $100,000 and the remaining legal cost commitment to be paid of $84,059 is included in accrued liabilities. This investment is subject to loss should Electrum not prevail in the Litigation. However Company management estimates that recovery is more likely than not, and no impairment has been recorded at December 31, 2018.
On October 31, 2018, Mentor also entered into a secured Capital Agreement with Electrum under which Mentor invested an additional $100,000 of capital in Electrum. In consideration for Mentors investment, Electrum shall pay to Mentor on the payment date the sum of (i) $100,000, (ii) ten percent of the Recovery, and (iii) 0.083334% of the Recovery for each full month from October 31, 2018 to the payment date for each full month that $833 is not paid to Mentor. The payment date under the October 31, 2018 Capital Agreement is the earlier of November 1, 2021, or the final resolution of the Litigation. Payment is secured by all assets of Electrum. This investment is included at its $100,000 cost as part of Contractual interests in legal recoveries on the consolidated balance sheets at December 31, 2018.
Subsequent to year-end, on January 28, 2019, a second secured Capital Agreement (Second Capital Agreement) was entered into between Mentor and Electrum under which Mentor invested an additional $100,000 of capital in Electrum. This Second Capital Agreement also provides Mentor the option, at any time up to and including 90 days following payment date, to convert its 6,198 membership interests in Electrum into a cash payment plus an additional percentage of the Recovery. See Note 27.