UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
| x | ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended: April 30, 2015
| o | TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from________ to ___________
Commission
File No.: 000-55031
THE
MARYJANE GROUP, INC.
(Exact
name of registrant as specified in its charter)
Nevada | |
98-1039235 |
(State or other jurisdiction of incorporation or organization) | |
(I.R.S. Employer Identification No.) |
910
Sixteenth Street, Suite 412, Denver, CO 80202
(Address
of principal executive offices)
Registrants
telephone number, including area code: (303) 835-8603
Securities
registered pursuant to Section 12(b) of the Exchange Act: None
|
Securities
registered pursuant to Section 12(g) of the Exchange Act: |
Common
Stock, Par Value $0.001 |
|
|
|
(Title
of class) |
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
¨ No x
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes x No
¨
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No
¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer ¨ |
Accelerated
filer ¨ |
|
Non-accelerated
filer ¨ |
Smaller reporting
company x |
|
(Do not check
if smaller reporting company.) |
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
o No x
The
aggregate market value of the voting common stock held by non-affiliates of the registrant (6,880,000 shares) is based on the
closing price of the registrants common stock as reported on OTCQB on October 31, 2014, which was the last business day
of the registrants most recently completed second fiscal quarter, was $825,600. For purposes of this computation, all officers,
directors, and 10% beneficial owners of the registrant are deemed to be affiliates.
The
number of shares outstanding of the registrants common stock as of July 24, 2015 was 903,876,699.
DOCUMENTS
INCORPORATED BY REFERENCE:
None.
Table
of Contents
INTRODUCTORY
COMMENT
Cautionary
Statement Concerning Forward-Looking Information
This
Annual Report on Form 10-K contains forward-looking statements (as such term is defined
in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act) and information relating to the Company that are based on the current beliefs
of the Companys management as well as assumptions made by and information currently available to management, including
statements related to the markets for the Companys products and services, general trends and trends in the Companys
operations or financial results, plans, expectations, estimates and beliefs. When used in this report, the words anticipate,
believe, estimate, expect, intend, plan, predict, opinion,
will and similar expressions and their variants, as they relate to the Company or the Companys management, may identify
forward-looking statements. Such statements reflect the Companys judgment as of the date of this report with respect to
future events, the outcome of which is subject to certain risks, including the risk factors described herein, which may have a
significant impact on the Companys business, operating results or financial condition. You are cautioned that these forward-looking
statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results or outcomes may vary materially from those described herein. The Company undertakes no obligation
to update forward-looking statements. Among the general factors that could cause actual results and financial condition are:
| ● | The
success or failure of managements efforts to implement their business strategy; |
| ● | The
ability of the Company to raise sufficient capital to meet operating requirements; |
| ● | The
uncertainty of consumer demand for our products and services; |
| ● | The
ability of the Company to compete with more established companies; |
| ● | Heightened
competition, including, with respect to pricing, entry of new competitors and the development of new products by new and existing
competitors; |
| ● | Absolute
and relative performance of our products and services; |
| ● | The
effect of changing economic conditions; |
| ● | The
ability of the Company to attract and retain quality employees and management; |
| ● | The
current global recession and financial uncertainty; and |
| ● | Other
risks which may be described in future filings with the U.S. Securities and Exchange Commission (SEC) |
No
assurances can be given that the results contemplated in any forward-looking statements will be achieved or will be achieved in
any particular timetable. We assume no obligation to publicly correct or update any forward-looking statements as a result of
events or developments subsequent to the date of this Annual Report. The reader is advised, however, to consult any further disclosures
we make on related subjects in our filings with the SEC.
Unless
otherwise provided in this Annual Report on Form 10-K (the Report), all references in this Report to we,
us, our Company, our, The MaryJane Group, Inc., the Company, or the
Registrant refers to The MaryJane Group, Inc. and its subsidiaries. Unless otherwise indicated in this Report, all
references in this Report to the Companys Board of Directors shall refer to the Board of Directors of The MaryJane Group,
Inc. which was reconstituted upon the closing of the aforementioned Securities Exchange Agreements. The Company specializes in
lodging and entertainment services surrounding the recreational marijuana industry in Colorado.
PART
I
Corporate
Overview and History of The MaryJane Group, Inc.
The
MaryJane Group, Inc., f/k/a Pladeo Corp., a Nevada corporation (the Company) was
incorporated in Nevada on February 16, 2012 for the purpose of developing online chat systems free of charge. The Company was
unable to raise sufficient funds to implement its business plan. As a result of being unable to properly fund and build our business
of developing online chart systems, we were considered a shell company under the rules of the Commission. On February
26, 2014, Joel Schneider, entered into a share purchase agreement with Lisbeth Guerrero, the Companys former sole officer and
director, pursuant to which he purchased 8,000,000 shares of the Companys common stock, representing 77.2% of the issued
and outstanding shares of the Companys common stock on that date (the Share
Purchase Agreement). In connection with the purchase, Ms. Guerrero resigned as sole officer and director and Mr.
Schneider became our sole officer and director.
On
February 27, 2014, we entered into and closed a Securities Exchange Agreement by and among
the Company, Capital Growth Corporation, a Colorado corporation (CGC) and the shareholders of CGC on February 27,
2014 (the CGC Acquisition) and on March 14, 2014, we entered into and closed a
Securities Exchange Agreement between the Company and the managing member of Mary Jane Entertainment, LLC, Mile High Times, LLC,
Mary Jane Tours, LLC, and Dab City Radio, LLC, each a Colorado limited liability company (referred to individually by name or
collectively as the Mary Jane companies) (the Mary Jane companies Acquisition). As a result, we
ceased being a shell company upon the acquisition of the five operating subsidiaries. Shortly thereafter,
the Company changed its name to The MaryJane Group, Inc.
Subsequent
to completing the Acquisition with CGC and the Mary Jane companies, we formed the following Colorado limited liability companies
as wholly-owned subsidiaries, namely: Mary Jane Glassworks, LLC and Bud and Breakfast, LLC (both organized on April 10, 2014),
Mary Jane Hospitality, LLC and Mary Jane Events, LLC (both organized on July 22, 2014), and Mary Jane Designs, LLC (organized
on August 28, 2014). In an effort to streamline operations and focus on our core business of hospitality in the cannabis industry,
we dissolved the following entities on November 21, 2014: (i) Mary
Jane Tours, LLC; (ii) Mile High Times, LLC; (iii) Dab City Radio, LLC; and (iv) Mary Jane Glassworks, LLC.
Unless
otherwise stated or unless the context otherwise requires, the description of our business set forth below is provided on a combined
basis, taking into account our newly-acquired wholly owned subsidiaries mentioned herein.
Overview
of Operating Businesses
Our
primary focus includes providing lodging, events, spa services and brand merchandising concentrated in the cannabis industry.
Legalization
of recreational marijuana initially in Colorado and Washington and the growing number of jurisdictions with medical marijuana
laws spawned a Green Rush in America in 2014. On January 1, 2014, the State of Colorado became the first state to
legalize the use of recreational marijuana. Colorado residents, who are at least 21 years of age with photo identification, may
legally purchase as much as one ounce of marijuana in a single transaction. Non-Colorado residents, bearing the same identification,
may purchase as much as one-quarter ounce. Marijuana cannot be consumed in any public space, including the shops where it was
purchased. In 2015, Oregon, Alaska and the District of Columbia legalized marijuana for recreational use; however, sales currently
remain banned in the District. Additionally, 23 states have legalized marijuana for medical purposes.
According
to a recent report from The ArcView Group, a cannabis industry investment and research firm based in Oakland, California (ArcView),
found that the U.S. market for legal cannabis grew 74% in 2014 to $2.7 billion, up from 1.5 billion in 2013, making legal marijuana
the fastest-growing industry in the United States. The report projects a 32% growth in the market and concluded that if the trend
toward legalization spreads to all 50 states, the total market value would top $36.8 billion – more than $3 billion larger
than the organic food industry. ArcView predicts that over the next five years, 14 more states will legalize recreational marijuana
and two more states will legalize medical marijuana. Currently, at least ten states are already considering legalizing recreational
marijuana.
In
Colorado, the recreational and medical marijuana sales totaled $700 million in 2014; however, the real economic impact is expected
to be much higher as this figure excludes marijuana-related products such as pipes or any marijuana-related increase in tourism.
Our
operating subsidiaries, as outlined herein, were formed for the purpose of providing financing to assist Colorado marijuana growers,
providing cannabis-friendly lodging and providing value added services of information and entertainment to consumers supporting
the recreational marijuana industry. While our services are currently concentrated only in Colorado, we believe that our business
model can easily be expanded as recreational marijuana becomes legal in other states.
Capital
Growth Corporation, organized on February 4, 2014 (Capital Growth), was formed for the purpose of providing short-
and long-term financing to assist growers and retail establishments engaged in the manufacture and distribution of recreational
marijuana within the State of Colorado. Since its formation, Capital Growth has not entered into any funding transactions. The
Company utilizes Capital Growth as a business development company. Mary Jane Entertainment, LLC was formed to provide contracted
limousine and party-bus services and currently continues to operate on a limited basis. Bud and Breakfast, LLC was formed to operate
and manage our two marijuana-friendly Bud + Breakfast locations with a third location opening in mid-July 2015. We intend to actively
seek additional Bud + Breakfast locations. Mary Jane Hospitality, LLC was formed to seek additional lodging and hospitality businesses
located in Colorado, and to also seek the same type of businesses in other jurisdictions as recreational marijuana becomes legal
in other states. Mary Jane Events, LLC was formed for the purposes of planning private and corporate events focused upon the recreational/medicinal
marijuana industry. Mary Jane Designs, LLC was formed to manufacture and promote our branded merchandise at our properties.
Neither
the Company, nor any of its subsidiaries, have been involved in any bankruptcy, receivership or any similar proceeding, and except
for the subject acquisitions set forth herein, has not had or been a party to any material reclassifications, mergers or consolidations
since inception.
The
Companys primary SIC code is 7990 – Services; Miscellaneous Amusement and Recreation.
We
maintain the following websites: www.themaryjanegrp.com and www.budandbfast.com.
Our
Products
Bud
+ Breakfast at the Adagio
On
April 10, 2014, we entered into a one-year lease with the owner of the Adagio Bed and Breakfast located at 1430 Race Street, Denver,
Colorado (the Adagio). We transformed the Adagio from a traditional bed and breakfast to the first, all-inclusive
Bud + Breakfast in what our management believes to be the first of its kind. The guest package includes a Wake and
Bake Breakfast, a 4:20 Happy Hour and a facility to consume the best marijuana and marijuana edibles Colorado has to offer. We
provide our guests an on-site chef who prepares a gourmet breakfast and afternoon hors doeuvres. Since beginning Bud +
Breakfast operations in April 2014, reservations and occupancy rates have increased dramatically with corresponding revenue of
approximately $50,000 to $60,000 per month. Our Bud + Breakfast locations allow us to book tours and sell our branded apparel,
merchandise and remaining glass products to guests. As a result of our success at the Adagio, we are actively seeking additional
lodging facilities.
On
February 27, 2015, we exercised our option to purchase the Adagio and executed a Contract to Buy and Sell Real Estate (the Sales
Contract) with A Capital Inn, Inc. (the Seller). The purchase price for the Adagio was $1,500,000 with the Seller
agreeing to finance $1,000,000. Upon execution of the Sales Contract, the Company made a non-refundable deposit of $50,000; however,
we were unable to secure proper financing to close the purchase. Subsequently, we entered into a six-month lease agreement for
the monthly rate of $10,000 plus a 2½ % gross revenue royalty which ends on December 31, 2015. We are currently seeking
a larger property to replace the Adagio. Our ideal property is a 20 to 25 room hotel within walking distance of the Denver metropolitan
area.
Bud
+ Breakfast at Mountain Vista
After
validating our Bud + Breakfast business model at the Adagio, on September 4, 2014, we entered into a one-year lease with the owners
of the Mountain Vista Bed and Breakfast located at 358 Lagoon Lane, Silverthorne, Colorado. Since opening on October 1, 2014,
we have achieved occupancy levels higher than expected and generated revenues of approximately $12,000 to $17,000 per month. Effective
June 1, 2015, we added a fifth room to the property and project this additional room will generate an additional $1,800 to $2,500
per month.
Hotel
San Ayre, a Bud + Breakfast Property
On
June 24, 2015, we executed a two-year lease with the owner of Hotel San Ayre with an option to purchase its four locations in
Colorado Springs, Colorado. This property is our largest project to date in terms of rentable units with 11 rooms. Guests will
receive similar offerings including our Wake and Bake Breakfast and 4:20 Happy Hour and all guests will have access to a lounge
that will include all amenities found at our other locations including a game room, and outdoor lounge area with a hot tub.
Canna-camp
On
May 22, 2015, we entered into a joint-venture agreement with the owners of the Wilderness Trails Ranch, LLC to open an exclusive
cannabis resort near Durango, Colorado. As of July 2, 2015, we withdrew our position in the joint-venture due to our partners
inability to perform. We are currently seeking a new location for Canna-camp 2016.
Overview
of Marketing Plan and Positioning
Our
marketing strategy is a simple one -- satisfied customers are our best marketing tool. Social media plays a huge role in our success
and we distribute advertising brochures to local businesses throughout Denver and surrounding cities. Our sales and marketing
teams use online travel conglomerates including www.Expedia.com, www.Hotels.com, www.Bedandbreakfast.com, and www.Airbnb.com as
a source for marketing our properties. In addition to these outlets, we have formed relationships with local online advertising
platforms such as www.coloradopotguide.com to establish a presence with cannabis-driven tourists.
Our
Bud + Breakfast offering is already positioned as the only complete cannabis-friendly lodging offering with the City of Denver
and the State of Colorado. As a result, it has been featured on and mentioned by a number of news outlets including 60 Minutes,
Time.com, The Tonight Show, ABC News, New York Times and the Huffington Post, to name a few.
Sales
Strategy
According
to the United Nations, 158.8 million people around the world use marijuana—more than 3.8% of the planets population.
Recent U.S. government statistics reveal that over 95 million American adults have used marijuana, over 22 million American adults
have used marijuana this year and over 8 million American adults have likely used marijuana today. Our target market is the recreational
marijuana consumers in Colorado who are between 21 and 75 years of age from all walks of life. Our target market increases
exponentially
with the addition of out-of-state and international visitors who come to Colorado specifically because of the legalization of
recreational marijuana. The desire to indulge in the recreational marijuana experience is larger than ever and the market is positioned
for a company like ours to provide that experience. All ages are flocking to Colorado for the legal purchase and consumption of
cannabis products including raw bud, concentrates, and infused edibles and drinks. Our Bud + Breakfast lodging, tours and events
provide patrons with the ultimate cannabis experience and our products appeal to all ages, sexes and ethnicities.
Colorado
has very strict laws regarding the possession and public consumption of recreational marijuana. We provide products and services
to meet the needs of every cannabis connoisseur from every demographic by providing safe access to their cannabis experience from
beginning to end.
We
are evolving into a notable hospitality organization by building successful businesses in the cannabis industry and then leveraging
that experience to meet the industrys needs. By strategically laying the foundation as the Green Rush was gaining
momentum, we are building a recognizable brand that we will leverage to provide tourism, information, and entertainment through
carefully chosen channels that cater to the interests of the marijuana community.
Intellectual
Property
We
have registered the following trademarks in Colorado, Oregon and Washington: Bud + Breakfast, 4:20 Happy Hour,
and Wake and Bake Breakfast. The same trademarks are currently pending in California and on the federal level.
Competition
and Our Competitive Advantage
We
believe the greatest threat of competition to our business are non-traditional lodging facilities that list on sites such as www.Airbnb.com,
www.vrbo.com, however there is no assurance that additional cannabis friendly lodging facilities will be established in the future,
which if that happens will cause competition to the Bud + Breakfast. Competition may come from entities that are better financed
then our company.
Government
Regulation
Our
products and services may be subject to civil regulations of local municipalities; however, we do not believe that our products
or services are subject to any state or federal governmental regulation.
Employees
We
currently have 18 employees.
Corporate
Information
Our
corporate headquarters are located at 910 Sixteenth Street, Suite 412, Denver, CO 80202. Our telephone number is 303-835-8603.
Our corporate website is www.themaryjanegrp.com.
Environmental
Laws
We
do not handle, store or transport hazardous materials or waste products. We abide by all applicable federal, state and local laws
and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. We do
not anticipate the cost of complying with these laws and regulations to be material.
Reports
to Security Holders
We
are subject to the requirements of Section 13(a) under the Exchange Act which requires us to file annual reports on Form 10-K,
quarterly reports on Form 10-Q, and current reports on Form 8-K, and we are
required
to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section
12(g) of the Exchange Act. You may read and copy any materials we file with the Securities and Exchange Commission (SEC)
at the SECs Public Reference Room at 100 F Street NE, Washington, DC 20549. You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports,
proxy and information statements, and other information filed electronically with the SEC at http://www/sec.gov.
You
may obtain a copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
we electronically file such material with the SEC. You may also obtain these reports free of charge by either sending a written
request to Joel C. Schneider, Chief Executive Officer, The MaryJane Group, Inc., 910 Sixteenth Street, Suite 412, Denver, CO 80202
or by downloading the reports from our website at http://www.themaryjanegrp.com.
We
are a smaller reporting company, and as such, are not required to provide information pursuant to this item.
| ITEM
1B. | UNRESOLVED
STAFF COMMENTS. |
N/A.
Our
principal office, and that of our subsidiaries, is located at 910 Sixteenth Street, Suite 412, Denver, Colorado 80202 where we
lease 1,126 square feet of office space. We entered into the three-year lease on July 21, 2014 which expires on July 31, 2017.
The monthly lease payment through July 31, 2015 is $1,505; thereafter it increases to $1,600 and to $1,700 on August 1, 2015 and
2016, respectively. We believe that the leased premises are suitable and adequate to meet our current needs.
On
April 9, 2014, we entered into a one-year lease with the owner of the Adagio located at 1430 Race Street, Denver, Colorado (the
Adagio Lease) for a monthly lease payment of $9000 per month, plus 2½% of the monthly gross lodging revenue
and the issuance of 10,000 shares of our Common Stock. The Adagio Lease commenced on April 10, 2014 and expired April 9, 2015.
On February 27, 2015, we exercised our option to purchase the Adagio and executed a Contract to Buy and Sell Real Estate (the
Sales Contract) with A Capital Inn, Inc. (the Seller). The purchase price for the Adagio was $1,500,000
with the Seller agreeing to finance $1,000,000. Upon execution of the Sales Contract, the Company made a non-refundable deposit
of $50,000; however, we were unable to secure proper financing to close the purchase. Subsequently, we entered into a six-month
lease agreement for the monthly rate of $10,000 plus a 2½% royalty of gross lodging revenue which expires on December 31,
2015. We are currently seeking a larger property to replace the Adagio. Our ideal property would be a 20 to 25 room hotel within
walking distance of the Denver metro.
On
September 4, 2014, we entered into a one year lease with the owners of the Mountain Vista Bed and Breakfast (Mountain Vista),
located at 358 Lagoon Lane in Silverthorne, Colorado (the Mountain Vista Lease). The Mountain Vista Lease commenced
October 1, 2014 and expires September 30, 2015. The monthly rent is $3,500 per month, plus 2% of the monthly gross lodging revenue.
As additional consideration, we agreed to issue the owners of the Mountain Vista 10,000 shares of our Common Stock. Pursuant to
the terms of the Mountain Vista Lease, we were granted the exclusive option to purchase the Mountain Vista at the market value
of the premises determined by a commercial appraisal on the option date.
On
June 24, 2015, we executed a two-year lease option agreement with Hotel San Ayre, LLC for the purchase of Hotel San Ayre and its
four locations in Colorado Springs, Colorado (the Lease). The Lease term begins on July 15, 2015 and terminates the
earlier of July 14, 2017 or the closing date of the purchase thereof. The base rental amount for the first 12 months of the Lease
is $12,500 and is $13,500 for the last 12 months of
the
Lease. We are responsible for all operation, repair, use and maintenance of the premises during the term of the Lease. Joel Schneider,
our Chief Executive Officer, personally guaranteed the Lease. Upon execution of the Lease, we paid a non-refundable deposit of
$30,000 which may be applied to the future purchase; however, is not considered a security deposit if the purchase option is not
exercised. The purchase price for the Hotel San Ayre is $2,100,000 on an as-is basis.
| ITEM
3. | LEGAL
PROCEEDINGS. |
None.
| ITEM
4. | MINE
SAFETY DISCLOSURE. |
N/A.
PART
II
| ITEM
5. | MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES. |
Market
Information
As
of the date of this Annual Report, our Common Stock is quoted on the OTCQB under the symbol MJMJ. The following table
sets forth the high and low sales prices for each quarter relating to our Common Stock for the last two fiscal years. These quotations
reflect inter-dealer closing prices without retail mark-up, markdown, or commissions, and may not reflect actual transactions.
Quarter
Ended |
High |
Low |
Fiscal
Year 2015 (May 1, 2014 to April 30, 2015) |
|
|
Fourth
Quarter (ended April 30, 2015) |
$
0.15 |
$
0.02 |
Third
Quarter (ended January 31, 2015) |
$
0.26 |
$
0.07 |
Second
Quarter (ended October 31, 2014) |
$
0.53 |
$
0.07 |
First
Quarter (ended July 31, 2014) |
$12.00 |
$
0.23 |
|
|
|
Fiscal
Year 2014 (May 1, 2013 to April 30, 2014) |
|
|
Fourth
Quarter (ended April 30, 2014) |
$11.50 |
$5.00 |
Third
Quarter (ended January 31, 2014) |
N/A |
N/A |
Second
Quarter (ended October 31, 2013) |
N/A |
N/A |
First
Quarter (ended July 31, 2013) |
N/A |
N/A |
Holders
Records
of our stock transfer agent indicate that as of July 25, 2015, we had approximately 55 record holders of our Common Stock. The
number of registered shareholders excludes any estimate by us of the number of beneficial owners of shares of our Common Stock
held in street name. As of the date of this Report, we had 903,876,699 shares of Common Stock issued and outstanding.
Dividends
Historically,
we have not paid dividends on our Common Stock and we currently do not intend to pay any dividends on our Common Stock in the
foreseeable future. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends.
Securities
Authorized for Issuance under Equity Compensation Plans
None
Recent
Sales of Unregistered Securities
Issuance
of Shares of Our Common Stock
| ● | Pursuant
to the terms of certain convertible debt instruments, we issued an aggregate of 9,290,844
in exchange of debt totaling $114,799. |
| | |
| ● | Pursuant
to employment agreements with certain individuals, we issued an aggregate of 1,605,000
shares of our Common Stock having an aggregate fair market value on the date of issuance
of $853,850. |
| | |
| ● | Pursuant
to the terms of consulting agreements with certain individuals and/or entities, we issued
an aggregate of 765,000 shares of our Common Stock having an aggregate fair market value
on the date of issuance of $199,400. |
| | |
| ● | Pursuant
to a private placement, we issued an aggregate of 700,000 shares of our Common Stock
to two entities and two individuals for an aggregate purchase price of $15,000. |
| | |
| ● | Pursuant
to the terms of a loan consolidation, we issued 350,000 shares of our Common Stock to
an entity as an inducement for the transaction having a fair market value on the date
of issuance of $8,864. |
| | |
| ● | Pursuant
to the terms of certain agreements, we issued an aggregate of 67,000 shares of our Common
Stock having a fair market value on the date of issuance of $78,800. |
Issuance
of Common Stock Purchase Warrants
On
May 21, 2014, we issued a Warrant for the purchase of 7,500 shares of our Common Stock to each of two individuals for services
to be rendered (the May 2014 Service Warrants). The May 2014 Service Warrants have exercisable terms of three years
at $1.50 per share. The fair value of the May 2014 Service Warrants of $159,948 was determined by using the Black-Scholes-Merton
option pricing model (Black-Scholes Model) on the date of the grant. The fair value of the May 2014 Service Warrants
was recorded as an expense in the accompanying consolidated financial statements.
On
May 21, 2014, we issued a Warrant for the purchase of 62,500 shares of our Common Stock in connection with the issuance of a convertible
promissory note (the May 2014 Warrant) In September 2014, the May 2014 Warrant was canceled (see Note 4 in the accompanying
consolidated financial statements).
On
July 10, 2014, we issued Warrants for the purchase of an aggregate of 125,000 shares of our Common Stock in connection with the
issuance of convertible promissory notes (the July 2014 Warrants). In September 2014, the July 2014 Warrants were
canceled (see Note 4 in the accompanying consolidated financial statements).
On
August 13, 2014, we issued a Warrant for the purchase of 513,333 shares of our Common Stock in connection with the issuance of
a convertible promissory note (the August 2014 Warrant) (see Note 4 in the accompanying consolidated financial statements).
The August 2014 Warrant has an exercisable term of five years and is exercisable at $0.132 per share. The fair value of the August
2014 Warrant of $126,476 was determined by using the Black-Scholes Model on the date of the grant. The change in fair value as
of April 30, 2015 was determined to be $2,691. The fair value of the August 2014 Warrant was recorded as a derivative liability
and the change in fair value was recorded as an interest expense in the accompanying consolidated financial statements. On June
26, 2015, the holder of the warrant exercised 35,714,285 at an exercise price of $0.0007. The holder surrendered 6,944,444 as
part of the cashless conversion. There are 61,085,658 shares eligible for purchase under this warrant.
On
October 22, 2014, we issued a Warrant for the purchase of 176,471 shares of our Common Stock in connection with the issuance of
a convertible promissory note (the October 2014 Warrant) (see Note 4 in the accompanying consolidated financial statements).
The October 2014 Warrant has an exercisable term of five
years
and is exercisable at $0.17 per share. The fair value of the October 2014 Warrant of $26,982 was determined by using the Black-Scholes
Model on the date of the grant. The change in fair value as of April 30, 2015 was determined to be $1,024. The fair value of the
October 2014 Warrant was recorded as a derivative liability and the change in fair value was recorded as an interest expense in
the accompanying consolidated financial statements.
On
February 9, 2015, we issued Warrants for the purchase of an aggregate of 458,333 shares of our Common Stock in connection with
the issuance of convertible promissory notes (the February 2015 Warrant) (see Note 6 in the accompanying consolidated
financial statements). The February 2015 Warrant has an exercisable term of five years, is exercisable at $0.06 per share and
contains provisions for a cashless exercise. The fair value of the February Warrant of $47,732 was determined by using the Black-Scholes
Model on the date of the grant. The change in fair value as of April 30, 2015 was determined to be $240. The fair value of the
February 2015 Warrant was recorded as a derivative liability and the change in fair value was recorded as an interest expense
in the accompanying consolidated financial statements.
(The
remainder of this page intentionally left blank.)
Issuance
of Convertible Promissory Notes
The
following table sets forth the issuance of convertible debt instruments during the fiscal year ended April 30, 2015. All funds
received were used for working capital:
Issue Date
Due Date | |
Interest
Rate | |
Original
Amount | | |
Balance at
Report
Date | | |
Conversion Rate |
5/2/14 4/30/15 | |
8% | |
$ | 50,000 | | |
$ | — | (1) | |
NA |
6/16/14 6/16/15 | |
10% | |
$ | 23,750 | | |
$ | 23,750 | (2) | |
$1.00 per share |
7/1/14 7/1/15 | |
10% | |
$ | 23,750 | | |
$ | 23,750 | (3) | |
$1.00 per share |
8/13/14 2/13/16 | |
8% | |
$ | 61,600 | | |
$ | 59,839 | (4) | |
60% discount to the lowest daily volume weighted average price for (i) the 20 trading days immediately prior to the original issue date or (ii) the 20 trading days prior to the date of conversion |
9/17/14 9/12/15 | |
8% | |
$ | 52,500 | | |
$ | 42,500 | (5) | |
43% discount of the lowest trading price for the 18 days prior to conversion |
9/30/14 7/10/15 | |
8% | |
$ | 86,000 | | |
$ | 77,876 | (6) | |
Lesser of $0.10 or a 45% discount to the market price |
10/22/14 3/22/16 | |
10% | |
$ | 60,000 | | |
$ | 41,250 | (7) | |
$0.25 per share subject to certain adjustments |
11/26/14 8/26/15 | |
8% | |
$ | 50,000 | | |
$ | 50,000 | (8) | |
45% discount to the average of the lowest two trading prices during the twenty-five trading day period ending on the latest complete trading day prior to the date of conversion |
12/22/14 12/22/15 | |
10% | |
$ | 50,000 | | |
$ | 50,000 | | |
Lesser of $0.08 or a 50% discount to the market price during the 20 consecutive trading days prior to the conversion date |
2/9/15
7/9/16 | |
10% | |
$ | 27,500 | | |
$ | 27,500 | | |
60% discount of the lowest daily volume weighted average for the 20 days prior to conversion |
3/13/15 3/13/16 | |
8% | |
$ | 52,500 | | |
$ | 52,500 | (5) | |
43% discount of the lowest trading price for the 18 days prior to conversion |
3/16/15 3/16/16 | |
5% | |
$ | 99,340 | | |
$ | 47,840 | (9) | |
Lesser of (i) a 50% discount to the market price during the 20 consecutive trading days prior to the conversion date or (ii) $0.001 |
3/20/15 3/20/16 | |
8% | |
$ | 50,000 | | |
$ | 50,000 | (10) | |
45% discount to the average of the lowest two trading prices during the twenty-five trading day period ending on the latest complete trading day prior to the date of conversion |
4/2/15 4/2/16 | |
8% | |
$ | 73,500 | | |
$ | 73,500 | (11) | |
55% discount of the average lowest 3 trading price of our Common Stock for the 10 days prior to conversion |
4/10/15 10/10/15 | |
10% | |
$ | 25,000 | | |
$ | 25,000 | | |
48% discount to the lowest intra-day trading price for the 15 days prior to conversion |
4/20/15 4/20/16 | |
8% | |
$ | 53,244 | | |
$ | 53,244 | (12) | |
48% discount to the lowest intra-day trading price for the 15 days prior to conversion |
| (1) | Although
this convertible note was issued on April 30, 2014, the funding occurred on May 2, 2014. At April 30, 2015, this convertible
note was in default, however it was purchased by a third party on May 22, 2015. See Recent Events footnote 1 for details. |
| (2) | This
convertible note was purchased by a third party on June 12, 2015. See Recent Events footnote 4 for details. |
| (3) | This
convertible note was purchased by a third party on June 12, 2015. See Recent Events footnote 4 for details. |
| (4) | On
August 13, 2014, we received payment of $50,000, net of legal fees of $6,000 and original issue discount of $5,600. We also issued
a Common Stock Purchase Warrant for the purchase of 513,333 shares of our Common Stock. The five-year warrant is exercisable
at $0.132 per share and contains provisions for a cashless exercise and anti-dilution. On June 26, 2015, using the cashless
provision and adjusting for dilution, 35,714,285 shares of our Common Stock were issued, while Common Stock Purchase Warrants
for the purchase of 6,944,444 shares were forfeited. |
| (5) | On
September 12, 2014, we issued two 8% Convertible Redeemable Notes each in the amount of $52,500 for an aggregate principal amount
of $105,000 (the First September 2014 Note and Second September 2014 Note). On September 17, 2014, we
received |
| | payment
of $45,000, net of legal fees of $2,500 and finders fees of $5,000, under the First September 2014 Note. On March 13, 2015,
we received payment of $45,000 net of legal fees of $2,500 and finders fees of $5,000, under the Second September 2014 Note.
Prior to April 30, 2015, $10,000 was converted into 570,342 shares of our Common Stock. Between May 1, 2015 and the date of
this Report, $98,936.07 was converted into 123,435,320 shares of our Common Stock. |
| (6) | This convertible note replaced certain
convertible notes dated May 15, and July 10, 2014 on September 30, 2014, and contained provisions wherein we (i) issued
350,000 shares of our Common Stock to the entity and (ii) canceled 125,000 previously authorized but unissued
warrants to purchase shares of our Common Stock. Prior to April 30, 2015, $8,124 was converted into 889,814 shares of our
Common Stock. Between May 1, 2015 and the date of this Report, $85,541 was converted into 94,626,663 shares of our
Common Stock. |
| (7) | This
convertible note is to be funded in four tranches. The first tranche of $60,000, net of $5,000 in legal fees and the original
issue discount of $5,000, was funded on October 22, 2014 and was immediately deemed eligible for conversion. The funding of
the remaining three tranches in the amount of $55,000 each (net of the original issue discount of $5,000) is yet to be determined,
but will be deemed eligible for conversion on the date of funding. In conjunction with the issuance of the October Note, we
issued four warrants to purchase shares of our Common Stock (Warrant(s)) (designated Warrant #1, Warrant #2, Warrant
#3 and Warrant #4). Warrant #1 is for the purchase of 176,471 shares of our Common Stock. Warrants #2, #3 and #4 are for an
amount determined by dividing $27,500 by our Common Stocks market price on the date corresponding with the second, third
and fourth funding. Prior to April 30, 2015, $21,861 was converted into 2,186,087 shares of our Common Stock. Between May
1, 2015 and the date of this Report, $52,039 was converted into 73,404,597 shares of our Common Stock. |
| (8) | On
November 26, 2014, we received payment of $50,000, net of legal fees of $3,000 expense of $2,750. |
| (9) | This
convertible note was purchase on March 16, 2015 from an entity holding convertible notes dated March 20 and April 7, 2014 with
aggregate principal and interest of $99,340. Prior to April 30, 2015, $51,000 was converted into 3,891,033 shares of our Common
Stock. Between May 1, 2015 and the date of this Report, $47,840 was converted into 60,771,144 shares of our Common Stock. |
| (10) | On
March 20, 2015, we received payment of $50,000, net of legal fees of $3,000 expense of $2,750. |
| (11) | This
convertible note was purchase on April 2, 2015 from an entity holding convertible notes dated March 20 and April 7, 2014 with
aggregate principal and interest of $73,500. Between May 1, 2015 and the date of this Report, $73,000 was converted into 70,003,488
shares of our Common Stock. |
| (12) | This
convertible note was purchase on April 20, 2015 from an entity holding a convertible note dated April 30, 2014 with aggregate
principal and interest of $53,244. Between May 1, 2015 and the date of this Report, $35,496 was converted into 50,708,285
shares of our Common Stock. |
Exemptions
from Registration
In
connection with above-mentioned sales of unregistered securities for cash purchased by individuals and entities, each investor
represented that they were accredited investors (as defined by Rule 501 of Regulation D under the Securities Act of 1933) and
were acquiring the shares for investment and not distribution, that they could bear the risks of the investment and could hold
the securities for an indefinite period of time. The investors received written disclosures that the securities had not been registered
under the Securities Act and that any resale must be either registered under the Securities Act or in reliance upon an available
exemption from registration. No general solicitation was undertaken by the Company in connection with the offer or sale of these
securities. All of the individuals and entities listed above that purchased the unregistered securities for cash were all known
to the Company and its management through pre-existing business relationships, as long standing business associates and friends.
All purchasers were provided access to all material information that they requested and all information necessary to verify such
information, and were afforded access to management of the Company in connection with their purchases. All certificates or agreements
representing such securities were issued with restrictive legends that prohibited further transfer of the securities or agreements
representing such securities, without such securities either being first registered or otherwise exempt from registration in any
further resale or disposition. In connection with the above-mentioned issuances of unregistered securities for cash, the Company
made such issuances in reliance upon Rule 506 of Regulation D under the Securities Act.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
None.
| ITEM 6. | SELECTED
FINANCIAL DATA. |
We
are a smaller reporting company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.
| ITEM 7. | MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Managements
Discussion and Analysis or Plan of Operation
You
should read the following discussion and analysis in conjunction with the information set forth under our consolidated financial
statements and the notes to those financial statements included elsewhere in this Annual Report. This discussion contains forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from
those contained in or implied by any forward-looking statements.
Company
Overview
Our
primary focus includes providing lodging, events, spa services and brand merchandising concentrated in the cannabis industry.
Our operating subsidiaries, as outlined herein, were formed for the purpose of providing financing to assist Colorado marijuana
growers, providing cannabis-friendly lodging and providing value added services of information and entertainment to consumers
supporting the recreational marijuana industry. While our services are currently concentrated only in Colorado, we believe that
our business model can easily be expanded as recreational marijuana becomes legal in other states.
Liquidity
and Capital Resources
We
will be dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure, expansion expenses
and significant marketing/investor related expenditures to gain market recognition, so that we can achieve a level of revenue
adequate to support our cost structure; however, none of this can be assured. We believe that we will need approximately $1 million
over the next twelve months. While initial operations have been funded with private placements of equity and bridge loans, there
can be no assurance that adequate financing will continue to be available, and, if available, be on terms that are favorable.
Our cash balance at April 30, 2015 was $44,990.
We
believe that we will achieve operating profitability during the quarter ending April 30, 2016; however, due to conditions and
influences out of our control, including the current state of the national economy, we cannot guarantee that profitability will
be achieved or that it will be achieved in the stated time frame, nor is there any assurance that such an operating level can
ever be achieved.
As
of April 30, 2015, our working capital deficit was $570,791, our accumulated deficit was $2,934,048 and our stockholders
deficit was $745,898. Operating loss was $2,123,225 and $237,398 for the years ended April 30, 2015 and 2014, respectively. Our
net loss was $2,680,584 and $238,140 for the years ended April 30, 2015 and 2014, respectively.
Results
of Operations
Revenue,
net and Gross Profit
Revenue
for the year ended April 30, 2015 was $609,113 as compared to $16,234 for the year ended April 30, 2014. Our revenue during the
year ended April 30, 2015 was primarily derived from the sale of rooms and merchandise in our Bud + Breakfast properties. Our
gross profit for the year ended April 30, 2015 was $193,444 compared to $10,066 gross profit for year ended April 30, 2014.
Operating
Expenses
For
the year ended April 30, 2015, general and administration costs were $2,291,155, sales and marketing costs were $19,906 and depreciation
expense was $5,608. For the year ended April 30, 2014, general and administration costs were $232,586, sales and marketing costs
were $5,892 and depreciation expense was
$8,986.
The change is primarily due to stock based compensation and increased activity in our Bud + Breakfast operations.
Critical
Accounting Estimates and New Accounting Pronouncements
Critical
Accounting Estimates
The
preparation of financial statements in accordance with accounting principles generally accepted in the U.S. (GAAP)
requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements.
Management considers an accounting estimate to be critical if:
| ● | if
requires assumptions to be made that were uncertain at the time the estimate was made,
and |
| | |
| ● | changes
in the estimate or different estimates that could have been selected could have a material
impact on our results of operations or financial condition. |
We
base our estimates and judgments on our experience, our current knowledge, our beliefs of what could occur in the future, our
observation of trends in the industry, information provided by our customers and information available from other sources. Actual
results may differ from these estimates under different assumptions or conditions. We have identified the following accounting
policies and estimates as those that we believe are most critical to our financial condition and results of operations and that
require managements most subjective and complex judgments in estimating the effect of inherent uncertainties: share-based
compensation expense, income taxes, complex derivative financial instruments and impairment of long-lived assets.
Stock
Based Compensation
We
calculate share-based compensation expense for option awards and certain warrant issuances (Share-based Awards) based
on the estimated grant/issue date fair value using the Black-Sholes Model, and recognize the expense on a straight-line basis
over the vesting period, net of estimated forfeitures. We have not included an estimate for forfeitures due to our limited history
and we revise based on actual forfeitures each period. The Black-Scholes Model requires the use of a number of assumptions including
volatility of the stock price, the weighted average risk-free interest rate, and the vesting period of the Share-based Award in
determining the fair value of Share-based Awards. Although we believe our assumptions used to calculate share-based compensation
expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation
and inherent uncertainty. In addition, significant changes to our assumptions could significantly impact the amount of expense
recorded in a given period.
Income
Taxes
As
part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the
jurisdictions in which we operate. Our provision for income taxes is determined using the asset and liability approach to account
for income taxes. A current liability is recorded for the estimated taxes payable for the current year. Deferred tax assets and
liabilities are recorded for the estimated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using the enacted tax rates in effect for the year in which the timing differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of changes in tax rates or tax laws are recognized in the provision for income taxes
in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount more-likely-than-not to be realized. Changes in valuation allowances will flow through the statement of operations
unless related to deferred tax assets that expire unutilized or are modified through translation, in which case both the deferred
tax asset and related valuation allowance are similarly adjusted. Where a valuation allowance was established through purchase
accounting for acquired deferred tax assets, any future change will be credited or charged to income tax expense.
The
determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and
application of complex tax laws. In the ordinary course of our business, there are
transactions
and calculations for which the ultimate tax determination is uncertain. In spite of our belief that we have appropriate support
for all the positions taken on our tax returns, we acknowledge that certain positions may be successfully challenged by the taxing
authorities. We determine the tax benefits more likely than not to be recognized with respect to uncertain tax positions. Although
we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject to interpretation and
inherent uncertainty; therefore, our assessments can involve both a series of complex judgments about future events and rely on
estimates and assumptions. Although we believe these estimates and assumptions are reasonable, the final determination could be
materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities.
Complex
Derivative Financial Instruments.
From
time to time we sell common stock and we issue convertible debt, both with common stock purchase warrants, which may include terms
requiring conversion price or exercise price adjustments based on subsequent issuance of securities at prices lower than those
in the agreements of such securities. In these situations, the instruments may be accounted for as liabilities and recorded at
fair value each reporting period. Due to the complexity of the agreement, we used an outside expert to assist in providing the
mark to market fair valuation of the liabilities over the reporting periods in which the original agreement was in effect. It
was determined that a Binomial Lattice option pricing model using a Monte Carlo simulation would provide the most accuracy given
all the potential variables encompassing a future dilutive event. This model incorporated transaction assumptions such as our
stock price, contractual terms, maturity, risk free rates, as well as estimates about future financings, volatility, and holder
behavior. Although we believe our estimates and assumptions used to calculate the fair valuation liabilities and related expense
were reasonable, these assumptions involved complex judgments about future events, which are open to interpretation and inherent
uncertainty. In addition, significant changes to our assumptions could significantly impact the amount of expense recorded in
a given period.
New
Accounting Pronouncements
During the year ended April 30, 2015 and through this date, the Financial Accounting Standards Board has issued
various Accounting Standards Updates through Accounting Standards Codification No. 2015-11, most of which are specific
in nature. We have made a determination that these updates do not currently impact our financial reporting process and
we do not believe that they will materially affect us in the future.
Recent
Events Since April 30, 2015
Amendment
to Articles of Incorporation
On
May 11, 2015, the Board of Directors and shareholders owning a majority of the shares outstanding of the Company approved an increase
in its authorized shares of common stock. The Company filed a Certificate of Amendment to Certificate of Incorporation with the
Nevada Secretary of State to increase its authorized shares of common stock from 200,000,000 to 1,000,000,000 shares, $0.001 par
value per share.
On
June 19, 2015, the Board of Directors designated 100,000 shares of its blank check preferred stock as Series A Preferred Stock,
par value $0.001 per share. Each share of Series A Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters
submitted to a vote of the stockholders of the Company.
On
June 25, 2015, the Board of Directors and a majority of the shareholders approved an increase in its authorized shares and filed
a Certificate of Amendment to Certificate of Incorporation with the Nevada Secretary of State to increase its authorized capital
to 2,002,000,000 shares including 2,000,000,000 shares of common stock, $0.001 par value per share, and 2,000,000 of preferred
stock, $0.001 par value per share.
Lease
with Hotel San Ayre, LLC
On
June 24, 2015, the Company executed a Lease Option Agreement (the Lease) with Hotel San Ayre, LLC for the purchase
of Hotel San Ayre and its four property locations in Colorado Springs, Colorado. The two-year lease option term commences on July
15, 2015 and terminates the earlier of July 14, 2017 or the closing date of the purchase thereof. The base rental amount for the
first 12 months of the Lease is $12,500 and is $13,500 for the last 12 months of the Lease. The Company is responsible for all
operation, repair, use and maintenance of the premises during the term of the Lease. Joel Schneider, the Companys Chief Executive
Officer, personally guaranteed the Lease.
Upon
execution of the Lease, the Company paid a hard deposit of $30,000 which may be applied to the future purchase; however, is not
considered a security deposit and is not refundable if the purchase option is not exercised. The purchase price for the Hotel
San Ayre is $2,100,000 on an as-is basis.
Unregistered
Sales of Equity Securities
Issuances
of Convertible Promissory Notes
The
following table sets forth the issuance of convertible debt instruments subsequent to the fiscal year ended April 30, 2015. All
funds received were used for working capital:
Issue
Date
Due
Date | |
Interest
Rate | |
Original
Amount | | |
Balance at
Report Date | | |
Conversion Rate |
5/22/15 5/22/16 | |
12% | |
$ | 53,275 | | |
$ | 53,275 | (1) | |
40% discount of the lowest trading price for the 10 days prior to conversion |
5/22/15 5/22/16 | |
12% | |
$ | 38,000 | | |
$ | 38,000 | (2) | |
40% discount of the lowest trading price for the 10 days prior to conversion |
6/11/15
6/11/16 | |
8% | |
$ | 60,000 | | |
$ | 60.000 | (3) | |
57% discount of the lowest trading price for the 20 days prior to conversion |
6/12/15
6/12/16 | |
8% | |
$ | 52,087 | | |
$ | 52,087 | (4) | |
59% discount of the lowest trading price for the 20 days prior to conversion |
6/12/15
6/12/16 | |
8% | |
$ | 30,000 | | |
$ | 30,000 | (5) | |
59% discount of the lowest trading price for the 20 days prior to conversion |
6/23/15
6/23/16 | |
8% | |
$ | 69,000 | | |
$ | 69,000 | (6) | |
Lesser of 50% of the lowest sale price in (i) the 25 trading days immediately prior to the original issue date or (ii) the 25 trading days prior to the conversion date |
6/30/15
6/30/16 | |
8% | |
$ | 50,750 | | |
$ | 50,750 | (7) | |
55% discount of the 2 lowest trading prices for the 5 days prior to conversion |
| (1) | This
convertible note was purchase on May 22, 2015 from an entity holding a convertible note dated April 30, 2014 with aggregate principal
and interest of $53,275. Between May 22, 2015 and the date of this Report, $53,275 was converted into 59,931,882 shares of our
Common Stock. |
| (2) | On
May 22, 2015, we received a payment of $38,000, net of legal fees of $5,000. |
| (3) | On
June 11, 2015, we received a payment of $60,000, net of legal fees of $3,000. |
| (4) | This
convertible note was purchase on June 12, 2015 from an entity holding convertible note dated June 16, 2014 and July 1, 2015 with
aggregate principal and interest of $52,087. Between June 12, 2015 and the date of this Report, $52,272 was converted into 66,394,959
shares of our Common Stock. |
| (5) | On
June 12, 2015, we received a payment of $30,000, net of legal fees of $1,500. |
| (6) | On
June 23, 2015, we received a payment of $69,000, net of legal fees of $3,000 and expense of $6,000. |
| (7) | On
June 30, 2015, we received a payment of $50,750, net of legal fees of $2,750 and expense of $3,000. |
Conversion
of Debt
Between
May 1, 2015 and the date of this report, we converted debt in the aggregate amount of $661,322 into 869,238,855 shares of our
Common Stock.
Amendment
of Convertible Debt Instrument
On July 10, 2015, we agreed to amend a secured convertible promissory note originally entered into on October
22, 2014 in the principal amount of $225,000, of which we only received $50,000. The amendment provides that we may not prepay
the note without the written consent of the noteholder. The amendment deleted all prior conversion terms and now allows the investor
to convert the remainder of the debt at a conversion price equal to 50% of the lowest closing bid price of our common stock in
the twenty (20) trading days immediately preceding conversion. The change in conversion terms was beneficial to us in that it reduced
the effective conversion discount of the note from 65% to 50% and eliminated all true-up conditions. In addition, all warrants
issued in the original transaction with the investor were canceled. The outstanding principal balance due under this note as of
July 10, 2015 is $35,437.
Issuance
of Series A Preferred Stock
On
June 23, 2015, the Board of Directors approved the issuance of 100,000 shares of Series A Preferred Stock to Joel Schneider, the
Companys Chief Executive Office and President, for certain financial accommodations made to the Company including personal guarantees
on loans and property leases.
Off-Balance
Sheet Arrangements
As
of April 30, 2015, we had no material off-balance sheet arrangements.
| ITEM
7A. | QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
We
are a smaller reporting company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.
| ITEM 8. | FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA. |
INDEX
TO FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Stockholders
The
MaryJane Group, Inc.
Denver,
Colorado
We
have audited the accompanying consolidated balance sheet of the MaryJane Group, Inc. and its subsidiaries (the Company),
as of April 30, 2015 and the related consolidated statements of operations, stockholders deficit, and cash flows for the
year then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the MaryJane Group, Inc. and its subsidiaries as of April 30, 2015 and the results of their operations and their cash flows
for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations since inception
and has a working capital deficiency, both of which raise substantial doubt about its ability to continue as a going concern.
Managements plans in regard to these matters are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/
Turner, Stone & Company, L.L.P.
Certified
Public Accountants
July
27, 2015
EXPLANATORY NOTE: At the time of
this filing, Harris & Gillespie is dissolved; therefore, we were unable to obtain their consent and updated opinion required
to be filed as exhibits to this Report pertaining to the audit conducted by Harris & Gillespie for the year ended April 30,
2014.
HARRIS & GILLESPIE CPAS, PLLC
CERTIFIED PUBLIC ACCOUNTANT’S
3901 STONE WAY N., SUITE 202
SEATTLE, WA 98103
206.547.6050
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors
The Maryjane Group Inc. and Subsidiaries
We have audited the accompanying balance sheet
of The Maryjane Group Inc. and Subsidiaries as of April 30, 2014 and 2013, and the related statements of operations, stockholders’
deficit and cash flows for the periods then ended. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of The Maryjane Group Inc. and Subsidiaries as of April
30, 2014 and 2013 and the results of its operations and cash flows for the periods then ended in conformity with generally accepted
accounting principles in the United States of America.
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. As discussed in Note #2 to the financial statements, although
the Company has limited operations it has yet to attain profitability. This raises substantial doubt about its ability to continue
as a going concern. Management’s plan in regard to these matters is also described in Note #2. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
/S/ HARRIS & GILLESPIE CPA’S, PLLC
Seattle, Washington
August 12, 2014
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES |
CONSOLIDATED
BALANCE SHEETS |
| |
April 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
ASSETS |
Current Assets: | |
| | | |
| | |
Cash | |
$ | 44,990 | | |
$ | 3,431 | |
Prepaid expenses | |
| 39,808 | | |
| 10,149 | |
Employee advances | |
| 55 | | |
| 3,300 | |
Total current assets | |
| 84,853 | | |
| 16,880 | |
| |
| | | |
| | |
Fixed assets, net | |
| 18,313 | | |
| 51,436 | |
Security deposits | |
| 14,500 | | |
| 10,000 | |
Total assets | |
$ | 117,666 | | |
$ | 78,316 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS DEFICIT |
Current Liabilities: | |
| | | |
| | |
Convertible notes payable, net of debt discount of $417,752 and $0, respectively | |
$ | 327,549 | | |
$ | 75,000 | |
Accounts payable | |
| 23,056 | | |
| 12,358 | |
Promissory note | |
| 17,160 | | |
| — | |
Other current liabilities | |
| 287,879 | | |
| 50,223 | |
Bank overdraft | |
| — | | |
| 13,757 | |
Total current liabilities | |
| 655,644 | | |
| 151,338 | |
| |
| | | |
| | |
Long-term Liabilities: | |
| | | |
| | |
Convertible notes payable, net of debt discount of $23,237 and $0, respectively | |
| 4,263 | | |
| — | |
Convertible debentures | |
| — | | |
| 90,000 | |
Accrued interest | |
| 603 | | |
| 506 | |
Derivative liabilities | |
| 203,145 | | |
| — | |
Total long-term liabilities | |
| 208,011 | | |
| 90,506 | |
Total liabilities | |
| 863,655 | | |
| 241,844 | |
| |
| | | |
| | |
Commitments and Contingencies (Note 10) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders Deficit: | |
| | | |
| | |
Preferred stock - par value $0.001; 2,000,000 shares authorized; no shares issued and outstanding | |
| — | | |
| — | |
Common stock - par value $0.001; 2,000,000,000 shares authorized; 30,637,844 and 17,860,000 issued and outstanding, respectively | |
| 30,638 | | |
| 17,860 | |
Additional paid in capital | |
| 2,211,957 | | |
| 72,076 | |
Prepaid services | |
| (54,536 | ) | |
| — | |
Accumulated deficit | |
| (2,934,048 | ) | |
| (253,464 | ) |
Total stockholders deficit | |
| (745,989 | ) | |
| (163,528 | ) |
Total liabilities and stockholders deficit | |
$ | 117,666 | | |
$ | 78,316 | |
The accompanying footnotes are an integral part of
these consolidated financial statements.
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
| |
Year Ended April 30, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
| |
| | | |
| | |
Revenues, net | |
$ | 609,113 | | |
$ | 16,234 | |
| |
| | | |
| | |
Cost of revenue | |
| 415,669 | | |
| 6,168 | |
| |
| | | |
| | |
Gross profit | |
| 193,444 | | |
| 10,066 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
General and administration | |
| 2,291,155 | | |
| 232,586 | |
Sales and marketing | |
| 19,906 | | |
| 5,892 | |
Depreciation | |
| 5,608 | | |
| 8,986 | |
Total operating expense | |
| 2,316,669 | | |
| 247,464 | |
| |
| | | |
| | |
Operating loss | |
| (2,123,225 | ) | |
| (237,398 | ) |
| |
| | | |
| | |
Other income and (expense) | |
| | | |
| | |
Miscellaneous income | |
| 25,301 | | |
| — | |
Interest expense | |
| (529,563 | ) | |
| (742 | ) |
Disposal of fixed assets | |
| (49,142 | ) | |
| — | |
Change in fair value of derivative liability | |
| (3,955 | ) | |
| — | |
Total other income (expense) | |
| (557,359 | ) | |
| (742 | ) |
| |
| | | |
| | |
Loss before taxes | |
| (2,680,584 | ) | |
| (238,140 | ) |
| |
| | | |
| | |
Provision for income taxes | |
| — | | |
| — | |
| |
| | | |
| | |
Net loss | |
$ | (2,680,584 | ) | |
$ | (238,140 | ) |
| |
| | | |
| | |
Loss per share, basic | |
$ | (0.14 | ) | |
$ | (0.02 | ) |
| |
| | | |
| | |
Weighted average number of shares outstanding | |
| 19,400,827 | | |
| 13,729,347 | |
The accompanying footnotes are an integral part of
these consolidated financial statements.
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES |
CONSOLIDATED
STATEMENT OF STOCKHOLDERS DEFICIT |
| |
Common Stock | | |
Additional Paid | | |
Prepaid | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
in Capital | | |
Services | | |
Deficit | | |
Total | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, April 30, 2013 | |
| 9,140,000 | | |
| 9,140 | | |
| 10,260 | | |
| — | | |
| (15,324 | ) | |
| 4,076 | |
Issuance of shares pursuant to stock purchase agreement | |
| 1,220,000 | | |
| 1,220 | | |
| 10,980 | | |
| — | | |
| — | | |
| 12,200 | |
Shares issued to acquire Capital Growth Corporation | |
| 5,000,000 | | |
| 5,000 | | |
| — | | |
| — | | |
| — | | |
| 5,000 | |
Shares issued to acquire the Mary Jane Group of companies | |
| 2,500,000 | | |
| 2,500 | | |
| 43,566 | | |
| — | | |
| — | | |
| 46,066 | |
Forgiveness of related party loan | |
| — | | |
| — | | |
| 7,270 | | |
| — | | |
| — | | |
| 7,270 | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (238,140 | ) | |
| (238,140 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, April 30, 2014 | |
| 17,860,000 | | |
| 17,860 | | |
| 72,076 | | |
| — | | |
| (253,464 | ) | |
| (163,528 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of shares pursuant to stock purchase agreements | |
| 700,000 | | |
| 700 | | |
| 14,300 | | |
| — | | |
| — | | |
| 15,000 | |
Issuance of shares pursuant to debt conversion agreements | |
| 9,290,844 | | |
| 9,291 | | |
| 105,508 | | |
| — | | |
| — | | |
| 114,799 | |
Issuance of shares pursuant to employment agreements | |
| 1,605,000 | | |
| 1,605 | | |
| 852,245 | | |
| — | | |
| — | | |
| 853,850 | |
Issuance of shares for services | |
| 1,182,000 | | |
| 1,182 | | |
| 285,882 | | |
| — | | |
| — | | |
| 287,064 | |
Derivative liability associated with convertible debt | |
| — | | |
| — | | |
| (199,190 | ) | |
| — | | |
| — | | |
| (199,190 | ) |
Debt discount associated with convertible debt | |
| — | | |
| — | | |
| 919,690 | | |
| — | | |
| — | | |
| 919,690 | |
Warrants issued for services | |
| — | | |
| — | | |
| 161,446 | | |
| — | | |
| — | | |
| 161,446 | |
Prepaid services, net of amortization | |
| — | | |
| — | | |
| — | | |
| (54,536 | ) | |
| — | | |
| (54,536 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,680,584 | ) | |
| (2,680,584 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, April 30, 2015 | |
| 30,637,844 | | |
| 30,638 | | |
| 2,211,957 | | |
| (54,536 | ) | |
| (2,934,048 | ) | |
| (745,989 | ) |
The accompanying footnotes are an integral part of
these consolidated financial statements.
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
| |
Year Ended April 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITES | |
| | | |
| | |
Net loss | |
$ | (2,680,584 | ) | |
$ | (238,140 | ) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | |
| | | |
| | |
Effect of merger and recapitalization pursuant to execution of Security Exchange Agreements | |
| — | | |
| (7,124 | ) |
Depreciation | |
| 5,608 | | |
| 8,986 | |
Amortization of prepaid services | |
| 799,314 | | |
| — | |
Amortization of debt discount | |
| 478,701 | | |
| — | |
Amortization of prepaid expense | |
| 120,492 | | |
| — | |
Warrants issued for services | |
| 161,446 | | |
| — | |
Common stock issued for services | |
| 110,264 | | |
| — | |
Change in fair value of derivative liability | |
| 3,955 | | |
| — | |
Loss on disposal of fixed assets | |
| 49,142 | | |
| — | |
Change in operating assets and liabilities: | |
| | | |
| | |
Prepaid expense | |
| — | | |
| (10,149 | ) |
Other current assets | |
| 13,394 | | |
| (3,300 | ) |
Accounts payable | |
| 12,198 | | |
| 12,358 | |
Bank overdraft | |
| (13,756 | ) | |
| 13,757 | |
Other current liabilities | |
| 257,155 | | |
| 50,224 | |
Other long-term liabilities | |
| 97 | | |
| 505 | |
Net cash flows used in operating activities | |
| (682,574 | ) | |
| (172,883 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | |
Security deposit | |
| (4,500 | ) | |
| (10,000 | ) |
Purchase of fixed assets | |
| (6,627 | ) | |
| (7,232 | ) |
Proceeds from acquisitions | |
| — | | |
| 5,000 | |
Net cash flows used in investing activities | |
| (11,127 | ) | |
| (12,232 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds from convertible promissory notes | |
| 703,100 | | |
| 75,000 | |
Proceeds from promissory note | |
| 39,000 | | |
| — | |
Proceeds from sale of common stock | |
| 15,000 | | |
| 12,200 | |
Payment of promissory note | |
| (21,840 | ) | |
| — | |
Proceeds from convertible debentures | |
| — | | |
| 90,000 | |
Net cash flows provided by financing activities | |
| 735,260 | | |
| 177,200 | |
| |
| | | |
| | |
Increase (decrease) in cash | |
| 41,559 | | |
| (7,915 | ) |
Cash, beginning of year | |
| 3,431 | | |
| 11,346 | |
Cash, end of year | |
$ | 44,990 | | |
$ | 3,431 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
| |
| | | |
| | |
Cash paid for interest | |
$ | 9,128 | | |
$ | — | |
Cash paid for income taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES: |
| |
| | | |
| | |
Shares issued per employement agreements | |
$ | 853,850 | | |
$ | — | |
Shares issued for services | |
$ | 161,800 | | |
$ | — | |
Shares issued to acquire fixed assets | |
$ | 15,000 | | |
$ | — | |
Shares issued to acquire the Mary Jane companies | |
$ | — | | |
$ | 46,066 | |
| |
| | | |
| | |
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: |
| |
| | | |
| | |
Debt discount associated with convertible debt | |
$ | 919,690 | | |
$ | — | |
Derivative liability associated with convertible debt | |
$ | (199,190 | ) | |
$ | — | |
Shares issued for convertible debt | |
$ | 114,799 | | |
$ | — | |
Warrants issued as loan inducement | |
$ | 8,894 | | |
$ | — | |
Forgiveness of related party loan | |
$ | — | | |
$ | 7,270 | |
The accompanying footnotes are an integral part of
these consolidated financial statements.
THE
MARYJANE GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – ORGANIZATION AND NATURE OF BUSINESS
The
MaryJane Group, Inc., f/k/a Pladeo Corp., a Nevada corporation (the Company) was
incorporated in Nevada on February 16, 2012 for the purpose of developing online chat systems free of charge. The Company was
unable to raise sufficient funds to implement its business plan. As a result of being unable to properly fund and build our business
of developing online chart systems, we were considered a shell company under the rules of the Commission. On February
26, 2014, Joel Schneider, entered into a share purchase agreement with Lisbeth Guerrero, the Companys former sole officer and
director, pursuant to which he purchased 8,000,000 shares of the Companys common stock, representing 77.2% of the issued
and outstanding shares of the Companys common stock on that date (the Share
Purchase Agreement). In connection with the purchase, Ms. Guerrero resigned as sole officer and director and Mr.
Schneider became our sole officer and director.
On
February 27, 2014, we entered into and closed a Securities Exchange Agreement by and among
the Company, Capital Growth Corporation, a Colorado corporation (CGC) and the shareholders of CGC on February 27,
2014 (the CGC Acquisition) and on March 14, 2014, we entered into and closed a
Securities Exchange Agreement between the Company and the managing member of Mary Jane Entertainment, LLC, Mile High Times, LLC,
Mary Jane Tours, LLC, and Dab City Radio, LLC, each a Colorado limited liability company (referred to individually by name or
collectively as the Mary Jane companies) (the Mary Jane companies Acquisition). As a result, we
ceased being a shell company upon the acquisition of the five operating subsidiaries. Shortly thereafter,
the Company changed its name to The MaryJane Group, Inc.
Subsequent
to completing the CGC and Mary Jane companies Acquisitions, we formed the following Colorado limited liability corporations as
wholly-owned subsidiaries, namely: Mary Jane Glassworks, LLC and Bud and Breakfast, LLC, (both organized on April 10, 2014), Mary
Jane Hospitality, LLC and Mary Jane Events, LLC (both organized on July 22, 2014), and Mary Jane Designs, LLC (organized on August
28, 2014). In an effort to streamline the operation, on November
21, 2014, we dissolved the following entities; Mary Jane Tours, LLC; (ii) Mile High Times, LLC; (iii) Dab City Radio, LLC; and
(iv) Mary Jane Glassworks, LLC.
Change
in Officers
On
June 8, 2014, Jose Ramirez, our Chief Operating Officer, tendered his 60-day resignation. We accepted his resignation as Chief
Operating Officer and the Board of Directors requested that the resignation take effect immediately rather than in 60-days to
allow the Board of Directors to immediately commence a search for his replacement. Mr. Ramirez remained as a member of the Board
of Directors until he was removed on July 14, 2014.
On
June 27, 2014, we entered into an Executive Employment Agreement with Charles G. Berkowitz wherein Mr. Berkowitz was hired to
serve as our Chief Operating Officer for an initial term of three years. Upon execution of the Agreement, Mr. Berkowitz was issued
250,000 shares of our common stock. On August 29, 2014, our Board of Directors terminated the Executive Employment Agreement for
cause retroactive to August 4, 2014.
Overview
of Operating Businesses
Our
primary focus includes providing lodging, events, spa services and brand merchandising concentrated in the cannabis industry.
Our operating subsidiaries, as outlined herein, were formed for the purpose of providing financing to assist Colorado marijuana
growers, providing cannabis-friendly lodging and providing value added services of information and entertainment to consumers
supporting the recreational marijuana industry. While our services are currently concentrated only in Colorado, we believe that
our business model can easily be expanded as recreational marijuana becomes legal in other states.
Legalization
of recreational marijuana initially in Colorado and Washington and the growing number of jurisdictions with medical marijuana
laws spawned a Green Rush in America in 2014. On January 1, 2014, the State of Colorado became the first state to
legalize the use of recreational marijuana. Colorado residents, who are at least 21 years of age with photo identification, may
legally purchase as much as one ounce of marijuana in a single transaction. Non-Colorado residents, bearing the same identification,
may purchase as much as one-quarter ounce. Marijuana cannot be consumed in any public space, including the shops where it was
purchased. In 2015, Oregon, Alaska and the District of Columbia legalized marijuana for recreational use; however, sales currently
remain banned in the District. Additionally, 23 states have legalized marijuana for medical purposes.
Capital
Growth Corporation, organized on February 4, 2014 (Capital Growth), was formed for the purpose of providing short-
and long-term financing to assist growers and retail establishments engaged in the manufacture and distribution of recreational
marijuana within the State of Colorado. Since its formation, Capital Growth has not entered into any funding transactions. The
Company utilizes Capital Growth as a business development company. Mary Jane Entertainment, LLC was formed to provide contracted
limousine and party-bus services and currently continues to operate on a limited basis. Bud and Breakfast, LLC was formed to operate
and manage our two marijuana-friendly Bud + Breakfast locations with a third location opening in mid-July 2015. We intend to actively
seek additional Bud + Breakfast locations. Mary Jane Hospitality, LLC was formed to seek additional lodging and hospitality businesses
located in Colorado, and to also seek the same type of businesses in other jurisdictions as recreational marijuana becomes legal
in other states. Mary Jane Events, LLC was formed for the purposes of planning private and corporate events focused upon the recreational/medicinal
marijuana industry. Mary Jane Designs, LLC was formed to expand and promote our branded merchandise at our properties.
Fiscal
year end
We
elected April 30th as our fiscal year ending date.
Basis
of presentation and going concern uncertainty
The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles
in the United States of America (GAAP), which contemplates continuation of the Company as a going concern, dependent
upon our ability, among other matters, to establish itself as a profitable business. At April 30, 2015, we had an accumulated
deficit of $2,934,048 and for the years ended April 30, 2015 and 2014, incurred losses of $2,680,584 and $238,140, respectively.
Our
ability to continue in business is dependent upon obtaining sufficient financing or attaining profitable operations. However,
there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations,
and therefore, these matters raise substantial doubt about our ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they include adjustments
relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be
unable to continue in operation.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
For
purposes of the Statements of Cash Flows, we consider amounts held by financial institutions and short-term investments with an
original maturity of 90 days or less at the time of purchase to be cash and cash equivalents. Beginning January 1, 2013, insurance
coverage reverted to $250,000 per depositor at each financial institution, and our non-interest bearing cash balances may exceed
federally insured limits. We had no interest-bearing amounts on deposit in excess of federally insured limits at April 30, 2015
and 2014.
Trade
Accounts Receivable
Trade
accounts receivable are customer obligations due under normal trade terms. We provide an allowance for doubtful accounts, which
is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Trade accounts
receivable passed due by more than 90 days are considered delinquent. Delinquent receivables are written off based on individual
credit evaluations, results of collection efforts, and specific circumstances of the customer. Recoveries of accounts previously
written off are recorded as reductions of bad debt expense when received. At April 30, 2015 and 2014, we had no trade accounts
receivable.
Fixed
Assets
Fixed
assets are stated at cost, net of accumulated depreciation. Maintenance and repair costs, which do not significantly extend the
useful lives of the respective assets, are charged to operating expenses as incurred. We use the straight-line method of depreciation
for its property and equipment based on the estimated useful lives of the assets, generally three to five years.
Revenue
Recognition
We
recognize revenue in accordance with ASC Topic 605, Revenue Recognition, which requires 1) evidence of an arrangement,
2) delivery of the product or service, 3) a fixed or determinable price, and 4) assurance of collection within a reasonable period
of time.
Fair
Value of Financial Instruments
Our
financial instruments consist primarily of receivables, accounts payable, accrued expenses and short- and long-term debt. The
carrying amount of receivables, accounts payable and accrued expenses approximates our fair value because of the short-term maturity
of such instruments. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates
fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms and
remaining maturities are used to estimate the fair value of the our short- and long-term debt and would be considered Level 3
inputs under the fair value hierarchy.
We
have categorized our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy
in accordance with GAAP. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical
assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets
and liabilities recorded in the consolidated balance sheets at fair value are categorized based on a hierarchy of inputs, as follows:
| Level 1 - | Unadjusted
quoted prices in active markets for identical assets or liabilities. |
| Level
2 - | Quoted
prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly
or indirectly through market corroboration, for substantially the full term of the financial instrument. |
| Level
3 - | Unobservable
inputs for the asset or liability. |
The
Companys financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant
liability as detailed below. The fair value of this warrant liability is included in long-term liabilities on the accompanying
consolidated financial statements.
The
following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis:
Description | |
Assets/ (Liabilities) Measured at
Fair Value | | |
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1) | | |
Significant
Other
Observable
Inputs (Level 2) | | |
Significant
Other
Unobservable
Inputs (Level 3) | |
Fair value of warrant liability | |
$ | (203,145 | ) | |
$ | — | | |
$ | — | | |
$ | (203,145 | ) |
The
following table provides a summary of changes in fair value associated with the Level 3 liabilities for the year ended April 30,
2015
| |
Fair Value
Measurements
Using Significant
Unobservable
Inputs (Level 3) | |
Balance at April 30, 2014 | |
$ | — | |
Issuances of derivative liabilities | |
| (199,190 | ) |
Change in fair value of derivative liabilities | |
| (3,955 | ) |
Transfers in and/out of Level 3 | |
| — | |
Ending balance at April 30, 2015 | |
$ | (203,145 | ) |
The
above table of Level 3 liabilities begins with the prior period balance and adjusts the balance for changes that occurred during
the current period. The ending balance of the Level 3 securities presented above represent our best estimates and may not be substantiated
by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances
are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.
In
accordance with ASC Topic 740, Income Taxes, we recognize the effect of uncertain income tax positions only if the positions
are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income
tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or
measurement are reflected in the period in which those changes in judgment occur. We recognize both interest and penalties related
to uncertain tax positions as part of the income tax provision.
Basic
Income (Loss) Per Share
We
calculate earnings per share (EPS) in accordance with ASC Topic 260, Earnings Per Share, which requires the
computation and disclosure of two EPS amounts, basic and diluted. Basic EPS is computed based on the weighted average number of
shares of common stock outstanding during the period. Diluted EPS is
computed
based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during
the period. Such potential dilutive common shares consist of convertible debt, stock options and warrants to purchase common stock
of the Company. Potential common shares totaling 428,143,468 and 1,497,000 at April 30, 2015 and 2014, respectively, have been
excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss.
Stock
Based Compensation
We
recognize compensation expense for all stock based payments granted based on the grant date fair value estimated in accordance
with ASC Topic 718, Share Based Payments. Compensation expense is generally recognized on a straight-line basis over the
employees requisite service period based on the awards estimated lives for fixed awards with ratable vesting provisions.
We recognized no stock based compensation during the years ended April 30, 2015 and 2014.
Use
of Estimates
Our
consolidated financial statements have been prepared in accordance GAAP. The preparation of these consolidated financial statements
requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses
and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies,
on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions.
Recently
Issued and Newly Adopted Accounting Pronouncements
During the year ended April 30, 2015 and through this date, the Financial Accounting Standards Board has issued
various Accounting Standards Updates through Accounting Standards Codification No. 2015-11, most of which are specific
in nature. We have made a determination that these updates do not currently impact our financial reporting process and
we do not believe that they will materially affect us in the future.
Reclassifications
Certain
2014 amounts have been reclassified to conform to current year presentation.
NOTE
3 – FIXED ASSETS
Fixed
assets consist of the following:
| |
April 30, | |
| |
2015 | | |
2014 | |
Furniture and fixtures | |
$ | 23,194 | | |
$ | 19,752 | |
Leasehold improvements | |
| 2,320 | | |
| — | |
Equipment | |
| 865 | | |
| 40,670 | |
| |
| 26,379 | | |
| 60,422 | |
Less: accumulated depreciation | |
| (8,066 | ) | |
| (8,986 | ) |
TOTAL PROPERTY AND EQUIPMENT | |
$ | 18,313 | | |
$ | 51,436 | |
Depreciation
expense for the years ended April 30, 2015 and 2014 was $5,608 and $8,986, respectively.
NOTE
4 – CONVERTIBLE PROMISSORY NOTES
A
summary of our convertible promissory notes is as follows:
Issue Date
Due Date | |
Interest
Rate | |
Original
Amount | | |
Current
Balance | | |
Conversion Rate |
4/07/14
4/30/15 | |
5% | |
$ | 50,000 | | |
$ | — | (1) | |
NA |
4/07/14
4/30/15 | |
5% | |
$ | 35,000 | | |
| — | (2) | |
NA |
4/23/14
4/23/15 | |
10% | |
$ | 48,500 | | |
| — | (3) | |
NA |
4/30/14
4/30/15 | |
8% | |
$ | 50,000 | | |
| 50,000 | (4) | |
NA |
5/21/14
5/21/15 | |
8% | |
$ | 50,000 | | |
| — | (5) | |
NA |
6/16/14
6/16/15 | |
8% | |
$ | 23,750 | | |
| 23,750 | | |
$1.00 per share |
7/01/14
7/01/15 | |
8% | |
$ | 23,750 | | |
| 23,750 | | |
$1.00 per share |
7/10/14
7/10/15 | |
8% | |
$ | 36,000 | | |
| — | (6) | |
NA |
8/13/14
2/13/16 | |
8% | |
$ | 61,600 | | |
| 59,839 | (7) | |
60% discount to the lowest daily volume weighted average price for (i) the 20 trading days immediately prior to the original issue date or (ii) the 20 trading days prior to the date of conversion |
9/12/14
9/12/15 | |
8% | |
$ | 52,500 | | |
| 42,500 | (8) | |
43% discount of the lowest trading price of our Common Stock for the 18 days prior to conversion |
9/30/14
7/10/15 | |
8% | |
$ | 86,000 | | |
| 77,876 | (9) | |
lesser of $0.10 or a 45% discount to the market price |
10/22/14
3/22/16 | |
10% | |
$ | 60,000 | | |
| 41,250 | (10) | |
$0.25 per share, subject to certain adjustments |
11/26/14
8/26/15 | |
8% | |
$ | 50,000 | | |
| 50,000 | | |
45% discount to the average of the lowest two trading prices during the twenty-five trading day period ending on the latest complete trading day prior to the date of conversion |
12/22/14
12/22/15 | |
10% | |
$ | 50,000 | | |
| 50,000 | | |
lesser of $0.08 or a 50% discount to the market price during the 20 consecutive trading days prior to the conversion date |
3/13/15
3/13/16 | |
8% | |
$ | 52,500 | | |
| 52,500 | (8) | |
43% discount of the lowest trading price of our Common Stock for the 18 days prior to conversion |
3/16/15
3/16/16 | |
5% | |
$ | 99,340 | | |
$ | 47,840 | (11) | |
Lesser of (i) a 50% discount to the market price during the 20 consecutive trading days prior to the conversion date or (ii) $0.001 |
3/20/15
3/20/16 | |
8% | |
$ | 50,000 | | |
| 50,000 | | |
45% discount to the average of the lowest two trading prices during the twenty-five trading day period ending on the latest complete trading day prior to the date of conversion |
4/2/15
4/2/16 | |
8% | |
$ | 73,500 | | |
| 73,500 | (12) | |
|
4/2/15
4/2/16 | |
8% | |
$ | 42,000 | | |
| 42,000 | | |
|
4/10/15
10/10/15 | |
10% | |
$ | 25,000 | | |
| 25,000 | | |
48% discount from the lowest intra-day trading price for the 15 days prior to the date of conversion |
4/20/15
4/20/16 | |
8% | |
$ | 53,244 | | |
| 35,496 | (13) | |
48% discount from the lowest intra-day trading price for the 15 days prior to the date of conversion |
| |
| |
| | | |
| 745,301 | | |
|
Unamortized debt discount | | |
| (417,752 | ) | |
|
| |
| |
| | | |
$ | 327,549 | | |
|
| (1) | This
convertible note (including principal and accrued interest) was purchased by a third party on March 16, 2015. See #11 above
and below. |
| (2) | This
convertible note (including principal and accrued interest) was purchased by a third party on April 2, 2015. See #12 above and
below. |
| (3) | This
convertible note (including principal and accrued interest) was purchased by a third party on April 20, 2015. See (#13) above
and below. |
| (4) | At
April 30, 2014, this convertible note was in default, however it was purchased by a third party on May 22, 2015. See Note 11. |
| (5) | This
convertible note (including principal and accrued interest) was combined with #6 (see above and below) and replaced with #9
(see above and below) on September 30, 2014. |
| (6) | This
convertible note (including principal and accrued interest) was combined with #5 (see above and below) and replaced with #9
(see above and below) on September 30, 2014. |
| (7) | This
convertible note (including principal and accrued interest) was transferred from long term convertible debt on February 9, 2015.
See #3 in Note 7. We also issued a Common Stock Purchase Warrant for the purchase of 513,333 shares of our Common. The five-year
warrant is exercisable at $0.132 per share and contains provisions for a cashless exercise. |
| (8) | On
September 12, 2014, we issued two 8% Convertible Redeemable Notes each in the amount of $52,500 for an aggregate principal
amount of $105,000 (the First September 2014 Note and Second September 2014 Note). On September 17, 2014,
we received payment of $45,000, net of legal fees of $2,500 and finders fees of $5,000, under the First September 2014
Note. On March 13, 2015, we received payment of $45,000, net of legal fees of $2,500 and finders fees of $5,000, under
the Second September 2014 Note. Prior to April 30, 2014, $10,000 was converted into 570,342 shares of our Common Stock. |
| (9) | This
convertible note replaced #s 5 and 6 above on September 30, 2014, and contained provisions wherein we (i) issued 350,000 shares
of our Common Stock to the entity and (ii) canceled 62,500 warrants to purchase shares of our Common Stock and 125,000 previously
authorized but unissued warrants to purchase shares of our Common Stock. On April 29, 2015, $8,124 was converted into 889,814
shares of our Common Stock. |
| (10) | This
convertible note (including principal and accrued interest) was transferred from long term convertible debt on March 22, and
the original issue discount of $5,000, was funded on October 22, 2014 and was immediately deemed eligible for conversion.
The funding of the remaining three tranches in the amount of $50,000 each (net of the original issue discount of $5,000) is
yet to be determined, but will be deemed eligible for conversion on the date of funding. In conjunction with the issuance
of the October Note, we issued four warrants to purchase shares of our Common Stock (Warrant(s)) (designated Warrant
#1, Warrant #2, Warrant #3 and Warrant #4). Warrant #1 is for the purchase of 176,471 shares of our Common Stock. Warrants
#2, #3 and #4 are for an amount determined by dividing $27,500 by our Common Stocks market price on the date corresponding
with the second, third and fourth funding. Prior to April 30, 2015, $21,861 was converted into 2,186,087 shares of our Common
Stock. |
| (11) | This
convertible note was purchased from #1 above, and #1 in Note 7. On April 7, April 15, April 22, and April 30, 2015, $25,000,
$10,000, $10,000, and $6,000 were converted into 616,523, 1,000,000, 1,000,000, and 1,274,510 shares of our Common Stock,
respectively. |
| (12) | This
convertible note was purchased from #2 above, and #2 in Note 7. |
| (13) | This
convertible note was purchased from #3 above. On April 23, 2015, $17,748 was converted into 1,613,445 shares of our Common
Stock. |
NOTE
5 – PROMISSORY NOTES
On
February 12, 2015, we entered into a loan agreement with an entity and borrowed $39,000. Pursuant to the terms of the loan agreement,
we are required to make 100 equal installments of $553, or an aggregate of $55,300, to repay the principal balance and interest
in full.
NOTE
6 – OTHER CURRENT LIABILITIES
Other
current liabilities consist of the following:
| |
April 30, | |
| |
2015 | | |
2014 | |
Payroll tax liability | |
$ | 182,142 | | |
$ | 13,290 | |
Accrued IRS and state interest and penalties | |
| 41,812 | | |
| — | |
Accrued lodging and sales tax | |
| 35,269 | | |
| — | |
Accrued interest expense | |
| 22,373 | | |
| 236 | |
Accrued payroll | |
| 4,424 | | |
| 24,508 | |
Other current liabilities | |
| 1,858 | | |
| 499 | |
Accrued outside services | |
| — | | |
| 11,690 | |
TOTAL OTHER CURRENT LIABILITIES | |
$ | 287,878 | | |
$ | 50,223 | |
NOTE
7 – LONG-TERM CONVERTIBLE DEBT
A
summary of our long-term convertible promissory notes is as follows:
Issue Date
Due Date | |
Interest
Rate | |
Original
Amount | | |
Current
Balance | | |
Conversion Rate |
3/20/14
3/20/17 | |
5% | |
$ | 45,000 | | |
$ | — | (1) | |
NA |
3/20/14
3/20/17 | |
5% | |
$ | 45,000 | | |
| — | (2) | |
NA |
8/13/14
2/13/16 | |
8% | |
$ | 61,600 | | |
| — | (3) | |
NA |
10/22/14
3/22/16 | |
10% | |
$ | 60,000 | | |
| — | (4) | |
NA |
2/9/15
7/9/16 | |
10% | |
$ | 27,500 | | |
| 27,500 | (5) | |
60% discount to the lowest daily volume weighted average price for (i) the 20 trading days immediately prior to the original issue date or (ii) the 20 trading days prior to the date of conversion |
| |
| |
| | | |
| 27,500 | | |
|
Unamortized debt discount | | |
| (23,237 | ) | |
|
| |
| |
| | | |
$ | 4,263 | | |
|
| (1) | This
5% debenture (including principal and accrued interest) was purchased by a third party on March 16, 2015. See #11 in Note 4 –
Convertible Promissory Notes. |
| (2) | This
5% debenture (including principal and accrued interest) was purchased by a third party on April 2, 2015. See #12 Note 4 –
Convertible Promissory Notes. |
| (3) | This
convertible note (including principal and accrued interest) was transferred to short term convertible debt on February 9, 2015.
See #7 in Note 4 – Convertible Promissory Notes. |
| (4) | This
convertible note (including principal and accrued interest) was transferred to short term convertible debt on March 22, 2015.
See #10 in Note 4 – Convertible Promissory Notes. |
| (5) | We
issued a Common Stock Purchase Warrant for the purchase of 458,333 shares of our Common Stock to an entity. See Note 8. |
NOTE
8 – CAPITAL STOCK
Preferred
Stock
At
April 30, 2015 we had 2,000,000 shares of preferred stock, $0.001 par value authorized (the Preferred Shares). We
had no Preferred Shares outstanding at April 30, 2015.
Common
Stock
At
April 30, 2015 we had 200,000,000 shares of common stock, $0.001 par value authorized (the Common Shares), with 30,637,844
Common Shares issued and outstanding. We also had 428,143,468 Common Shares reserved for potential debt conversions at April 30,
2015.
Common
Stock Issuances During the Year Ended April 30, 2015
Shares Issued | | |
Fair Market
Value of Shares
Issued | | |
Purpose |
| 9,290,844 | | |
$ | 114,799 | | |
Debt conversion |
| 1,605,000 | | |
| 853,850 | | |
Pursuant to terms of employment agreements |
| 755,000 | | |
| 196,000 | | |
Pursuant to terms of consulting agreements |
| 700,000 | | |
| 15,000 | | |
Pursuant to private placements agreements |
| 350,000 | | |
| 8,864 | | |
Loan consideration |
| 57,000 | | |
| 29,900 | | |
Services rendered |
| 20,000 | | |
| 52,300 | | |
Pursuant to terms of property lease agreements |
| 12,777,844 | | |
$ | 1,270,713 | | |
|
Common
Stock Issuances During Year Ended April 30, 2014
During
May and June 2013, we entered into a Securities Purchase Agreement with multiple investors for the issuance and sale of Company
Shares (the May/June 2013 Private Placement). The May/June 2013 Private Placement closed on June 21 2013, through
which we sold an aggregate of 1,220,000 Company Shares at $0.01 per share, for an aggregate purchase price of $12,200. Company
Shares included in the May/June 2013 Private Placement were registered pursuant to a Form S-1 Registration Statement under the
Securities Act of 1933 which was deemed effective by the Securities Exchange Commission (SEC) on April 12, 2014 (the
April 12, 2014 Form S-1").
On
February 27, 2014, pursuant to the terms of the CGC Acquisition, we acquired 100% of the issued and outstanding shares of CGC
and 100% of the issued and outstanding Common Stock Purchase Warrants of CGC (the CGC Warrants), in exchange for the
issuance of an aggregate of 5,000,000 Company Shares and Common Stock Purchase Warrants for the purchase of an aggregate of 1,497,000
Company Shares (the Company Warrants). The Company Shares included 4,502,000 shares to be issued to Mr. Schneider,
our sole officer and director. The Company Warrants are exercisable for a term of five years commencing six months from the date
of issuance at an exercise price of $1.00 per share.
On
March 14, 2014, pursuant to the terms of the Mary Jane companies Acquisition, we agreed to purchase and the managing member of
the Mary Jane companies agreed to sell 100% of their issued and outstanding shares or membership interests (the Mary Jane
companies Stock) in exchange for an aggregate of 2,500,000 Company Shares. In addition, the number of Company Shares to
be issued may be increased, but not decreased, one time only on the first year anniversary of the closing of the Mary Jane companies
Acquisition, so as to ensure that the value of the Company shares issued in the transaction exceeds $0.40 per share or an aggregate
of $1,000,000.
Warrants
to Purchase Common Stock of the Company
We
use the Black-Scholes-Merton option pricing model (Black-Scholes Model) to determine the fair value of Warrant(s).
The Black-Scholes Model is an acceptable model in accordance with GAAP.
Warrant
Activity during the Year Ended April 30, 2015
On
May 21, 2014, we issued Warrants to purchase 7,500 shares of our Common Stock to each of two individuals for services to be rendered
(the May 2014 Service Warrants). The May 2014 Service Warrants have an exercisable term of three years and are exercisable
at $1.50 per share. The fair value of the May 2014 Service Warrants of $159,948 was determined by using the Black-Scholes Model
on the date of the grant. The fair value of the May 2014 Service Warrants was recorded as an expense in the accompanying consolidated
financial statements.
On
May 21, 2014, we also issued a Warrant for the purchase of 62,500 shares of our Common Stock in connection with the issuance of
a convertible promissory note (the May 2014 Warrant) In September 2014, the May 2014 Warrants were canceled (see Note
4).
On
July 10, 2014, we issued Warrants for the purchase of an aggregate of 125,000 shares of our Common Stock in connection with the
issuance of convertible promissory notes (the July 2014 Warrants). In September 2014, the July 2014 Warrants were
canceled (see Note 4).
On
August 13, 2014, we issued a Warrant for the purchase of an aggregate of 513,333 shares of our Common Stock in connection with
the issuance of convertible promissory notes (the August 2014 Warrant) (see Note 4). The August 2014 Warrant have
an exercisable term of five years and are exercisable at $0.132 per share. The fair value of the August 2014 Warrant of $126,476
was determined by using the Black-Scholes Model on the date of the grant. The change in fair value as of April 30, 2015 was determined
to be $2,691. The fair value of the August 2014 Warrant was recorded as a derivative liability and the change in fair value was
recorded as an interest expense in the accompanying consolidated financial statements.
On
October 22, 2014, we issued a Warrants for the purchase of an aggregate of 176,471 shares of our Common Stock in connection with
the issuance of a convertible promissory note (the October 2014 Warrant) (see Note 4). The October 2014 Warrant have
an exercisable term of five years and are exercisable at $0.17 per share. The fair value of the October 2014 Warrant of $26,982
was determined by using the Black-Scholes Model on the date of the grant. The change in fair value as of April 30, 2015 was determined
to be $1,024. The fair value of the October 2014 Warrant was recorded as a derivative liability and the change in fair value was
recorded as an interest expense in the accompanying consolidated financial statements.
On
February 9, 2015, we issued a Warrant for the purchase of an aggregate of 458,333 shares of our Common Stock in connection with
the issuance of convertible promissory notes (the February 2015 Warrant) (see Note 6). The five-year February 2015
Warrant is exercisable at $0.06 per share and contains provisions for a cashless exercise. The fair value of the February Warrant
of $47,732 was determined by using the Black-Scholes Model on the date of the grant. The change in fair value as of April 30,
2015 was determined to be $240. The fair value of the February 2015 Warrant was recorded as a derivative liability and the change
in fair value was recorded as an interest expense in the accompanying consolidated financial statements.
Warrant
Activity during the Year Ended April 30, 2014
On
February 27, 2014, we issued Warrants or the purchase of an aggregate of 748,500 shares of our Common Stock to two entities (the
February 2014 Warrants). The February 2014 Warrants have an exercisable term of five years and are exercisable at
$1.00 per share. The fair value of the October 2014 Warrants of $1,498 was determined by using the Black-Scholes Model on the
date of the grant. The fair value of the February 2014 Warrants was recorded as a warrant liability in the accompanying condensed
consolidated financial statements.
Stock
Options
Effective
May 9, 2014, we established the MaryJane Group, Inc. 2014 Equity Incentive Plan ("2014 Plan) pursuant to which 1,000,000
shares of our Company Shares were reserved for issuance upon the exercise of options ("2014 Plan Option(s)). The 2014
Plan was designed to serve as an incentive for retaining our qualified and competent key employees, officers and directors, and
certain consultants and advisors. The 2014 Plan Options have an exercise period of ten years from the date of issuance. At April
30, 2015, no options were granted under the 2014.
NOTE
9 – INCOME TAXES
At
April 30, 2015, we had a federal net operating tax loss carry-forward of approximately $3,000,000. The tax loss carry-forwards
are available to offset future taxable income with the federal carry-forwards beginning to expire in 2033. Future tax benefits
which may arise as a result of these losses have not been
recognized
in these consolidated financial statements, as their realization is determined not likely to occur and accordingly, the Company
has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The
difference between the expected income tax expense (benefit) and the actual tax expense (benefit) computed by using the Federal
statutory rate of 34% is as follows:
| |
Tax Years Ended April 30, | |
| |
2015 | | |
2014 | |
Expected income tax benefit at statutory rate of 34% | |
$ | (997,577 | ) | |
$ | (86,178 | ) |
Change in valuation account | |
| 997,577 | | |
| 86,178 | |
Income tax expense (benefit) | |
$ | — | | |
$ | — | |
Deferred
tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial
reporting purposes. Temporary differences, which give rise to a net deferred tax asset, are as follows:
| |
Tax Years Ended April 30, | |
| |
2015 | | |
2014 | |
Deferred Tax Assets: | |
| | | |
| | |
Tax benefit of net operating loss carry-forward | |
$ | 997,577 | | |
$ | 86,178 | |
Less: valuation allowance | |
| (997,577 | ) | |
| (86,178 | ) |
Net deferred tax asset | |
$ | — | | |
$ | — | |
NOTE
10 – COMMITMENTS AND CONTINGENCIES
Office
Leases
On
July 21, 2014, we relocated our principal office, and that of our subsidiaries, to 910 Sixteenth Street, Suite 412, Denver, Colorado
80202 when we entered into a three-year lease. We lease 1,129 square feet of office space under the lease which expires on July
31, 2017. The monthly lease amount through July 31, 2015 is $1,505; thereafter, it increases to $1,600 and $1,700 on August 1,
2015 and 2016, respectively. The lease permits a one-time extension of the lease for a two-year period with the lease amount being
increased to $1,800 and $1,900, respectively. Rent expense for the period from July 21, 2014 to April 30, 2015 was $13,545.
As
of April 30, 2015, future minimum rental payments are as follows:
Years Ending April 30, | |
| |
2015 | |
$ | 18,915 | |
2016 | |
| 20,100 | |
2017 | |
| 5,100 | |
Total | |
$ | 44,115 | |
On
September 1, 2013, we entered into a Commercial Lease Agreement (the 2013 Lease) for 4,000 square feet of office and
warehouse space expiring November 30, 2018. The base lease rate is $2,699 per month. The lease was terminated as of August 1,
2014. Rent expense for the periods from May 1, 2014 to July 31, 2014 and September 1, 2013 to April 30, 2014 was $8,097 and $21,592,
respectively.
On
April 1, 2014, we entered into a Commercial Lease Agreement (the 2014 Lease) for 4,000 square feet of retail and warehouse
space expiring November 30, 2018. The base lease rate is $2,950 per month. The lease was terminated as of August 1, 2014. Rent
expense for the periods from May 1, 2014 to July 31, 2014 and April 1, 2014 to April 30, 2014 was $8,850 and $2,950, respectively.
Property
Leases
On
April 9, 2014 we entered into a one year lease with the owner of the Adagio Vista Bed and Breakfast (Adagio) located
at 1430 Race Street, Denver, Colorado (the Adagio Lease). The Adagio Lease commenced April 10, 2014 and expires April
9, 2015. The monthly rent is $9,000 per month, plus 2 1/2% of the monthly gross lodging revenue. As additional consideration,
we issued the owner of the Adagio 10,000 shares of our Common Stock. We entered into a six-month lease agreement for the monthly
rate of $10,000 plus a 2 ½ % gross revenue royalty which ends on December 31, 2015. As additional consideration, we put
down an additional $10,000 as a refundable deposit.
On
September 4, 2014, we entered into a one year lease with the owners of the Mountain Vista Bed and Breakfast (Mountain Vista),
located at 358 Lagoon Lane, Silverthorne Colorado (the Mountain Vista Lease). The Mountain Vista Lease commenced October
1, 2014 and expires September 30, 2015. The monthly rent is $3,500 per month, plus 2% of the monthly gross lodging sales. As additional
consideration, we agreed to issue the owners of the Mountain Vista 10,000 shares of our Common Stock. Pursuant to the terms of
the Mountain Vista Lease, we were granted the exclusive option to purchase the Mountain Vista at the market value of the premises
determined by a commercial appraisal on the option date.
Income
Taxes Returns
Federal
and state income tax returns for the partial fiscal year ended April 30, 2012 and the fiscal years ended April 30, 2013 and 2014
have not been filed. No taxable income was reported during those periods; therefore, no taxes will be due. Penalties and interest
related to non-filing of the returns may be due, however management has determined that charges, if any, will be nominal and no
accrual for this expense has been recorded in the accompanying consolidated financial statements.
NOTE
11 – SUBSEQUENT EVENTS
Corporate
Actions
Amendment
to Articles of Incorporation
On
May 11, 2015, the Board of Directors and shareholders owning a majority of the shares outstanding of the Company approved an increase
in its authorized shares of common stock. The Company filed a Certificate of Amendment to Certificate of Incorporation with the
Nevada Secretary of State to increase its authorized shares of common stock from 200,000,000 to 1,000,000,000 shares, $0.001 par
value per share.
On
June 19, 2015, the Board of Directors designated 100,000 shares of its blank check preferred stock as Series A Preferred Stock,
par value $0.001 per share. Each share of Series A Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters
submitted to a vote of the stockholders of the Company.
On
June 25, 2015, the Board of Directors and a majority of the shareholders approved an increase in its authorized shares and filed
a Certificate of Amendment to Certificate of Incorporation with the Nevada Secretary of State to increase its authorized capital
to 2,002,000,000 shares including 2,000,000,000 shares of common stock, $0.001 par value per share, and 2,000,000 of preferred
stock, $0.001 par value per share.
Issuance
of Series A Preferred Stock
On
June 23, 2015, the Board of Directors approved the issuance of 100,000 shares of Series A Preferred Stock to Joel Schneider, the
Companys Chief Executive Office and President, for certain financial accommodations made to the Company including personal guarantees
on loans and property leases.
Formation
of Subsidiaries
We
formed two subsidiaries, MJ Ranch, LLC and SA Hotel, LLC, on June 8 and June 23 2015, respectively. MJ Ranch, LLC will be used
to search for a new property that is suitable to host Cannacamp. SA Hotel, LLC will be used to develop and maintain operations
for our new property in Colorado Springs, CO.
Property
Transactions
Hotel
San Ayre
On
June 24, 2015, the Company executed a Lease Option Agreement (the Lease) with Hotel San Ayre, LLC for the purchase
of Hotel San Ayre and its four property locations in Colorado Springs, Colorado. The two-year lease option term commences on July
15, 2015 and terminates the earlier of July 14, 2017 or the closing date of the purchase thereof. The base rental amount for the
first 12 months of the Lease is $12,500 and is $13,500 for the last 12 months of the Lease. The Company is responsible for all
operation, repair, use and maintenance of the premises during the term of the Lease. Joel Schneider, the Companys Chief Executive
Officer, personally guaranteed the Lease.
Upon
execution of the Lease, the Company paid a hard deposit of $30,000 which may be applied to the future purchase; however, is not
considered a security deposit and is not refundable if the purchase option is not exercised. The purchase price for the Hotel
San Ayre is $2,100,000 on an as-is basis.
Adagio
On
February 27, 2015, we exercised our option to purchase the Adagio and executed a Contract to Buy and Sell Real Estate (the Sales
Contract) with A Capital Inn, Inc. (the Seller). The purchase price for the Adagio was $1,500,000 with the Seller
agreeing to finance $1,000,000. Upon execution of the Sales Contract, the Company made a non-refundable deposit of $50,000 and
on May 15, 2015 we made an additional $25,000 non-refundable deposit; however, we were unable to secure proper financing to close
the purchase. Subsequently, we entered into a six-month lease agreement for the monthly rate of $10,000 plus a royalty of 2 ½%
of gross lodging revenue which ends on December 31, 2015. We are currently seeking a larger property to replace the Adagio. Our
ideal property would be a 20 to 25 room hotel within walking distance of the Denver metropolitan area.
Canna-camp
On
May 22, 2015, we entered into a joint-venture agreement with the owners of the Wilderness Trails Ranch, LLC to open an exclusive
cannabis resort near Durango, Colorado. As of July 2, 2105 we withdrew our position in the joint-venture due to our partners
lack of ability to perform. We are currently seeking a new location for Canna-camp 2016. The Company spent approximately $20,000
towards this project and is seeking to recoup $10,000 from our property partner.
Issuance
of Convertible Debt
On
June 1, 2015, we entered into an agreement with an investor to retire certain outstanding debt in exchange for another convertible
promissory note in the principal amount of $53,274 bearing interest at 12% annually. The principal and all accrued but unpaid
interest is due on May 26, 2016. In addition, we issued and sold a convertible promissory note bearing interest at 12% annually,
compounded monthly, in the principal amount of $48,000. The principal and all accrued but unpaid interest is due on May 22, 2016.
We agreed to pay the investors expenses associated with the transaction in the amount of 5,000. The note is convertible at a
price of the lesser of (i) $0.02 per share or (ii) 40% of the lowest Trading Price in the 10 trading days prior to conversion.
The holders ability to convert the note, however, is limited in that it will not be permitted to convert any portion of
the note if the number of shares of our common stock beneficially owned by the holder and its affiliates, together with the number
of shares of our common stock issuable upon any full or partial conversion,
would
exceed 4.99% of our outstanding shares of common stock. The holder has the right to waive this term upon 61 days notice
to us.
On
June 11, 2015, we issued an 8% Convertible Promissory Note in the aggregate amount of $60,000. This note matures on June 11, 2016
and is convertible at 57% of the lowest trading price for the 20 days prior to the conversion date. We received $57,000 in net
proceeds from this transaction which we used for general working capital.
On
June 12, 2015, a third party purchased two Convertible Promissory Notes issued on June 16, 2014 and July 1, 2014. We issued a
Convertible Promissory Note in the aggregate amount of $52,087 and an 8% Convertible Promissory Note in the aggregate amount of
$30,000. The notes mature June 12, 2016 and is convertible at 59% of the lowest trading price for the 20 days prior to the conversion
date. We received $28,500 in net proceeds from this transaction which we used for general working capital.
On
June 23, 2015, we issued a 10% Convertible Promissory Note in the aggregate amount of $69,000. The note matures June 23, 2016
and is convertible at 50% to the lowest sale price of common stock in (i) 25 trading days immediately prior to the Original Issue
Date or (ii) the 25 trading days prior to the conversion date. We received $60,000 in net proceeds from this transaction which
we used for general working capital.
On
June 30, 2015, we issued an 8% Convertible Promissory Note in the aggregate amount of $50,750. The note matures March 30, 2016
and is convertible at 55% of the average of the two lowest prices in the prior 5 trading days prior to the conversion date. We
received $45,000 in net proceeds from this transaction which we used for general working capital.
Amendment
of Convertible Debt Instrument
On July 10, 2015, we agreed to amend a secured convertible promissory note originally entered into on October
22, 2014 in the principal amount of $225,000, of which we only received $50,000. The amendment provides that we may not prepay
the note without the written consent of the noteholder. The amendment deleted all prior conversion terms and now allows the investor
to convert the remainder of the debt at a conversion price equal to 50% of the lowest closing bid price of our common stock in
the twenty (20) trading days immediately preceding conversion. The change in conversion terms was beneficial to us in that it reduced
the effective conversion discount of the note from 65% to 50% and eliminated all true-up conditions. In addition, all warrants
issued in the original transaction with the investor were canceled. The outstanding principal balance due under this note as of
July 10, 2015 is $35,437.
Unregistered
Sales of Equity Securities
Subsequent
to April 30, 2015, we converted debt in the aggregate amount of $661,322 into 869,238,855 shares of our Common Stock.
| ITEM 9. | CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
Effective
January 14, 2015, the Board of Directors of the Company approved a change in independent registered public accountants from Harris
& Gillespie, CPAs, PLLC, f/k/a Thomas J. Harris, CPA (Harris & Gillespie) to Turner, Stone and Company LLP
(Turner Stone). Accordingly we terminated our relationship with Harris & Gillespie and engaged Turner Stone to
serve as our independent registered public accountants.
At
the time of this filing, Harris & Gillespie is dissolved; therefore, we were unable to obtain their consent and updated opinion
required to be filed as exhibits to this Report pertaining to the audit conducted by Harris & Gillespie for the year ended
April 30, 2014.
| ITEM 9A. | CONTROLS
AND PROCEDURES. |
Evaluation
of Disclosure Controls and Procedures
As
of April 30, 2015, management carried out an evaluation, under the supervision and with the participation of our chief executive
officer and principal financial officer, of the effectiveness of our disclosure controls and procedures. Based upon the evaluation,
our chief executive officer and principal financial officer concluded that, as of April 30, 2015, our disclosure controls and
procedures were effective at the reasonable assurance level.
There
are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurances of achieving their control objectives.
Managements
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, is a process designed by, or under
the supervision of, the chief executive officer and chief financial officer, or persons performing similar functions, and effected
by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies
and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could
have a material effect on the financial statements.
Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Our
management, under the supervision and with the participation of our chief executive officer and principal financial officer,
conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth in
1992 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework. Based on this evaluation our management concluded that our internal control over
financial reporting was not effective as of April 30, 2015.
Changes
in Internal Control Over Financial Reporting
There
were no material changes in our internal control over financial reporting that occurred during the three month period ended April
30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| ITEM
9B. | OTHER
INFORMATION. |
None.
PART
III
| ITEM 10. | DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE. |
Directors,
Executive Officers, Promoter and Control Persons
The
following table sets forth information on our executive officers and directors as of the filing of this Report. All executive
officers serve at the discretion of the Board of Directors. The term of office of each of our directors expire at our next Annual
Meeting of Shareholders or until their successors are duly elected and qualified. We do not have any promoters or control persons.
Name |
Age |
Position |
Date
Elected Director |
Date
Appointed Officer |
Joel
C. Schneider |
56 |
Chief
Executive Officer, President, Chief Financial Officer, Secretary, Treasurer, Sole Director |
February
22, 2014 |
February
22, 2014 |
Business
Experience of Directors and Executive Officers
Joel
Schneider – President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and sole Director
On
February 22, 2014, Mr. Schneider became our President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer
and sole Director. Mr. Schneider was admitted to the New York State Bar in 1984. He earned a Bachelor of Arts Degree in Political
Science in 1981 at State University of New York at Buffalo. He received a Juris Doctor degree from California Western School of
Law in San Diego, California in 1984. Mr. Schneider has been in the private practice of law from 1984 to 1989 and from 1995 to
the present. From 1990 to 1995, Mr. Schneider was the Chairman of the Board and Chief Executive Officer of E.S.C. Industries,
Inc. and Economy Fasteners, both companies which specialized in the distribution of fastening and anchoring devices. From 1990
to 1991, Mr. Schneider was Chairman of the Board of Protective Apparel Corporation of America, a manufacturer of bullet resistant
vests. During his years of practicing law, Mr. Schneider has represented many public companies as corporate and securities counsel.
Involvement
in Certain Legal Proceedings
Currently,
and for the past ten years, our sole officer has not been involved in any legal proceeding concerning (i) any bankruptcy petition
filed by or against any business of which he was a general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (ii) any conviction in a criminal proceeding or being subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); (iii) being subject to any order, judgment or decree, not subsequently
reversed, suspended, or vacated, of any court of competent jurisdiction permanently or temporarily enjoining, barring, suspending
or otherwise limiting involvement in any type of business, securities or banking activity; or (iv) being found by a court, the
Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law (and
the judgment has not been reversed, suspended or vacated).
Family
Relationships
There
are no family relationships between our officers and directors.
Other
Directorships
Other
than as indicated within this section at Business Experience, our sole director does not hold or has not been nominated
to hold a directorship in any company with a class of securities registered pursuant to Section 12 of the Exchange Act (the Act)
or subject to the requirements of Section 15(d) of the Securities Act of 1933, or any company registered as an investment company
under the Investment Company Act of 1940.
Committees
of the Board
We
have not yet appointed an Audit Committee or Nominating Committee. Until such time as appointments are made, our sole director
will serve in those capacities.
Codes
of Conduct
On
March 31, 2014, our Board of Directors approved (i) a Code of Business Conduct and Ethics for each director and executive officer,
(ii) a Code of Ethics for Financial Executives for all officers with financial oversight responsibilities, and (iii) an Insider
Trading Policy for each director and executive officer. A form of the Code of Business Conduct and Ethics, Code of Ethics for
Financial Executives, and Insider Trading Policy is attached hereto as an exhibit and is included herein by reference. We will
provide a copy of these policies free of charge upon written request.
The
Code of Business Conduct and Ethics is applicable to all of our directors and executive officers. This code is intended to focus
the members of our Board of Directors and each executive officer on areas of ethical risk, provide guidance to directors and executive
officers to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and help foster
a culture of honesty and accountability. All members of our Board of Directors and all executive officers are required to sign
this code on an annual basis.
The
Code of Ethics is applicable to all financial executives and any other senior officer with financial oversight responsibilities.
This code governs the professional and ethical conduct of our financial executives, and directs that they: (i) act with honesty
and integrity; (ii) provide information that is accurate, complete, objective, relevant, and timely; (iii) comply with federal,
state, and local rules and regulations; (iv) act in good faith with due care, competence and diligence; and (v) respect the confidentiality
of information acquired in the course of their work and not use the information acquired for personal gain. All of our financial
executives are required to sign this code on an annual basis.
The
Insider Trading Policy is applicable to all directors and officers. Insider trading generally refers to the buying or selling
of a security in breach of a fiduciary duty or other relationship of trust and confidence while in possession of material, non-public
information about the security. Insider trading violations may also include tipping such information, securities trading
by the person tipped, and securities trading by those who misappropriate such information. The scope of insider trading
violations can be wide reaching. As such, our Board of Directors has adopted an Insider Trading Policy that outlines the definitions
of insider trading, the penalties and sanctions determined, and what constitutes material, non-public information. Illegal insider
trading is against our policy as such trading can cause significant harm to our reputation for integrity and ethical conduct.
Individuals who fail to comply with the requirements of the policy are subject to disciplinary action, at the sole discretion
of the Company, including dismissal for cause. All members of our Board of Directors and all executive officers are required to
ratify the terms of this policy on an annual basis.
Indemnification
Section
145 of the Nevada Corporation Law provides in relevant parts as follows:
(1)
A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses (including attorneys fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his
conduct
was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or on a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(2)
A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise
against expenses (including attorneys fees) actually and reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made in respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless
and only to the extent that the court in which such action or suit was brought shall determine on application that, despite the
adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity
for such expenses which such court shall deem proper.
(3)
To the extent that a director, officer, employee, or agent of a corporation has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to in (1) or (2) of this subsection, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by him in
connection therewith.
(4)
The indemnification provided by this section shall not be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person.
The
foregoing discussion of indemnification merely summarizes certain aspects of indemnification provisions and is limited by reference
to the above discussed sections of the Nevada Corporation Law.
Our
Articles of Incorporation and Bylaws provide that we may indemnify to the full extent of its power to do so, all directors, officers,
employees, and/or agents. Insofar as indemnification by us for liabilities arising under the Securities Act that may be permitted
to our officers and directors pursuant to the foregoing provisions or otherwise, we are aware that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
| ITEM 11. | EXECUTIVE
COMPENSATION. |
Summary
Compensation Table
The
table below shows certain compensation information for services rendered in all capacities for the last two fiscal years ended
April 30, 2015 and 2014. The information includes the dollar value of base salaries, bonus awards, the number of non-qualified
stock options (Options) granted and certain other compensation, if any, whether paid or deferred.
Name
and
Principal
Position |
Year |
Salary($) |
Bonus
($) |
Stock
Awards
($) |
Option
Awards
($)(1) |
Non-Equity
Incentive Plan Compen-sation
($) |
Nonquali-fied
Deferred Compen-sation Earnings
($) |
All
Other Compen-sation
($) |
Total
($) |
Joel
C. Schneider(1)
(CEO/CFO) |
2015 |
$108,617 |
— |
— |
— |
— |
— |
$6,000 |
$114,617 |
2014 |
$5,498 |
— |
— |
— |
— |
— |
— |
$5,498 |
Gabe
Berkowitz
(former
officer) |
2015 |
$4,167 |
— |
— |
— |
— |
— |
— |
$4,167 |
2014 |
— |
— |
— |
— |
— |
— |
— |
— |
Jose
Ramirez
(former
officer) |
2015 |
$7,897 |
— |
— |
— |
— |
— |
— |
$7,897 |
2014 |
$14,206 |
— |
— |
— |
— |
— |
— |
$14,206 |
LaRon
Bradford
(former
officer) |
2015 |
— |
— |
— |
— |
— |
— |
— |
— |
2014 |
$7,445 |
— |
— |
— |
— |
— |
— |
$7,445 |
| (1) | For
2015: All Other Compensation includes $6,000 for car allowance and $0 for health insurance premiums paid on Mr. Schneiders
behalf. |
Outstanding
Equity Awards at Fiscal Year End
The
Company had no outstanding equity awards to officers as of the fiscal years ended April 30, 2015 and 2014. No executive officers
have exercised any of their equity awards.
Employment
Agreements with Executive Officers
On
March 24, 2014, in conjunction with the Mary Jane Group Acquisition, our CGC subsidiary entered into an Employment Agreement with
Joel Schneider (as President and Chief Executive Officer) for a term of three years. The Employment Agreement can be extended
for additional one-year terms on the anniversary date thereof. Salary under the Employment Agreement is $100,000 through December
31, 2014, $125,000 for calendar year 2015, and $150,000 for the remaining term of the Employment Agreement. Mr. Schneiders base
annual salary may be increased from time to time as determined by the Board of Directors, and, if so increased, such base annual
salary shall not thereafter, during Mr. Schneiders employment under the Agreement, be decreased. The Employment Agreement also
provides that Mr. Schneider paid a car allowance of $500 per month and Mr. Schneider is also paid living expenses of $1,500 per
month from the date of the Employment Agreement through December 2014. The Employment Agreements contain non-compete clauses that
expire two years after the termination date and non-solicitation clauses that expire one year after the termination date of the
Employment Agreement. The Company may, in its discretion and at its option, terminate Mr. Schneiders employment with or without
cause, and without prejudice to any other right or remedy to which the Company or Mr. Schneider may be entitled at law or in equity
or under the Employment Agreement.
On
March 24, 2014, we entered into an Employment Agreement with LaRon Bradford (Vice President and Director of Sales and Marketing)
for a term of three years. Salary under the Employment Agreement was $100,000 through December 31, 2014. On April 21, 2014, we
terminated the employment of Mr. Bradford for
cause.
Pursuant to the terms of the Employment Agreement, upon termination for cause, he was not eligible for any compensation other
than his base salary accrued through the date of termination.
On
March 24, 2014, we entered into an Employment Agreement with Jose Ramirez (Vice President and Chief Operating Officer) for a term
of three years. Salary under the Employment Agreement was $100,000 through December 31, 2014. On June 8, 2014, Mr. Ramirez resigned
as Vice President and Chief Operating Officer. Pursuant to the terms of the Employment Agreement, he was not eligible for any
compensation other than his base salary accrued through the date of resignation.
On
June 27, 2014, we entered into an Executive Employment Agreement with Charles Berkowitz wherein Mr. Berkowitz was hired to serve
as our Vice President and Chief Operating Officer for an initial term of three years. Salary under the Executive Employment Agreement
was $100,000 through December 31, 2014. Upon execution of the Executive Employment Agreement, Mr. Berkowitz was issued 250,000
shares of the Companys Common Stock. On August 29, 2014, Mr. Berkowitz was terminated as Vice President and Chief Operating Officer.
Pursuant to the terms of the Executive Employment Agreement, he was not eligible for any compensation other than his base salary
accrued through the date of resignation.
Director
Compensation
We
do not pay cash fees to directors who attend regularly scheduled and special board meetings. We paid no compensation to our directors
for services rendered for the year ended April 30, 2015.
| ITEM 12. | SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
Beneficial
Security Ownership Table
As
of the date of this filing, the following table sets forth certain information with respect to the beneficial ownership of our
Common Stock and Preferred Stock by (i) each shareholder known by us to be the beneficial owner of more than five percent (5%)
of our Common Stock and Preferred Stock, (ii) by each of our current directors and executive officers as identified herein, and
(iii) all of our directors and executive officers as a group. Each person has sole voting and investment power with respect to
the shares of Common Stock and Preferred Stock, except as otherwise indicated. Beneficial ownership is determined in accordance
with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock
and Preferred Stock, non-qualified stock options (Options), common stock purchase warrants (Warrants),
and convertible securities that are currently exercisable or convertible into shares of our Common Stock within sixty (60) days
of the date of this document, are deemed to be outstanding and to be beneficially owned by the person holding the Options, Warrants,
or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person. Unless otherwise noted, the address for all officers
and directors listed below is 910 Sixteenth Street, Suite 412, Denver, CO 80202.
Title
of Class |
Name
and Address of Officer and Directors |
Amount
and Nature of Beneficial Ownership(1) |
Percent
of
Class |
Common
Stock |
Joel
C. Schneider (Chief Executive Officer, President, Secretary, Treasurer, Director) |
12,502,000 |
1.38% |
Common
Stock |
All
Officers & Directors as a Group (1 persons) |
12,502,000 |
1.38% |
|
|
|
|
Preferred
Stock |
Joel
C. Schneider (Chief Executive Officer, President, Secretary, Treasurer, Director) |
100,000 |
100.0% |
Preferred
Stock |
All
Officers & Directors as a Group (1 persons) |
100,000 |
100.0% |
| (1) | Unless
otherwise noted, we believe that all shares are beneficially owned and that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock and Preferred Stock owned by them. Applicable percentage
of ownership is based on 903,876,699 and 100,000 shares of Common Stock and Preferred Stock, respectively, currently outstanding. |
Under
Rule 144 promulgated under the Securities Act, our officers, directors and beneficial shareholders may sell up to one percent
(1%) of the total outstanding shares (or an amount of shares equal to the average weekly reported volume of trading during the
four calendar weeks preceding the sale) every three months provided that (i) current public information is available about our
Company, (ii) the shares have been fully paid for at least one year, (iii) the shares are sold in a brokers transaction
or through a market-maker, and (iv) the seller files a Form 144 with the SEC.
Section
16(a) Beneficial Ownership Reporting Compliance
During
the year ended April 30, 2015, we acknowledge that none of our officers and directors failed to file on a timely basis certain
ownership forms required by Section 16(a) of the Exchange Act.
| ITEM
13. | CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
None
of our directors, officers or principal shareholders, nor any associate or affiliate of the foregoing, has any interest, direct
or indirect, in any transaction or in any proposed transaction, which materially affected us during the year ended April 30, 2015.
Director
Independence
Although
our Board of Directors believes that our directors will exercise their judgment independently, no director is totally free of
relationships that, in the opinion of the Board of Directors, might interfere with their exercise of independent judgment as a
director.
Promoters
and Certain Control Persons
None.
| ITEM
14. | PRINCIPAL
ACCOUNTANT FEES AND SERVICES. |
Audit
Fees.
Turner
Stone—The aggregate amount expected to be billed for professional services rendered by Turner Stone for the quarterly
review for the three month period ended January 31, 2015 and the annual integrated audit for the year ended April 30, 2015 is
estimated to be $29,000.
Harris
& Gillespie—The aggregate amount be billed for professional services rendered by Harris & Gillespie for the
year ended April 30, 2015 for quarterly reviews and the annual integrated audit totaled $9,000. The aggregate amount billed for
professional services rendered by Harris & Gillespie for the year ended April 30, 2014 for quarterly reviews and the annual
integrated audit totaled $15,000.
Tax
Fees. We incurred no other fees for the 2015 and 2014 fiscal years.
All
Other Fees. We incurred no other fees for the 2015 and 2014 fiscal years.
| ITEM
15. | EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES. |
Exhibit
No. |
Date
of Document |
Name
of Document |
2.1 |
February
27, 2014 |
Securities
Exchange Agreement by and among Pladeo Corp., Capital Growth Corporation and the Shareholders of Capital Growth Corporation(2)
|
2.2 |
March
14, 2014 |
Securities
Exchange Agreement by and between Pladeo Corp. and the Principal Shareholders of Mary Jane Entertainment, LLC, Mile High Times,
LLC, Dab City Radio and Mary Jane Tours, LLC(3) |
3.1 |
February
16, 2012 |
Articles
of Incorporation(1) |
3.2 |
March
24, 2014 |
Certificate
of Amendment to Articles of Incorporation (to change name to The MaryJane Group, Inc.)* |
3.3 |
April
8, 2015 |
Certificate
of Amendment to Articles of Incorporation (increase to 202,000,000 authorized capital shares) (8) |
3.4 |
May
11, 2015 |
Certificate
of Amendment to Articles of Incorporation (increase to 1,002,000,000 authorized capital shares)(9) |
3.5 |
June
22, 2015 |
Certificate
of Designation (to establish Series A Preferred Stock) (10) |
3.6 |
June
25, 2015 |
Certificate
of Amendment to Articles of Incorporation (increase to 2,002,000,000 authorized capital shares) (10) |
3.7 |
n/a |
Bylaws(1) |
10.0 |
March
14, 2014 |
Employment
Agreement between Capital Growth Corporation and Joel Schneider(3) |
10.1 |
March
14, 2014 |
Employment
Agreement between Capital Growth Corporation and Jose Ramirez(3) |
10.2 |
March
14, 2014 |
Employment
Agreement between Capital Growth Corporation and LaRon Bradford(3) |
10.3 |
August
8, 2013 |
Lease
between MaryJane Entertainment LLC and Washington Commerce Center, LLC(3) |
10.4 |
March
20, 2014 |
Securities
Purchase Agreement, form of(3) |
10.5 |
March
20, 2014 |
Convertible
Debenture, form of(3) |
10.6 |
n/a |
Insider
Trading Policy(3) |
10.7 |
June
8, 2014 |
Resignation
of Jose Ramirez(4) |
10.8 |
June
27, 2014 |
Executive
Employment Agreement with Charles G. Berkowitz(5) |
10.9 |
July
21, 2014 |
University
Office Building Lease* |
10.10 |
September
4, 2014 |
Lease
between the Company and Mountain Vista Bed and Breakfast(6) |
10.11 |
February
5, 2015 |
Consulting
Agreement between the Company and dLOMa Performance Hospitality, LLC and Dustin Lombard* |
10.12 |
February
25, 2015 |
Contract
to Buy and Sell Real Estate between the Company and A Capital Inn, Inc.(7) |
10.13 |
May
22, 2015 |
Venture
Agreement between Wilderness Ranch Trails, LLC and the Company* |
10.14 |
May
25, 2015 |
Consulting
Agreement between Cultivating Spirits, LLC and Philip Wolf and the Company* |
10.15 |
June
23, 2015 |
Lease
between the Company and Hotel San Ayre, LLC(11) |
14.00 |
n/a |
2014
Code of Business Conduct and Ethics, form of(3) |
14.01 |
n/a |
2014
Code of Business Ethics for Financial Executives, form of(3) |
21.00 |
July
27, 2015 |
Subsidiaries
of the Registrant* |
31.1 |
July
27, 2015 |
Certification
of Chief Executive Officer and Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a).* |
32.1 |
July
27, 2015 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.* |
101.INS |
n/a |
XBRL
Instance Document* |
101.SCH |
n/a |
XBRL
Taxonomy Extension Schema Document* |
101.CAL |
n/a |
XBRL
Taxonomy Extension Calculation Linkbase Document* |
101.DEF |
n/a |
XBRL
Taxonomy Extension Definition Linkbase Document* |
101.LAB |
n/a |
XBRL
Taxonomy Extension Label Linkbase Document* |
101.PRE |
n/a |
XBRL
Taxonomy Extension Presentation Linkbase Document* |
| (1) | Filed
as an exhibit to the Companys Registration Statement on Form S-2 filed with the Commission on July 17, 2012, which exhibit
is incorporated herein by reference. |
| (2) | Filed
as an exhibit to the Companys Current Report on Form 8-K, as amended, filed with the Commission on March 18, 2014, which
exhibit is incorporated herein by reference. |
| (3) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on April 4, 2014, which exhibit is incorporated
herein by reference. |
| (4) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on June 12, 2014, which exhibit is incorporated
herein by reference. |
| (5) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on July 3, 2014, which exhibit is incorporated
herein by reference. |
| (6) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on September 10, 2014, which exhibit
is incorporated herein by reference. |
| (7) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on March 3, 2014, which exhibit is incorporated
herein by reference. |
| (8) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on April 13, 2015, which exhibit is incorporated
herein by reference. |
| (9) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on May 11, 2015, which exhibit is incorporated
herein by reference. |
| (10) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on June 26, 2015, which exhibit is incorporated
herein by reference. |
| (11) | Filed
as an exhibit to the Companys Current Report on Form 8-K filed with the Commission on June 29, 2015, which exhibit is incorporated
herein by reference. |
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
DATE:
July 27, 2015 |
|
|
THE
MARYJANE GROUP, INC. |
|
|
By: |
/s/
Joel C. Schneider |
|
|
Joel
C. Schneider |
|
|
Chief
Executive Officer/Chief Financial Officer |
|
|
Principal
Executive Officer |
|
|
Chief
Accounting Officer |
Suite
412
UNIVERSITY
BUILDING OFFICE LEASE
THIS
OFFICE LEASE ("Lease") is entered into by Landlord and Tenant (as defined in Section 1). In consideration of the mutual
covenants hereinafter set forth, Landlord and Tenant agree as follows:
| 1. | Definitions; Basic Lease Information. |
In
addition to the terms which are defined elsewhere in this Lease, the following terms are used in this Lease and shall have the
meanings specified:
| a) | LEASE DATE: 21 July 2014 (to be dated upon
Landlord’s signature) |
| b) | TENANT: Joel C. Schneider |
| c) | TENANT'S TRADE NAME: The Mary Jane Group,
Inc. |
| d) | TENANT'S ADDRESS: 910 Sixteenth Street, Suite
412, Denver, Colorado 80202 |
| e) | LANDLORD: 910 ASSOCIATES, INC. |
| f) | LANDLORD'S ADDRESS: 910 Sixteenth Street,
Suite 500, Denver, Colorado 80202 |
| g) | PREMISES: Suite 412, The University Building,
910 Sixteenth Street, Denver, Colorado 80202 consisting of approximately 1,129 rentable square feet. |
| h) | RENTABLE AREA OF BUILDING: 104,234 square
feet |
| i) | AREA OF PREMISES AND BUILDING: The rentable
areas of the Premises and the Building as shown above have been determined by Landlord and are conclusive. |
| j) | COMMENCEMENT DATE: 21 July 2014 |
| k) | EXPIRATION DATE: 31 July 2017 |
| l) | SECURITY DEPOSIT: $7,500.00 |
| m) | MONTHLY BASE RENT: See Section 3(b) |
| n) | RENTABLE AREA OF PREMISES: Approximately
1,129 rentable square feet |
| o) | TENANT'S PRO RATA SHARE: 1.0831% |
| p) | PERMITTED USE OF PREMISES: Administrative
Office for Hospitality Group Catering to the Marijuana Industry |
| r) | GUARANTOR AND RELATIONSHIP TO TENANT: None |
| s) | BUILDING: Office building located at 910
Sixteenth Street, Denver, Colorado 80202, and commonly known as "University Building". |
| t) | ADDITIONAL RENT: Any and all amounts, other
than Monthly Base Rent, which Tenant is required or agrees to pay hereunder, including but not limited to Operating Expenses (as
hereinafter defined), late charges, reimbursements, repairs and attorneys' fees and costs incurred by Landlord in enforcing this
Lease. |
| u) | RENT: The total of Monthly Base Rent and
Additional Rent. |
| v) | OPERATING EXPENSES: Operating Expenses (defined
below) for calendar year 2013 were $8.92 per square foot and are included in the amount of Monthly Base Rent set forth in
Section 1(m). |
In
consideration of the obligation of Tenant to pay Rent, and in consideration of the other covenants, representations and warranties
of Tenant set forth in this Lease, Landlord leases to Tenant, and, in consideration of Landlord's covenants set forth in this Lease,
Tenant leases from Landlord the Premises in AS IS condition. The taking of possession by Tenant will conclusively establish that
the Premises were at such time complete and in good and satisfactory condition and repair acceptable to Tenant. Tenant is responsible
for any and all costs associated with any approved improvements and alterations including the installation of additional electrical
circuits (dedicated or otherwise), paint, carpet, doors, electric, plumbing, and ceiling tiles into the Premises. Landlord will
have carpets cleaned and paint walls as needed.
| 3. | Monthly Base Rent; Security Deposit; Office Services; and Signage. |
| a) | Monthly Base Rent: Tenant shall pay
to Landlord the Monthly Base Rent for the Premises, in advance, without demand, deduction or set off, throughout the entire term
of this Lease. The first installment of Monthly Base Rent will be due and payable on the Commencement Date and an installment of
Monthly Base Rent will be due and payable on or before the first day of each calendar month succeeding the Commencement Date. |
| b) | Monthly Base Rent Adjustment: The
Monthly Base Rent shall be increased annually as follows: |
On
21 July 2014, Monthly Base Rent shall be $0.00 per month.
On
1 August 2014, Monthly Base Rent shall be increased to $1,505.00 per month.
On
1 August 2015, Monthly Base Rent shall be increased to $1,600.00 per month.
On
1 August 2016, Monthly Base Rent shall be increased to $1,700.00 per month.
| c) | Security Deposit: Tenant shall deposit
with Landlord on the Lease Date, and shall maintain on deposit with Landlord throughout the term hereof, the Security Deposit,
which will be held by Landlord, without obligation for or accrual of interest, as security for the performance of Tenant's covenants
and obligations under this Lease. Landlord shall have the right to commingle such Security Deposit with other funds of Landlord.
It is expressly understood and agreed that such Security Deposit is not an advance rental deposit or a measure of Landlord's damages
in case of Tenant's default. Upon any default by Tenant, Landlord may, from time to time, without prejudice to or waiver of any
other remedy provided in this Lease or provided by law, use such Security Deposit to the extent necessary to make good any arrearage
of Rent or other payments due Landlord, and/or any other damage, injury, expense or liability caused by such default; and Tenant
will pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. Any unutilized
portion of such Security Deposit will be returned by Landlord to Tenant not later than sixty (60) days after expiration of this
Lease, upon the full performance of this Lease by Tenant and surrender of the Premises by Tenant to Landlord. If Tenant is not
in any state whatsoever of default under this Lease through 1 January 2016, irrespective of whether or not such default is cured,
Landlord will refund $4,100 of the original $7,500 security deposit to Tenant and the remaining $3,400 security deposit will be
retained for the term of the Lease and all renewals. |
| d) | Office Services. Landlord may offer,
as a service to its tenants in the Building, certain office services that may be utilized by Tenant pursuant to a fee schedule
as determined by Landlord from time-to-time (the "Office Services"). Tenant agrees to pay Landlord, as Additional Rent,
for any Office Services Tenant may utilize from time-to-time, within five (5) days of invoicing for any such Office Services, based
upon the fee schedule in effect at such time. |
| e) | Signage. Tenant must display a suite
sign based on Building standards and guidelines. Tenant is responsible for all costs associated with signage specifically, suite
signs and main lobby directory signs. Tenant shall affix no additional signage and/or awnings not considered Building standard,
in the Landlord's discretion, without prior written approval of Landlord. Landlord shall have the right to remove all non-permitted
signs and/or awnings, without notice to Tenant, and at the expense of Tenant. |
So long as there is no material
uncured default by Tenant, tenant shall have the option to extend the term of this Lease for one (1) two (2) year term following
the expiration date. The base rental rate for the renewal options shall be:
On 1 August
2017, Monthly Base Rent shall be increased to $1,800.00 per month.
On 1 August
2018, Monthly Base Rent shall be increased to $1,900.00 per month.
In order to exercise the option
to extend the Lease term, Tenant shall be required to give Landlord written notice of exercise of the option to extend at least
90 days prior to the expiration date of the then current term of this Lease (no later than 3 May 2017). If notice is not provided
within the designated timeframe, and the Tenant remains in possession of the premises, the monthly rent will increase by 50%.
| 5. | Use: Compliance with Laws and Rules and Regulations. |
The
Premises will be used only for the purpose set forth in Section 1(p) and for no other purpose. Tenant will at its own cost and
expense obtain any and all licenses and permits necessary for the Permitted Use of the Premises. Tenant will comply with all governmental
laws, ordinances and regulations applicable to the use of the Premises, and/or the operation of Tenant's business (including the
Americans With Disabilities Act of 1990), those Rules and Regulations set forth on Exhibit A attached hereto and made a part hereof,
as the same may be reasonably modified or propounded by Landlord from time to time, and will promptly comply with all governmental
orders and directives for the correction, prevention and abatement of nuisances in or upon, or connected with, the Premises, all
at Tenant's sole expense. Tenant will not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the Premises, nor take any other action which would constitute a nuisance or would disturb or endanger any other tenants
of the Building or unreasonably interfere with their use of their respective premises, nor impair, in the opinion of Landlord,
the appearance, character or reputation of the Building. Without Landlord's prior written
consent,
Tenant will not receive, store or otherwise handle any product, material or merchandise which is noxious, explosive or highly inflammable.
Tenant will not permit the Premises to be used for any purpose or in any manner (including without limitation any method of storage)
which would render the insurance on the Premises or Building void or the insurance risk more hazardous. If any increase in the
fire and extended coverage insurance premiums paid by Landlord for the Building is caused by Tenant's use and occupancy of the
Premises, then Tenant will pay to Landlord as Additional Rent, upon demand, the amount of such increase.
Tenant's
use and occupancy of the Premises shall in no manner or way result in the direct or indirect violation of any local, state or federal
law, rule or regulation pertaining to environmental regulation, contamination or clean-up (collectively, "Environmental Laws"),
including by way of example and without limitation the Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act and any similar statutes of the State of Colorado. Further, Tenant's use and occupancy of
the Premises shall not include the use, handling, transportation or storage of any hazardous and/or toxic substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos, petroleum products or raw materials which include hazardous
constituents) or any other substances or materials which are included under or regulated by Environmental Laws (collectively, "Hazardous
Substances"). Tenant shall keep or cause the Premises to be kept free from Hazardous Substances and in compliance with all
Environmental Laws and shall promptly notify Landlord if Tenant shall become aware of any Hazardous Substances on or about the
Premises or if Tenant shall become aware that the Premises are in direct or indirect violation of any Environmental Laws. Tenant
shall remove such Hazardous Substances and/or cure such violations, as applicable, promptly after Tenant becomes aware of same,
at Tenant's sole expense. Tenant hereby agrees to indemnify Landlord and hold Landlord and its successors, assigns, employees,
agents, officers, directors, partners, and attorneys harmless from and against any and all expenses, damages, suits, liabilities
and costs (including without limitation attorney's fees and consequential damages) suffered or incurred by Landlord or any of such
parties as a result of the use, handling, storage, transportation, treatment or disposal of Hazardous Substances on or about the
Premises and/or the violation of Environmental Laws (as well as any other laws, ordinances, rules or regulations as set forth in
the first paragraph of this Section 6), even if such damages and/or costs shall be suffered or incurred after expiration or earlier
termination of this Lease. Such indemnity shall expressly survive expiration or termination of this Lease, whether by lapse of
time or otherwise.
| 6. | Operating Expenses; Payment of Tenant's Pro Rata Share. |
| a) | Beginning on 1 August 2015, in addition to
the Monthly Base Rent, Tenant will pay the Landlord on the first day of each calendar month during the term of this Lease, as Additional
Rent, one-twelfth (1/12) of Tenant's Pro Rata Share of the amount by which Operating Expenses for the previous calendar year or
partial calendar year exceed the Operating Expense Base rounded to the nearest whole dollar. During January of each calendar year
or as soon thereafter as practicable, Landlord will give Tenant written notice of the amounts payable under this Section 6 for
the ensuing calendar year ("Increased Expenses"). On or before the first day of each calendar month during the ensuing
calendar year, Tenant will pay Landlord one-twelfth (1/12) of Tenant’s Pro Rata Share of such amount; provided, however,
if such notice is not given in January, Tenant will continue to pay its Pro Rata Share on the basis of the prior year's Operating
Expenses until the calendar month after such notice is given. If at any time it reasonably appears to Landlord that the Operating
Expenses for the then-current calendar year will vary from Landlord’s estimate then Landlord may readjust the estimated Operating
Expenses for such calendar year by notice to Tenant, and subsequent payments by Tenant for such year will be based upon such readjusted
estimated Operating Expenses. In the calendar month in which Tenant first pays its Pro Rata Share in accordance with the increase
of adjusted estimated Operating Expenses (and simultaneously therewith), Tenant will also pay Landlord Tenant's Pro Rata Share
of any additional amounts payable under the adjusted estimated Operating Expenses, for each calendar month which has elapsed since
December of the prior years. |
| b) | Unless delayed by causes beyond Landlord’s
reasonable control, Landlord shall deliver to Tenant within 60 days after the end of each calendar year a written statement (the
“Statement”) setting out in reasonable detail the amount of Tenant’s Pro Rata Share of Operating Expenses for
such year and certified to be correct by a representative of Landlord. If the aggregate of monthly installments of Operating Expenses
actually paid by Tenant to Landlord during such calendar differs from the amount of the Operating Expenses payable by Tenant for
such calendar year as indicated in the Statement, then, as the case may be, Tenant shall pay the difference to Landlord or Landlord
shall issue a credit to Tenant against the Rent remaining to be paid hereunder for the difference, or if no Rent then remains to
be paid, refund the difference to Tenant, without interest, within thirty (30) days after the date of delivery of the Statement. |
| c) | The term "Operating Expenses" means
and includes all costs and expenses of any kind or nature incurred by Landlord with respect to the ownership, maintenance, repair
and operation of the Building and Premises, including, by way of example and without limitation, supply costs; maintenance, replacement
and repair costs; the costs of utilities, security, trash, snow removal, cleaning and janitorial, landscaping and painting services;
maintenance, repair and replacement of HVAC, plumbing, electrical, mechanical, roof, structural or like systems and/or components;
any common area costs and expenses; labor costs incurred in the operation and maintenance of the Building and Premises, including
wages and |
other
payments; costs to Landlord for workmen's compensation and disability insurance, payroll taxes and welfare and other fringe benefits;
reasonable management and administrative fees in an amount customary for properties similar to the Building; legal, accounting,
inspection and consultation fees incurred in connection with the Building and Premises; amounts paid to contractors and subcontractors
for work or services performed in connection with the operation and maintenance of the Building and Premises (including common
areas); all real and personal property taxes and assessments (whether general or special) and governmental charges of any kind
and nature whatsoever including special district assessments and assessments due to deed restrictions and/or owners' associations
which accrue against the Building or any items of personal property utilized in the maintenance, repair and/or operation of the
Building during the term of this Lease; all insurance including, by way of example and without limitation, public liability insurance
and fire and extended coverage insurance with respect to the Building and any rental insurance and all risk insurance (should Landlord
decide to carry the same) (but Tenant shall have no interest in such insurance or the proceeds thereof); any expense attributable
to costs incurred by Landlord for any capital improvements; and any other costs, charges and expenses which under generally accepted
accounting principles would be regarded as maintenance and operating expenses with respect to the Building and Premises.
| d) | If at any time during the term of this Lease,
the present method of taxation is changed so that in lieu of the whole or any part of any taxes, assessments or governmental charges
levied, assessed or imposed on real estate and the improvements on such real estate, there is levied, assessed or imposed on Landlord
a capital levy or other tax directly on the rents received from the Building and/or a franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon such rents, then all such taxes, assessments, levies or charges, or the part thereof
so measured or based, will be deemed to be included within the terms "Operating Expenses" and "real property taxes"
(as used in Subparagraph (b) above) for the purposes of this Section 6. |
Tenant
will immediately give Landlord written notice of defect or need for repairs, after which Landlord will have a reasonable opportunity
to affect such repairs or cure such defect. Landlord's liability with respect to any defects, repairs or maintenance for which
Landlord is responsible under any of the provisions of this Lease will be limited to the cost of such repairs or maintenance or
the curing of such defect.
| a) | Notwithstanding Section 9, Tenant will, at
its own cost and expense, keep and maintain all improvements, furniture, fixtures and equipment located in the interior of the
Premises in good condition, promptly making all necessary repairs and replacements, and shall keep the whole of the Premises in
a clean and sanitary condition and appearance. Tenant shall not order any repairs or maintenance at the expense of Landlord. Tenant
will repair and pay for any damage caused to the Premises or Building by Tenant, or Tenant's employees, agents or invitees, or
caused by Tenant's default under this Lease. |
| b) | Tenant expressly acknowledges and agrees
that Landlord has and does lease the Premises to Tenant without any representation, warranty or covenant on the part of Landlord
as to the compliance of either the Premises or the Building or any portion thereof with the provisions of the Americans with Disabilities
Act of 1990 (the "Act"). Tenant shall be solely responsible for ADA compliance in the Premises at its expense. Tenant
agrees that if its use and/or occupancy of the Premises necessitates that Landlord make changes, modifications or incur additional
expenses with respect to the walkways, elevators, common area bathroom facilities or other common areas of the Building, or to
the Premises, in order that the Building, such common areas or the Premises comply with the Act, all of such incurred costs, modifications
or alterations shall be done at Tenant's sole cost and expense and Tenant shall pay all of same to Landlord on demand as Additional
Rent. |
Tenant
will not make any alterations, additions or improvements to the Premises (including but not limited to ceiling and wall penetrations)
without the prior written consent of Landlord. All alterations, additions, improvements and partitions erected by Tenant will be
and remain the property of Tenant during the term of this Lease and Tenant will, unless Landlord otherwise elects, remove all alterations,
additions, improvements and partitions erected by Tenant and restore the Premises to their original condition by the date of termination
of this Lease or upon earlier vacating of the Premises; provided, however, that if Landlord so elects and gives notice to Tenant
prior to termination of this Lease or upon earlier vacating of the Premises, such alterations, additions, improvements and partitions
will become the property of Landlord as of the date of termination of this Lease and will be surrendered to the Landlord with the
Premises. All such removals and restoration will be accomplished in a good and workmanlike manner so as not to damage the primary
structure or structural components of the Building.
Tenant
will give Landlord at least thirty (30) days’ prior written notice in its request for consent to make any alterations, additions
or improvements to the Premises or of its intent to erect shelves, bins or trade fixtures in the Premises (any of such
items hereinafter
being referred to as "Tenant Work"). Landlord reserves the right to approve any contractor(s) by whom the Tenant Work
is to be performed. Landlord shall be entitled to post notices on and about the Premises with respect to Landlord's non-liability
for the payment of the Tenant Work as provided in the Colorado mechanic's lien statutes and Tenant shall not permit such notices
to be defaced or removed. If Landlord approves Tenant's proposed contractor(s), prior to the commencement of any Tenant Work, Tenant
shall deliver to Landlord certificates issued by insurance companies qualified to do business in the State of Colorado evidencing
that worker's compensation, public liability insurance and property damage insurance, all in amounts and with companies and on
forms reasonably satisfactory to Landlord, are in force and maintained by all of such contractor(s). Among other things, all such
policies shall name Landlord as an additional insured and shall provide that the same may not be canceled or modified without thirty
(30) days prior written notice to Landlord.
| 10. | Landlord's Right of Access; Inspection. |
Landlord
and Landlord's agents and representatives will have the right to enter and inspect the Premises at any reasonable time for any
reasonable purpose, including, but not limited to, ascertaining the condition of the Premises, to show the Premises to any prospective
purchaser of the Building or in order to make such repairs, decorations, alterations, improvements or additions as may be required
or deemed necessary or desirable by Landlord. During the six (6) month period that is prior to the end of the term of this Lease,
Landlord and Landlord's agents and representatives will have the right to enter the Premises at any reasonable time for the purpose
of showing the Premises and shall be permitted to place a "For Rent" sign upon the Premises. Tenant will give written
notice to Landlord at least thirty (30) days prior to vacating the Premises and will arrange to meet with Landlord for a joint
inspection of the Premises prior to vacating. In the event Tenant fails to give such notice or arrange such joint inspection, Landlord's
inspection at or after Tenant's vacating the Premises will be conclusive for purposes of determining Tenant's responsibility for
repairs and restoration.
Landlord
agrees to provide utility service to the Building and Premises. Tenant will pay its Pro Rata Share of all charges for utility service
as part of the Operating Expenses. Landlord will not be liable for any interruption or failure of utility services. Tenant will
be responsible for all costs associated with bringing utilities to Tenant’s Premises as well as a one-time $500 tap fee
for access to the building natural gas service.
| 12. | Assignment and Subletting. |
Tenant
will not assign, sublet, transfer or encumber this Lease, or any interest in this Lease or the Premises, without the prior written
consent of Landlord. Any attempted assignment, subletting, transfer or encumbrance by Tenant in violation of the terms and covenants
of this Section 12 will be void and a default hereunder. All cash or other proceeds of any assignment, proceeds in excess of the
Rent under this Lease in the case of a subletting, and all cash or other proceeds of any other transfer of Tenant's interest in
this Lease or the Premises will be paid to Landlord, whether such assignment, subletting or other transfer is consented to by Landlord
or not. Tenant assigns all rights it might have or ever acquire in any such cash or proceeds to Landlord. No assignment, subletting
or other transfer, whether consented to by Landlord or not, shall relieve Tenant of its primary liability under and with respect
to all obligations contained in this Lease. Consent of Landlord to any assignment, subletting or other transfer of this Lease or
the Premises shall not relieve Tenant from seeking consent to any subsequent assignment, subletting or transfer. In no event shall
any proposed subtenant or assignee be an existing occupant of any space in the Building or Affiliate of any such occupant. For
purposes hereof, an Affiliate means a corporation or other business entity that directly or indirectly controls, is controlled
by, or is under common control with such occupant.
Notwithstanding
anything contained in this Lease to the contrary, Landlord shall not be obligated to consider any proposed assignment of this Lease
or sublet of all or any part of the Premises unless Tenant pays a non-refundable fee, payable to Landlord, in an amount of One
Thousand Dollars ($1,000.00) to cover Landlord's administrative, legal, and other costs and expenses incurred in processing each
of Tenant's requests. In addition, should any such request by Tenant seek any change or modification to the terms of this Lease,
and Landlord agrees to such additional and/or modified terms and conditions, in Landlord's sole and absolute discretion, Tenant
agrees to pay Landlord's reasonable attorneys' fees, costs and expenses with respect to consideration of such request and the negotiation
and preparation of any amendment to this Lease, which amounts shall be Additional Rent under this Lease.
| a) | Landlord, as an Operating Expense, will maintain
(i) fire and extended coverage insurance (broad form) covering the Building and the Building equipment and common area furnishings
and (ii) public liability and property damage insurance in such amounts as Landlord determines from time to time in its reasonable
discretion. Tenant will reimburse Landlord, as an Operating Expense, for the costs of all such insurance. All such insurance shall
be for the sole benefit of Landlord and its designated additional insureds. |
| b) | Tenant waives, disclaims and releases Landlord
from any and all rights of recovery, claims, actions or causes of action, against Landlord, its agents, officers and employees,
for or on account of any loss or damage that may occur to the |
Premises,
Building, or personal property within the Building, by reason of fire or the elements regardless of cause or origin, including
negligence of Landlord or its agents, officers and employees. Tenant agrees immediately to give to each insurance company which
has issued to it policies of fire and extended coverage insurance, written notice of the terms of the waivers contained in this
subsection, and to have the insurance policies properly endorsed, if necessary (and only to the extent available at reasonable
cost), to prevent the invalidation of the insurance coverages by reason of the waivers contained in this subsection. To the extent
such endorsement(s) are unavailable or cannot be obtained at reasonable cost, such requirement shall be deemed waived; provided
however, that if claiming such unavailability or excessive cost, Tenant shall give immediate written notice thereof to the Landlord.
| c) | Landlord will not be liable to Tenant or
Tenant's employees, agents, patrons or visitors, or to any other person whomsoever, for any injury (including death) to person
or damage to property on or about the Premises or Building, resulting from and/or caused in part or whole by the negligence or
fault of Tenant, its agents, servants or employees, or of any other person entering upon the Premises or Building. Tenant will
at all times indemnify and hold safe and harmless the Building, the Landlord, Landlord's officers, directors, partners, agents,
attorneys and employees from any losses, liabilities, claims, suits, costs, expenses, including without limitation reasonable attorneys'
fees, and damages, arising out of any such damage or injury. Further, Landlord shall have no liability for damage or personal injury
caused by the Premises or Building becoming out of repair, or caused by leakage of gas, oil, water or steam or by electricity emanating
from the Premises or Building, the criminal activities of any persons, or due to any cause whatsoever. |
| d) | Tenant will procure and maintain throughout
the term of this Lease a policy or policies of insurance, at its sole cost and expense, insuring both Landlord and Tenant, including
Tenant’s employees and officers, against all claims, demands or actions arising out of or in connection with: (i) the Premises;
(ii) the condition of the Premises; (iii) Tenant's operations in and maintenance and use of the Premises; and (iv) Tenant's liability
for injury to persons or damage to property assumed under this Lease. The liability limits of such policy or policies shall be
in the amount of not less than $2,000,000 per occurrence in respect of injury to persons (including death), and in the amount of
not less than $2,000,000 per occurrence in respect of property damage or destruction, including loss of use of the Premises. Tenant
shall also insure against damage or destruction to Tenant's furniture, fixtures, equipment, furnishings, floor coverings, inventory,
and plate glass or glass or other breakable materials used in structural portions of the Premises and any interior and exterior
windows and doors in the Premises in an amount equal to full replacement cost thereof. All such policies shall be procured by Tenant
from companies licensed to do business in Colorado and reasonably satisfactory to Landlord. Certified copies of such policies,
together with receipt evidencing payment of premiums for such policies, must be delivered to Landlord prior to the Commencement
Date. Not less than fifteen (15) days prior to the expiration date of any such policies, or the due date for the next-maturing
premiums, as applicable, certified copies of the renewals of such policies, bearing notations evidencing the payment of renewal
premiums or, if applicable, proof of payment of the next-maturing premiums, shall be delivered to Landlord by Tenant. All such
policies will provide that not less than thirty (30) days prior written notice will be given to Landlord before such policy may
be canceled or changed to reduce or materially alter the insurance provided by such policies. |
| 14. | Damage and Destruction. |
| a) | If the Building or Premises are damaged or
destroyed by fire, tornado or other casualty, Tenant will give immediate written notice of such damage or destruction to Landlord. |
| b) | If the Premises are totally destroyed by
fire, tornado or other casualty, or if they are so damaged that rebuilding or repairs cannot in Landlord's estimation be completed
within one hundred twenty (120) days after the date upon which Landlord is notified by Tenant or otherwise obtains actual knowledge
of such damage, this Lease may be terminated by Landlord or Tenant upon written notice within thirty (30) days of such determination
by Landlord and the unaccrued Rent (other than in the event such damage or destruction was caused by Tenant or its employees or
agents) will be abated during the unexpired portion of this Lease, effective upon the date of the occurrence of such damage. |
| c) | If the Premises are damaged by any peril
covered by the insurance to be provided by Landlord under Section 13, such insurance proceeds are made available to Landlord and
this Lease has not been terminated under Section 14(b), Landlord will proceed with reasonable diligence to rebuild and repair the
Premises to substantially the condition in which it existed prior to such damage, except that Landlord will not be required to
rebuild, repair or replace any part of the partitions, fixtures, additions, other improvements and/or personal property which may
have been placed in, on or about the Premises by Tenant. Unless this Lease is terminated under Section 14(b) there shall be no
abatement of Rent. |
| d) | In the event the holder of any indebtedness
secured by a mortgage or deed of trust covering the Building or Premises requires that the insurance proceeds, if any, be applied
to such indebtedness, then Landlord will have the right to terminate this Lease by delivering written notice of termination to
Tenant within fifteen (15) days after such |
requirement
is made by any such holder, whereupon all rights and obligations of Landlord and Tenant under this Lease will cease and terminate
except as to any previously accrued rent or additional rent.
| a) | If the whole of the Premises or so much thereof
as to render the balance unusable by Tenant for the proper conduct of its business shall be taken under power of eminent domain
or transferred under threat thereof, then this Lease, at the option of either Landlord or Tenant exercised by either party giving
written notice to the other of such election within thirty (30) days after such conveyance or taking of possession, whichever is
earlier, shall forthwith terminate and the Rent shall be duly apportioned as of the date of such taking or conveyance. No award
for any partial or entire taking shall be apportioned between Landlord and Tenant; Tenant hereby assigns to Landlord any award
which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to
the same or any part thereof. Notwithstanding the foregoing, Tenant shall be entitled to seek, directly from the condemning authority,
an award for its removable trade fixtures, equipment, personal property and relocation expenses, if any, to the extent Landlord's
award is not diminished thereby. In the event of a partial taking or conveyance which does not result in a termination of this
Lease, Monthly Base Rent shall be reduced in proportion to the reduction in the size of the Premises so taken or conveyed and this
Lease shall be modified accordingly. |
| b) | If all or any portion of the Premises shall
be condemned or taken for governmental occupancy for a limited period, this Lease shall not terminate and Landlord shall be entitled
to receive the entire amount of any such award or payment thereof as damages, rent or otherwise. Tenant hereby assigns to Landlord
any award which may be made in such temporary taking, together with any and all rights of Tenant now or hereafter arising in or
to the same or any part thereof. Tenant shall, however, be entitled to an abatement of Monthly Base Rent in proportion to the reduction
in size of the Premises so taken for such limited period. |
| c) | A voluntary sale by Landlord to any such
competent authority having the power of eminent domain or similar powers, either under threat of condemnation or while condemnation
proceedings are pending, shall be deemed to be a taking by eminent domain for the purpose of this section. |
Tenant
will, at the termination of this Lease by lapse of time or otherwise, surrender immediate possession of the Premises to Landlord.
If Landlord agrees in writing that Tenant may hold over after the expiration or termination of this Lease, unless Landlord and
Tenant otherwise agree in writing on the terms of such holding over, the hold over tenancy shall be deemed to be month-to-month
and will be subject to termination by Landlord or by Tenant at any time upon not less than ten (10) days' advance written notice,
with any such hold over period ending only on the last day of a calendar month, and all of the other terms and provisions of this
Lease will be applicable during such holdover period, except that the Monthly Base Rent then in effect shall be increased by fifty
percent (50%). No holding over by Tenant, whether with or without the consent of Landlord, will operate to extend this Lease except
as otherwise expressly provided in a writing signed by Landlord. The preceding provisions of this Section 16 are not consent for
Tenant to hold over. In the event Tenant holds over without the written agreement of Landlord, the holdover tenancy shall be deemed
to be a tenancy at will, terminable upon three (3) days prior written notice by Landlord and otherwise subject to all of the terms
and conditions of this Lease, except the Monthly Base Rent during any such tenancy at sufferance shall be equal to double the Monthly
Base Rent in effect on the termination date.
Subject
to Tenant paying the Rent and performing its covenants in this Lease, Tenant shall and may peacefully and quietly have, hold and
enjoy the Premises for the term of this Lease. Landlord shall not be responsible for the acts or omissions of any other tenant
or third party which may interfere with Tenant's use and enjoyment of the Premises. In the event of any transfer or transfers of
Landlord's interest in the Premises, the Building or in the real property of which the Premises are a part, other than a transfer
for security purposes only, the transferor shall automatically be relieved of any and all obligations and liabilities on the part
of Landlord accruing from and after the date of such transfer.
The
following events shall be deemed to be events of default by Tenant under this Lease:
| a) | Tenant fails to pay when due any Monthly
Base Rent, Operating Expenses, Additional Rent or any other amounts payable hereunder; |
| b) | This Lease or the estate of Tenant hereunder
is transferred to or passes to any other person or party in violation of the provisions of this Lease; |
| c) | This Lease or the Premises or any part thereof
becomes subject to attachment, levy or other process of law directed against Tenant and such attachment or levy is not discharged
within fifteen (15) days after the levy or attachment thereof; |
| d) | Tenant or any Guarantor hereof files a Petition
in Bankruptcy or insolvency or for reorganization or rearrangement of debt under the Bankruptcy Laws of the United States or any
insolvency act of any state, or voluntarily takes advantage of any such law, and same is not discharged within sixty (60) days; |
| e) | Involuntary proceedings under any such bankruptcy
or insolvency law are instituted against Tenant or against any Guarantor hereof, or a receiver or trustee is appointed for all
or substantially all of the property of Tenant or any such Guarantor and such proceedings are not dismissed or vacated within sixty
(60) days after such institution or appointment; |
| f) | Tenant abandons or vacates the Premises for
ten (10) consecutive days; |
| g) | Tenant fails to perform any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be performed, and such nonperformance continues for a period
of three (3) days after notice thereof by Landlord to Tenant; provided, however, that if Tenant cannot reasonably cure such nonperformance
within three (3) days, Tenant shall not be in default if it commences cure within said three (3) day period and diligently pursues
the same to completion, with completion to occur in any event within thirty (30) days after such notice; |
| h) | Tenant fails to obtain a release of any mechanic's
lien as required herein; |
| i) | Tenant discloses the terms of this Lease
to any party, except legal counsel and insurance providers in regard to fulfilling the requirements of this Lease, without first
obtaining Landlord’s written consent; and/or |
| j) | All or any part of the personal property
of Tenant is seized, subjected to levy or attachment, or similarly repossessed or removed from the Premises. |
| a) | Upon the occurrence of any event of default,
Landlord will have, at its election, the option to pursue any one or more of the following remedies: |
| i) | Landlord may, at Landlord's option but without
obligation to do so, and without releasing Tenant from any obligations under this Lease, make any payment or take any action as
Landlord deems necessary or desirable to cure any Event of Default in such manner and to such extent as Landlord deems necessary
or desirable. Landlord may do so without additional demand on or additional written notice to Tenant and without giving Tenant
an additional opportunity to cure such an Event of Default. Tenant shall pay Landlord, upon demand, all advances, costs and expenses
of Landlord in connection with making any such payment or taking any such action, including reasonable attorney's fees, together
with interest at the rate described in Section 19(e) from the date of payment of any such advances, costs and expenses by Landlord. |
| ii) | Landlord may terminate this Lease, effective
at such time as may be specified by written notice to Tenant, and demand (and, if such demand is refused, recover) possession of
the Premises from Tenant. Tenant will remain liable to Landlord for damages in an amount equal to the Rent and other changes which
would have been owing by Tenant for the balance of the Term had this Lease not been terminated, less the net proceeds, if any,
of reletting of the Premises by Landlord subsequent to such termination, after deducting all Landlord's expenses in connection
with such recovery of possession or reletting. Landlord will be entitled to collect and receive such damages from Tenant on the
days on which the Rent and other charges would have been payable if this Lease had not been terminated. Alternatively, at Landlord's
option, Landlord will be entitled to recover from Tenant, as damages for loss of the bargain and not as a penalty, an aggregate
sum equal to (i) all unpaid Rent and other charges for any period prior to the termination date of this Lease (including interest
from the due date to the date of the award at the rate described in Section 19(e), plus any other sum of money and damages owed
by Tenant to Landlord for events or actions occurring prior to the termination date; plus (ii) the present value at the time of
termination (calculated at the Prime Rate of the Wells Fargo Bank or its successor on the termination date) of the amount, if any,
by which (A) the aggregate of the Rent and all other charges payable by Tenant under this Lease that would have accrued for the
balance of the Term after termination (with respect to Operating Expenses, such aggregate will be calculated by assuming that Operating
Expenses for the calendar year in which termination occurs and for each subsequent calendar year remaining in the Term of this
Lease had the Lease not been terminated will increase by 8% per year over the amount of Operating Expenses for the prior calendar
year), exceeds (B) the amount of such Rent and other charges which Landlord will receive for the remainder of the Term from any
reletting of the Premises occurring prior to the date of the award, or if the Premises have not been relet prior to the date of
the award the amount, if |
any,
of such Rent and other charges which could reasonably be recovered by reletting the Premises for the remainder of the Term at the
then-current fair rental value, in either case taking into consideration loss of Rent while finding a new tenant, leasing brokers'
commissions and other costs which Landlord has incurred or might incur in leasing the Premises to a new tenant; plus (iii) interest
on the amount described in (ii) above from the termination date to the date of the award at the rate described in Section 19(e).
| iii) | Landlord may reenter and take possession
of all or any part of the Premises, without additional demand or notice, and repossess the same and expel Tenant and any party
claiming by, through or under Tenant, and remove the effects of both using such force for such purposes as may be necessary, without
being liable for prosecution for such action or being deemed guilty of any manner of trespass, and without prejudice to any remedies
for arrears of Rent or right to bring any proceeding for breach of this lease. No such reentry or taking possession of the Premises
by Landlord will be construed as an election by Landlord to terminate this Lease unless a written notice of such intention is given
to Tenant. No notice from Landlord or notice given under a forcible entry and detainer statute or similar laws will constitute
an election by Landlord to terminate this Lease unless such notice specifically so states. Landlord reserves the right, following
any reentry or reletting, to exercise its right to terminate this Lease by giving Tenant such written notice, in which event the
Lease will terminate as specified in such notice. After recovering possession of the Premises, Landlord may, from time to time,
but will not be obligated to, relet all or any part of the Premises for Tenant's account, for such term or terms and on such conditions
and other terms as Landlord, in its discretion, determines. Landlord may make such repairs, alterations or improvements as Landlord
considers appropriate to accomplish such reletting, and Tenant will reimburse Landlord upon demand for all costs and expenses,
including attorneys' fees, which Landlord may incur in connection with such reletting. Landlord may collect and receive the rents
for such reletting, but Landlord will in no way be responsible or liable for any failure to relet the Premises or for any inability
to collect any rent due upon such reletting. Regardless of Landlord's recovery of possession of the Premises, Tenant will continue
to pay on the dates specified in this Lease, Rent and other charges which would be payable if such repossession had not occurred,
less a credit for the net amounts, if any, actually received by Landlord through any reletting of the Premises. |
| b) | Whether or not Landlord elects to terminate
this Lease on account of any default by Tenant, Landlord shall have the right to terminate any and all subleases, licenses, concessions
or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord’s sole
discretion, succeed to Tenant’s interest in such subleases, licenses, concessions or arrangements. In the event of Landlord’s
election to succeed to Tenant’s interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of
the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable
thereunder. |
| c) | No failure by Landlord to insist upon the
strict performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy consequent upon a breach
thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any
such breach of such agreement, term, covenant or condition. No agreement, term, covenant or condition hereof to be performed or
complied with by Tenant, and no breach thereof, shall be waived, altered or modified except by written instrument executed by Landlord.
No waiver of any one breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition hereof
shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. Notwithstanding any
unilateral termination of this Lease, this Lease shall continue in force and effect as to any provisions hereof which require observance
or performance of Landlord or Tenant subsequent to termination. |
| d) | Nothing contained in this Section 19 shall
limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership,
reorganization or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such proceeding
and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to or less than the
amounts recoverable, either as damages or rent, referred to in any of the preceding provisions of this Section 19. |
| e) | Any Rent or other amounts owing to Landlord
hereunder which are not paid within five (5) days of the date they are due, shall thereafter bear interest from the due date at
the rate of eighteen percent (18%) per annum ("Interest Rate") until paid. Similarly, any amounts paid by Landlord to
cure any default of Tenant or to perform any obligation of Tenant, shall, if not repaid by the Tenant within five (5) days of demand
by Landlord, thereafter bear interest from the date paid by Landlord at the Interest Rate until paid. In addition, Tenant shall
pay to Landlord whenever any Monthly Base Rent, Additional Rent or any other sums due hereunder remain unpaid more than five (5)
days after the due date thereof, a late charge equal to fifteen percent (15%) of the amount due. Further, in the event of default
by Tenant, in addition to all other rights and remedies, Landlord shall be entitled to receive from Tenant all sums, the payment
of which may previously have been waived or abated by Landlord, or which may have been paid by Landlord pursuant to any agreement
to grant Tenant a rental abatement or other monetary inducement or concession, including but not |
limited
to any tenant finish allowance or moving allowance, together with interest thereon from the date or dates such amounts were paid
by Landlord or would have been due from Tenant but for the abatement, monetary inducement or concession, at the Interest Rate,
until paid; it being understood and agreed that such inducement, concession or abatement was made on the condition and basis that
Tenant fully perform all obligations and covenants under the Lease for the entire term.
| f) | Each right and remedy provided for in this
Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease, now or hereafter
existing at law or in equity or by statute or otherwise, including, but not limited to, suits for injunctive or declaratory relief
and specific performance. The exercise or commencement of the exercise by Landlord of any one or more of the rights or remedies
provided for in this Lease shall not preclude the simultaneous or subsequent exercise by Landlord of any or all other rights or
remedies provided for in this Lease. All costs incurred by Landlord in connection with collecting any amounts and damages owing
by Tenant pursuant to the provisions of this Lease or to enforce or seek interpretation of any provision of this Lease, including
by way of example, but not limitation, reasonable attorneys' fees, costs and expenses and court costs from the date any such matter
is turned over to an attorney, shall also be recoverable by Landlord from Tenant. |
| g) | In the event of any default by Landlord,
Tenant's exclusive remedy will be an action for damages (Tenant waives the benefit of any laws granting it a lien upon the property
of Landlord and/or upon rent due Landlord); provided that, prior to commencing any such action Tenant will give Landlord written
notice specifying such default with particularity, and, except as otherwise expressly set forth herein, Landlord will have thirty
(30) days in which to cure any such default; provided, however, that if Landlord cannot reasonably cure such default within said
thirty (30) day period, Landlord shall not be in default if it commences cure within said thirty (30) day period and diligently
pursues the same to completion. Unless and until Landlord fails to so cure any default after such notice, Tenant will not have
any remedy or cause of action by reason of such default or alleged default. All obligations of Landlord under this Lease will be
construed as independent covenants, not conditions; and all such obligations will be binding upon Landlord only during the period
of its ownership of the Premises. The term "Landlord" means only the owner, for the time being of the Premises, and in
the event of the transfer by such owner of its interest in the Premises, such owner will be released and discharged from all covenants
and obligations of the Landlord accruing after such transfer, but such covenants and obligations will be binding during the Lease
term upon each new owner for the duration of such owner's ownership. Landlord will not have any personal liability under this Lease;
Tenant agrees to look solely to the equity or interest then owned by Landlord in the Premises. |
| 20. | Subordination and Attornment. |
Tenant
accepts this Lease and the Premises subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the Premises or the Building. This provision is self-operative and no further instrument of
subordination will be required in order to affect it. Tenant will at any time on demand execute any instruments, releases or other
documents which may be required by any mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any
such mortgage or deed of trust. Tenant agrees that if the holder of any mortgage, deed of trust or other encumbrance encumbering
the Building succeeds to Landlord's interest in the Premises, Tenant will pay to such holder all Rents subsequently payable under
this Lease and Tenant will, upon request of such successor in interest, automatically become the Tenant of and attorn to such successor
in interest without change in the terms or provisions of this Lease. Tenant will, upon demand, execute, acknowledge and deliver
an instrument or instruments confirming such attornment.
| 21. | Mechanic's Liens and Tenant's Taxes. |
| a) | Tenant shall pay or cause to be paid all
costs for work done by or on behalf of Tenant or caused to be done by or on behalf of Tenant on the Premises of a character which
will or may result in liens against Landlord's interest in the Premises or Building and Tenant will keep the Premises and Building
free and clear of all mechanic's liens and other liens on account of work done for or on behalf of Tenant or persons claiming under
Tenant. Tenant shall indemnify, defend and save Landlord harmless of and from all liability, loss, damages, costs or expenses,
including reasonable attorneys' fees, incurred in connection with any claims of any nature whatsoever for work performed for, or
materials, services or supplies furnished to Tenant, including lien claims of laborers, materialmen or others. Should any such
liens be filed or recorded against the Premises or Building with respect to work done, services performed for or materials supplied
to or on behalf of Tenant, Tenant shall cause such liens to be released of record within five (5) days after notice thereof. If
Tenant shall be in default in paying any charge for which such a mechanic's lien or suit to foreclose such a lien has been recorded
or filed and shall not have caused the lien to be released or suit dismissed as aforesaid, Landlord may (but without being required
to do so) pay such lien or claim and any costs associated therewith, and the amount so paid, together with reasonable attorneys'
fees incurred in connection therewith, shall be immediately due from Tenant to Landlord as Additional Rent. |
| b) | Tenant shall be liable for and shall pay
at least ten (10) days before delinquency and Tenant hereby agrees to indemnify and hold Landlord harmless from and against any
liability in connection with, all taxes levied against any personal property, fixtures, equipment, apparatus, systems and appurtenances
placed by or on behalf of Tenant in or about or utilized by Tenant in, upon or in connection with the Premises ("Equipment
Taxes"). If any Equipment Taxes are levied against Landlord or Landlord's property or if the assessed value of Landlord's
property is increased by the inclusion therein of a value placed upon such personal property, fixtures, equipment, apparatus, systems
or appurtenances of Tenant, and if Landlord, after written notice to Tenant, pays the Equipment Taxes or taxes based upon such
an increased assessment (which Landlord shall have the right to do regardless of the validity of such levy, but under proper protest
if requested by Tenant prior to such payment and if payment under protest is permissible), Tenant shall pay to Landlord upon demand,
as Additional Rent hereunder, the taxes so levied against Landlord or the proportion of such taxes resulting from such increase
in the assessment. Notwithstanding the foregoing to the contrary, Tenant shall cooperate with Landlord to the extent reasonably
necessary to cause the fixtures, furnishings, equipment and other personal property to be assessed and billed separately from the
Building and/or the real property of which the Premises form a part. |
| c) | Tenant shall pay to Landlord, as Additional
Rent, any excise, sales, privilege or other tax, assessment or other charge (other than income or franchise taxes) imposed, assessed
or levied by any governmental or quasi-governmental authority or agency upon Landlord on account of this Lease, the Rent or other
payments made by Tenant hereunder, any other benefit received by Landlord hereunder, Landlord's business as a lessor hereunder,
or otherwise in respect of or as a result of the agreement or relationship of Landlord and Tenant hereunder. |
| 22. | Authority for Action and Notice. |
| a) | Except as otherwise provided herein, Landlord
may, for any matter pertaining to this Lease, act by and through its Building manager or any other person designated in writing
from time to time. |
| b) | All notices or demands required or permitted
to be given to Landlord hereunder shall be in writing, and shall be deemed duly served when received, if hand delivered and receipted
for, or upon deposit in the United States mail, with proper postage prepaid, certified or registered, return receipt requested,
addressed to Landlord at its address as specified in Section 1 hereof. All notices or demands required to be given to Tenant hereunder
shall be in writing, and shall be deemed duly served when received, if hand delivered, or upon deposit in the United States mail,
with proper postage prepaid, certified or registered, return receipt requested, addressed to Tenant at its address as specified
in Section 1 hereof. Either party shall have the right to designate in writing, served as above provided, a different address to
which notice is to be provided. The foregoing shall in no event prohibit notice from being given as provided in Rule 4 of the Colorado
Rules of Civil Procedure, as the same may be amended from time to time. |
| 23. | Estoppel Certificates. |
Tenant
agrees that, from time to time, upon not less than ten (10) days prior request by Landlord (and which ten-day period is not subject
to any notice and cure periods otherwise provided under this Lease), Tenant shall execute and deliver to Landlord a written Certificate
certifying all matters and statements pertaining to this Lease as may be requested by Landlord and/or Landlord's respective lenders
or purchasers. If Tenant fails to execute and deliver any such Certificate within ten (10) days after such request, then such failure
shall constitute a material default by Tenant under this Lease, and in such event, Tenant agrees to pay to Landlord as liquidated
damages therefore (and in addition to all equitable remedies available to Landlord) an amount equal to Fifty Dollars ($50.00) per
day for each day that Tenant fails to so deliver such Certificate to Landlord after the expiration of such ten (10) day period.
If Tenant
fails to execute any such instrument within said ten (10) day period, Tenant irrevocably appoints Landlord as its attorney-in-fact,
in Tenant's name, to execute such instrument and Tenant's failure to deliver such Estoppel Certificate within said ten (10) day
period shall be conclusive upon Tenant that this Lease is in full force and effect, without modification, except as may be represented
by Landlord, that there are no uncured defaults in Landlord's performance, not more than one (1) month's rental has been paid in
advance, and that all other statements required to be made in the Estoppel Certificate are conclusively made.
It is understood
and agreed that Tenant's obligation to furnish such Estoppel Certificates in a timely fashion is a material inducement for Landlord's
execution of this Lease.
| 24. | Landlord Option to Demolish. |
In
the event Landlord desires to sell the property, or to change the use of the building, or to remodel or demolish same, or any combination
thereof, Landlord shall have the right to terminate this Lease upon giving Tenant six (6) months advance written notice, at the
end of which Tenant shall surrender the premises to Landlord.
| 25. | Review by Legal Counsel. |
This
Lease has important legal consequences. This Lease was prepared by Landlord’s legal counsel, who does not represent the Tenant.
Tenant has been given the opportunity, and Landlord has strongly urged Tenant, to have its own legal counsel review this Lease
and to advise Tenant regarding this Lease and its consequences prior to entering into this Lease.
| a) | Words of any gender used in this Lease will
be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice
versa, unless the context otherwise requires. |
| b) | The terms, provisions, covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties to this Lease and their respective
heirs, legal representatives, successors and permitted assigns, except as otherwise expressly provided in this Lease. Landlord
shall have the right to transfer and assign, in whole or in part, its rights and obligations in the Building and this Lease. |
| c) | The captions inserted in this Lease are for
convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof,
or in any way affect the interpretation of this Lease. |
| d) | All obligations of Tenant under this Lease
which are not fully performed as of the expiration or earlier termination of this Lease will survive the expiration or earlier
termination of the Lease term, including without limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration or earlier termination of this Lease, and prior to Tenant's
vacating the Premises, Tenant will pay to Landlord any amount reasonably estimated by Landlord to put the Premises in good condition
and repair. Tenant shall also, prior to vacating the Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation for real estate taxes and insurance premiums for the year in which the Lease expires or terminates. All such amounts
shall be used and held by Landlord for payment of such obligations of Tenant under this Lease, with Tenant being liable for any
additional costs upon demand by Landlord, or with any excess to be returned to the Tenant after all such obligations have been
determined and satisfied, as the case may be. Any security deposit held by Landlord may, upon Landlord's election, be credited
against the amount payable by Tenant under this subsection. |
| e) | If any clause or provision of this Lease
is illegal, invalid or unenforceable under present or future laws effective during the term of this Lease, then and in that event,
it is the intention of the parties to this Lease that the remainder of this Lease will not be affected thereby, and it is also
the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable,
there be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible and be legal, valid and enforceable. |
| f) | Landlord reserves the right to relocate the
Tenant to substantially comparable space within the Building. Landlord will give Tenant written notice of its intention to relocate
the Premises, and Tenant will complete its relocation within thirty (30) days after Landlord's notice. The Monthly Base Rent of
the new premises will not exceed the Monthly Base Rent for the Premises unless Landlord and Tenant otherwise agree in writing.
Effective on the date of such relocation this Lease will be amended by deleting the description of the Premises and substituting
for it a description of the new premises. Landlord agrees to pay the reasonable costs of moving tenant to such other space within
the Building. |
| g) | This Lease is an offer only, subject to prior
leasing of the Premises and such offer is subject to withdrawal or non-acceptance by Landlord or to other leasing of the Premises
without notice. This Lease will not be valid or binding unless and until accepted by Landlord in writing and a fully executed copy
has been delivered to both parties to this Lease. |
| h) | Tenant represents and warrants that it has
dealt with no broker, agent or other person in correction with this transaction or that no broker, agent or other person brought
about this transaction, other than the Broker identified in Section 1, and Tenant agrees to indemnify and hold Landlord harmless
from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue
of having dealt with Tenant with regard to this Lease. At any time after commencement of the lease term, should Tenant retain a
real estate broker to represent its interest in negotiations with Landlord for either a new lease or modification of terms for
a pending renewal option, if any, Tenant shall be solely responsible for any and all commissions due to Tenant’s broker.
|
| i) | Time is of the essence hereof. |
| j) | This Lease shall be governed by and construed
in accordance with the applicable laws of the State of Colorado. Tenant agrees to submit to the jurisdiction of the District Court
in and for the City and County of Denver, Colorado with respect to any litigation concerning this Lease. |
| k) | This Lease, together with the exhibits attached
hereto, contains the entire agreement of the parties and, except as otherwise expressly set forth herein, may not be amended or
modified in any manner except by an instrument in writing signed by both parties. |
| l) | Wherever there is provided in this Lease
a time limitation for performance by Landlord or Tenant of any obligation, including but not limited to obligations related to
construction, repair, maintenance or service (but excluding Tenant's obligation to pay Rent and other monetary obligations of Tenant
hereunder), the time provided for shall be extended for as long as, and to the extent that delay in compliance with such limitation
is due to, an act of God, government control, labor disputes, strikes, civil disturbance or other factors beyond the reasonable
control of either Landlord or Tenant, as applicable. |
| m) | Neither Tenant nor anyone acting through,
for, or in place of Tenant, including but not limited to any trustee, receiver, trustee in bankruptcy or other liquidating agent,
shall conduct or advertise on or from or pertaining to the Premises, any auction or close-out or going out of business or liquidation
sale. |
| n) | This Lease has been freely negotiated by
both parties; and in any controversy, dispute, or conflict over the meaning, interpretation, validity or enforceability of this
Lease or any of its terms or conditions, there shall be no inference, presumption, or conclusion drawn whatsoever against either
party by virtue of that party having drafted this Lease or any portion thereof. |
LEASE
AGREEMENT SIGNATURE PAGE
BETWEEN
910 ASSOCIATES, INC. and Joel C. Schneider
LANDLORD: TENANT:
910 ASSOCIATES,
INC. Joel C. Schneider
a Colorado
corporation
/s/
David L. Kauman /s/ Joel C. Schneider
By: David
L. Kaufman By: Joel C. Schneider
Its: Property
Manager
EXHIBIT A - RULES
AND REGULATIONS
| 1. | At all times during the term of this Lease the Landlord shall have
the right by itself, its agents and employees, to enter into and upon the Premises during reasonable business hours for the purpose
of examining and inspecting the same and determining whether the Tenant shall have complied with his obligations under the Lease
and the Rules and Regulations contained herein, with respect to the care and maintenance of the Premises and the repair or rebuilding
of the improvements thereon, when necessary. |
| 2. | Tenant shall not use the name of the Building
for any purpose other than Tenant's business address and shall never use a picture or likeness
of the Building or Premises in any advertisement, notice or correspondence without the Landlord's written consent thereto. |
| 3. | Tenant shall not make or permit any noise,
vibration or odor that is objectionable to the public, or to other occupants of the Building, to emanate from the Premises and
shall not create or maintain a nuisance thereon and shall not disturb, solicit or canvass any occupant
and shall not do any act tending to injure the reputation of the Building. Nor shall Tenant use the Premises for lodging, sleeping,
cooking, or for any immoral or illegal purpose or for any purpose that will damage the Building, or the reputation thereof, or
for any purposes other than those specified in this Lease. |
| 4. | Tenant shall not place or permit any radio
antenna, loud speakers, sound amplifiers, or similar devices on the roof or outside of the Premises
or Building. Nothing shall be placed on the outside window ledges of the Building, nor shall any awnings or window coverings be
attached/installed in the Premises or Building without the prior written consent of the Landlord. |
| 5. | The Building sidewalks, entrances, passages,
vestibules, stairways, corridors, elevators and halls must not be obstructed or encumbered or used for any purpose other than ingress
and egress to and from the Premises. No furniture, refuse or other items shall be placed
in front of the Premises, or on/in any sidewalks, entrances, passages, vestibules,
stairways, corridors, elevators or halls. Landlord shall have the right to remove all non-permitted furniture or other items, without
notice to Tenant, and at the expense of Tenant. |
| 6. | Supplies, goods, materials, packages, furniture
and all such items of every kind are to be delivered at the entrance point provided therefor, or in such manner as the Landlord
may provide and the Landlord is not responsible for the loss or the damage of any
such property notwithstanding such loss or the damage which may occur through the carelessness
or negligence of the employees of the |
Building.
All such items moved in or out of the Building or Premises shall be done at such time and in such manner as acceptable to the Landlord,
and only upon the elevator designated by Landlord for such purpose. No safe or other item, the weight of which may constitute a
hazard or danger to the Building or its equipment, shall be brought into the Building or Premises.
| 7. | Tenant shall see that the windows and doors
of the Premises are closed and securely locked before leaving the Building or Premises to prevent damage from fire, storms, freezing,
theft or vandalism. Tenant must observe strict care and caution that all water faucets or other apparatus are entirely shut off
before Tenant or Tenant's employees leave the Building or Premises and that all electricity, gas or air shall likewise be carefully
shut off, so as to prevent waste or damage, and for any default or carelessness Tenant shall make good all injuries sustained by
Landlord and/or other Tenants or occupants of the Building or Premises. |
| 8. | If Tenant elects to install any concession
or vending machine in the Premises, such machines and their products shall be limited to the express
use of Tenant and its employees and guests. Tenant shall not sell or make available
from the Premises the following items: cigars, cigarettes, tobaccos, pipes, candies, newspapers, magazines or greeting cards. |
| 9. | Landlord reserves the right to designate
all sources furnishing sign painting, lettering and/or awnings and to establish a limitation on sign
and/or awning styles and format. Tenant shall affix no additional signage and/or awnings not considered Building standard,
in the Landlord's discretion, without prior written approval of Landlord. Landlord shall have the right to remove all non-permitted
signs and/or awnings, without notice to Tenant, and at the expense of Tenant. |
| 10. | No animals, except as required by law, e.g.
guide and service dogs, shall be permitted in or on the Premises or Building. |
| 11. | No additional
lock or locks shall be placed by Tenant on any doors in the Premises without the prior
written consent of Landlord. |
| 12. | Tenant shall
not conduct in or about the Premises or Building any auction, public or private, without the prior written consent of Landlord. |
| 13. | Tenant shall not allow to be deposited any
trash, refuse, cigarettes, or other substances of any kind within or without the Premises or Building except
in refuse containers provided therefore. Tenant shall not introduce onto the Building or Premises any
substance which might add an undue burden to the cleaning or maintenance of the Premises or Building. Tenant shall exercise its
best efforts to keep the sidewalks, entrances, passages, courts, lobby areas, stairways, vestibules, corridors, elevators and halls
in and about the Premises and Building clean and free from rubbish. |
| 14. | The light through the transoms and glass
partitions opening into the halls and other parts of the Building shall not be obstructed in any manner by Tenant. |
| 15. | Bicycles or
other vehicles shall not be permitted in the Premises or the Building. |
| 16. | Tenant shall
not mark upon, paint signs upon, cut, drill into, drive nails or screws into, or in
any way deface the walls, ceilings, partitions or floors of the Premises or the Building. |
| 17. | No act or thing done or omitted to be done
by Landlord or Landlord's agent during the term of the Lease which is necessary to enforce these Rules and Regulations shall constitute
an eviction by Landlord nor shall it be deemed a surrender or acceptance
of the Premises, and no agreement to accept such surrender shall be valid unless in writing signed by Landlord. No employee of
Landlord or Landlord's agent shall have any power to accept the keys of the Premises prior to the termination of the Lease. The
delivery of keys to any employee of Landlord or Landlord's agent shall not be construed as a termination of the Lease or a surrender
of the Premises. |
| 18. | Landlord shall not be liable to Tenant for
violation of any said Rules and Regulations or the breach of any covenant or condition in any Lease by
any other tenant in the Building. |
| 19. | The failure of the Landlord to seek redress
for violation of, or insist upon the strict performance of any covenants or conditions of this Lease or any of the Rules and Regulations
set forth above or hereafter adopted by Landlord, shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of any original violation. The
receipt by Landlord of Rent with knowledge of the breach of any covenant of this Lease
or breach of these Rules and Regulations shall not be deemed a waiver of such breach. The failure of Landlord to enforce any of
these Rules and Regulations as set forth above or hereafter adopted against Tenant and/or any other tenant in the Building shall
not be deemed a waiver of any such Rules and Regulations. |
| 20. | The Landlord at all times shall have the
right to amend, modify or waive any of the foregoing Rules and Regulations and to make such other and future rules
and regulations as the Landlord may adopt, provided such changes shall not unreasonably interfere with the Permitted Use of the
Premises. Tenant agrees to comply with all such rules and regulations upon notice to Tenant from Landlord
thereof. In the event of any breach of any rules and regulations herein set forth or any reasonable amendments, modifications or
additions hereto, Landlord shall have all remedies in this Lease provided for in the event of default by Tenant. |
| 21. | Tenant and their employees, clients and
customers shall not smoke in the building. This includes all common areas and suites. Nor shall Tenant, their employees, clients
and customers smoke within fifty (50) feet of the main entrance of the building. |
| 22. | No more than six (6) individuals can occupy
the premises defined in 1(g) on a regular, on going basis. |
| 23. | Tenant is responsible for policing its employees
including keeping employees from loitering in the hallways, bathrooms and in front of the building entrances as well as informing
employees and enforcing the non-smoking policy in the building. |
University Building Office
Lease for Suite 412
The Mary Jane Group, Inc.
– Joel C. Schneider
Table of Contents
1. Definitions; Basic Lease Information. |
1 |
2. Premises. |
1 |
3. Monthly Base Rent; Security Deposit; Office Services; and Signage. |
2 |
4. Option to Renew. |
2 |
5. Use: Compliance with Laws and Rules and Regulations. |
2 |
6. Operating Expenses; Payment of Tenant's Pro Rata Share. |
3 |
7. Landlord's Repairs. |
4 |
8. Tenant's Repairs. |
4 |
9. Alterations. |
4 |
10. Landlord's Right of Access; Inspection. |
5 |
11. Utilities. |
5 |
12. Assignment and Subletting. |
5 |
13. Insurance. |
5 |
14. Damage and Destruction. |
6 |
15. Condemnation. |
7 |
16. Holding Over. |
7 |
17. Quiet Enjoyment. |
7 |
18. Events of Default. |
7 |
19. Remedies. |
8 |
20. Subordination and Attornment. |
10 |
21. Mechanic's Liens and Tenant's Taxes. |
10 |
22. Authority for Action and Notice. |
11 |
23. Estoppel Certificates. |
11 |
24. Landlord Option to Demolish. |
11 |
25. Review by Legal Counsel. |
12 |
26. Miscellaneous. |
12 |
EXHIBIT A - RULES AND REGULATIONS |
13 |
VENTURE AGREEMENT
This Agreement, dated and
effective as of May 22, 2015 by and between The MaryJane Group, Inc. a Nevada corporation ("MaryJane") with offices
located at 910 16th Street, Suite 412, Denver, Colorado 80202, and Wilderness Trails Ranch, LLC.., a Colorado limited
liability company ("WTR") located at 23456 CR 501, Bayfield CO 81122 at Vallecito Lake Colorado. (MaryJane and
WTR being hereinafter sometimes collectively called "Partners" and individually called a "Partner"),
WITNESSETH
WHEREAS, the Partners wish
to engage together in the operation of an adult camp/ranch concept from July 1, 2015 through no later than October 15, 2015 to
be located at the ranch entitled Wilderness Trails Ranch, located in Bayfield, Colorado and, to further that objective, to form
a partnership and adopt this Agreement as the articles of partnership of such partnership;
WHEREAS, WTR has been the
operating entity of the guest ranch known as Wilderness Trails Ranch for many years and has the uniquely experienced management
led by Vanessa Roberts and her husband Lance Roberts as well as the experienced and well qualified returning staff to conduct the
day-to-day operations. Mary Jane has the marketing experience and a strong clientele to draw from to generate the bookings for
a successful operation. The parties desire to combine their unique strengths to conduct a new model for a Colorado experience which
will focus on mature and retiring adults.
NOW, THEREFORE, in consideration
of the foregoing and of the mutual covenants and benefits herein set forth and contemplated, the Partners agree as follows:
ARTICLE I
ORGANIZATION OF THE PARTNERSHIP
(a) Establishment.
(i) The Partners
hereby form and establish a general partnership (the "Partnership") under the Colorado
Limited Partnership Act for the limited purposes and scope set forth herein, and hereby adopt this Agreement as the Articles
of Partnership of the Partnership.
(ii) Except to the extent otherwise
provided herein, the rights and liabilities of the Partners and the conduct and termination of the Partnership shall be governed
by the Colorado Limited Partnership Act.
(iii) The Partners will promptly
execute all certificates and other documents, and make all such filings and recordings and perform such other acts as may now or
hereafter be necessary or desirable, to comply with the requirements of Colorado law for the organization and formation of the
Partnership and the carrying on of its business.
(iv) Each Partner shall be
a general partner.
(v) All real and other property
including permits and licenses owned by or granted to or held by the Partnership shall be deemed to be owned by or granted to or
held by the Partnership as an entity, and no Partner, individually, shall have any ownership of or right to use any such property.;
provided however, that nothing herein shall prevent either partner which currently holds a license or permit as a separate asset
to employ the use of such permit or license in the Partnership operations without having to transfer that permit or license to
the Partnership.
(b) Effective Date and Term.
The Partnership shall commence on the date hereof (hereinafter called the "Effective Date") and shall continue
in effect until terminated as provided in Article X hereof.
(c) Principal Office. The
principal office and place of business of the Partnership shall be 910 16th Street, Suite 412, Denver, Colorado 80202
or such other location as the Partners may designate.
(d) Purpose and Scope.
The sole purpose of the Partnership shall be to engage in the business of operating an adult camp/ranch concept from July 1, 2015
through no later than October 15, 2015 to be located at the ranch entitled Wilderness Trails Ranch, located in Vallecito, Colorado;
and performing all other activities, as are necessary or incidental to conducting such business.
Activities
and schedule will be added as addendum
The Partnership shall have
the power to do any act and thing and to enter into any contract incidental to, or necessary, proper or advisable for, the accomplishment
or attainment of the purpose of the Partnership specified in this Agreement.
(f) Partners' Authority.
Except as otherwise provided
in this Agreement, no Partner acting alone shall have any authority to act for, or to assume any obligations or responsibilities
on behalf of, the other Partner or the Partnership. Each Partner will indemnify the Partnership and the other Partner against any
claim, loss or damage to the Partnership or such other Partner which may result from the Partner's breach of this Section (f).
ARTICLE II
OTHER AND/OR COMPETING BUSINESSES
Except as otherwise provided
herein, nothing contained in this Agreement shall be deemed to restrict in any way the freedom of either Partner or of any Affiliate
of either Partner to conduct, independently of the Partnership, and whether or not in competition with the Partnership, any business
or activity whatever (other than the business contemplated to be performed by the Partnership under and in accordance with this
Agreement) without any accountability to the Partnership or to the other Partner. For purposes of this Agreement "Affiliate"
means, as to any entity, a corporation, company, trust, firm or other entity which directly or indirectly controls, or is controlled
by, or is under common control with, such entity.
ARTICLE III
CONTRIBUTIONS TO THE PARTNERSHIP
(a) Initial Contributions.
(i) MaryJane shall provide
the initial capital estimated to be approximately $30,000 to open the camp/ranch, develop the website to be utilized to accept
reservations for the camp, develop and institute an advertising/marketing campaign to market the business of the camp/ranch. Credit
card billing for said reservations will be provided and maintained by MaryJane. MaryJane will also be responsible for soliciting
sales affiliates if necessary.
(ii) WTR shall provide rights
to use the ranch entitled Wilderness Trails Ranch (“Ranch”) for the purposes of operating the camp/ranch and shall
provide continuous access to the ranch. WTR shall employ (to be paid for by MaryJane) the initial staff necessary to open the Ranch
for business. WTR shall also provide all equipment it currently owned by it and necessary for the operation of the Ranch. Mary
Jane will timely provide any and all necessary funds for all operating expenses, including without limitation all insurance coverage
required subject to the right to recoup such expenses as provided in this agreement.
(b) Additional Contributions.
(i) Either Partner may contribute
to the capital of the Partnership such additional cash as it may deem appropriate in connection with the business of the Partnership
and, with the consent of the other Partner, such additional other assets as it may deem advisable. Contributions under this Section
3(b)(i) shall be so designated by the contributing Partner and shall not be applied to satisfy such Partner's obligations to make
any other contributions required by this Agreement. Any income, profits or earnings from such contributions and any taxes and other
costs attributable thereto shall be for the account of the Partner making such contributions.
(ii) No interest shall be paid
by the Partnership on any capital contributed to the Partnership.
ARTICLE IV
PARTNERSHIP INTERESTS
(a) The Partners' Percentage Partnership
Interests.
Each Partner's Interest
in the Partnership (its "Partnership Interest") shall be 50% to MaryJane and 50% to WTR, subject to adjustment
as provided in Article VIII.
(b) Allocations to Be According
to Partnership Interests. Each Partner shall be entitled to each item of the Partnership's income, profit, gain, loss,
cost, deduction, credit or allowance in proportion to its Partnership Interest. Notwithstanding the foregoing MaryJane shall be
entitled to recoup its initial contributions out of first profits generated by Cannacamp. In
the event there are insufficient funds to reimburse
MaryJane's cash contributions, there shall be no recourse against WTR LLC as Partner nor any members of WTR LLC; provided however
said unreimbursed contributions to operations may augment the capital contribution of MaryJane such that MaryJane could recover
such expenses upon dissolution if there is sufficient value in the Partnership.
ARTICLE V
MANAGEMENT OF THE PARTNERSHIP
(a) Operating Management.
The general conduct of the
business of the Partnership shall be the responsibility of MaryJane. The general and daily operations of the ranch/camp shall be
the responsibility of WTR.
(b) Rights and Approvals.
All website design elements shall be subject to the approval of WTR before being made available to the public..
(c) Employees. WTR shall
be responsible for providing necessary personnel to operate and maintain the property of the PARTNERSHIP. During the pre-opening
period Mary- Jane shall be responsible for the payment of all salaries of personnel necessary to open Cannacamp. Such payments
shall be part of the initial contribution described above.
(d) Certain Matters Requiring Unanimous
Consent.
Notwithstanding any other
provision herein, the specific consent of each Partner shall be required in connection with the following matters:
(i) Any action or inaction
which might cause the breach or termination of any material agreement to which the Partnership or any Partner is a party, or termination
of any rights or benefits to which the Partnership or any Partner is entitled.
(ii) Any sale or transfer of
any property or asset of the Partnership, other than obsolete or worn-out assets and property or assets reasonably estimated to
be worth less than $100 except in the ordinary course of business.
(iii) The liquidation or dissolution
of the Partnership.
(iv) Any transfer, assignment,
charge, mortgage, lien or other encumbrance of, on or in respect of a Partner's Partnership Interest.
(v) Amendment of this Agreement.
(vi) Merger or consolidation
of the Partnership into or with any other entity.
(vii) Any significant reduction
or discontinuance of operations of the Partnership.
ARTICLE VI
ACCOUNTING MATTERS
(a) Fiscal Year. The fiscal
year of the Partnership shall be the calendar year.
(b) Books, Records and Accounts.
(i) The books and records of
the Partnership shall be maintained on an accrual basis so as to reflect accurately, among other things:
(A) contributions by each Partner,
(B) the capital account of each
Partner,
(C) distributions to each Partner,
(D) assets and liabilities,
(E) receivables from and payables
to each Partner,
(F) income of the Partnership,
and
(G) adequate records to permit
the filing of Partners' and Partnership tax returns showing gross receipts, cost of goods sold, gross income, other income, deductions,
losses, allowances, credits and net profits or losses.
(c) Expenses.
In addition to general operating expenses of Cannacamp, the carrying costs of WTR (ie. Mortgage payments, loan payments directly
related to the Ranch and real estate taxes) shall be included in the cost of operations of Cannacamp.
The PARTNERS
shall review the foregoing from time to time and may revise them if it so determines.
ARTICLE VII
DISTRIBUTIONS
| a) | Payment Amounts. Being that MaryJane shall own and operate the merchant account prescribed
to Cannacamp; MaryJane shall pay WTR 50% of the net profits generated by Cannacamp. |
| b) | Payment Distributions. MaryJane shall send payment as described in Article VII, Section
A on the tenth day of each month for the monies received for the month prior to the date of the payment. |
| c) | If For Dissolution. Except as otherwise specifically provided in this Agreement,
all distributions and withdrawals of any Partnership assets, including those on |
termination and dissolution of the
Partnership, shall be shared equally by the Partners; provided that if either Partner shall have made a contribution pursuant to
Section 3(b)(i) hereof, the property contributed shall be distributed by the Partnership to the contributing Partner upon its request
by written notice to the Partnership.
ARTICLE VIII
FAILURE TO PAY
(a) Failure of a Partner to Pay.
Except as provided in Article IV (b) above, If a Partner fails in its obligation to pay or contribute promptly any amount required
hereunder to the Partnership, such obligation shall constitute indebtedness due from such Partner to the Partnership and shall
bear interest at the monthly rate of 3%. In addition to the right of the Partnership to recover such indebtedness and interest:
(i) the other Partner may,
but shall not be required to, make such payment contribution (together with interest thereon) to the Partnership on behalf of such
defaulting Partner, which if made shall constitute indebtedness due from such defaulting Partner to such other Partner and shall
bear interest at the monthly rate of 3%, and
(ii) such other Partner may
at any time recover from the defaulting Partner the amount of such debt and interest and may recover any other damages suffered
as a result of such failure to make such a payment or contribution. If such other Partner elects to apply the provision of section
(b) of this Article VIII with respect to such failure, the provisions of this section (a) shall no longer be applicable with respect
to such obligation.
(b) Certain Consequences and Remedies.
If the amount referred to in section (a) of this Article VIII that a Partner shall have failed to pay or contribute shall at any
time exceed $100 in the aggregate, and such failure (hereinafter in this Section (b) called a "default") continues
for a period of 120 days after notice thereof to the Defaulting Partner from the other Partner (hereinafter in this Section (b)
called the "Non-Defaulting Partner"), which notice shall state that the Non-Defaulting Partner elects to have
the provisions of this Section (b) apply, then:
(i) The Partnership Interest
of the Defaulting Partner shall thereupon automatically be reduced to a percentage equal to 100 multiplied by N divided by D where
N equals the Valuation (as defined below in this Section (b)(ii) of the Defaulting Partner and D equals N plus the Valuation of
the Non-Defaulting Partner, and the Partnership Interest of the Non-Defaulting Partner shall thereupon automatically be increased
to the difference between the new Partnership Interest of the Defaulting Partner and 100%, and
(ii) The Non-Defaulting Partner
may at its option by giving notice to the Defaulting Partner declare the Partnership dissolved, and upon such declaration the Partnership
shall be dissolved and the provisions of Article X shall apply.
For purposes of this Section
(b) of Article VIII the term "Valuation" of either Partner means at any date $100 plus the aggregate amount of capital
contributions made by such Partner pursuant to Article Ill and used to pay costs incurred by the Partnership for capital
additions and improvements, reduced by amortization
at the rate of 3% per annum:
(x) from the date of this Agreement
in the case of said $100, and
(y) in the case of such capital
contributions, from the date such contributions were required to be made to the Partnership.
ARTICLE IX
RESTRICTIONS ON TRANSFER OF PARTNERSHIP
INTERESTS
(a) Permitted Transfers.
Neither Partner may transfer, sell, alienate, assign or otherwise dispose of all or any part of its interest in the Partnership,
whether voluntarily, involuntarily or by operation of law, or at a judicial sale or otherwise; provided that nothing herein contained
shall be construed to prohibit either
(i) the transfer of MaryJane's
entire interest in the Partnership to any corporation 100% of the capital stock of each class of which is owned directly or indirectly
by MaryJane, or
(ii) the transfer of WTR's
entire interest in the Partnership to any corporation 100% of the capital stock of each class of which is owned directly or indirectly
by WTR,
provided, however, that such transferee shall,
immediately upon such transfer, become a Partner and expressly assume in writing the due and punctual performance of all the obligations
of the transferring Partner under this Agreement and consent and undertake in writing to assume and perform all the obligations
hereunder not theretofore performed and discharged by such Partner and to execute this Agreement and to be bound by all the terms
and provisions hereof; provided further, however, that no such transfer shall be permitted without the express written consent
of the non-transferring Partner if such transfer would, in the reasonable opinion of the non-transferring Partner, result in adverse
tax consequences to the non-transferring Partner.
(b) Condition of Permitted Transfer.
Whenever pursuant to this Article IX any transferee is entitled to become a Partner, the other Partner shall execute an appropriate
instrument admitting such transferee as a Partner.
(c) Release under Certain Circumstances.
No transfer or other occurrence
referred to above in this Article IX shall release the transferring party of any obligations under this Agreement (and such transferring
party shall remain jointly and severally liable hereunder with such transferee corporation) unless the other Partner shall consent
thereto, which consent may not be unreasonably withheld.
ARTICLE X
TERM; DISSOLUTION; TERMINATION
(a) Term. The Partnership
shall continue until terminated in accordance with the provisions of this Article X. No Partner shall have the right to and each
Partner agrees not to dissolve, terminate or liquidate, or to petition a court for the dissolution, termination or liquidation
of the Partnership, except as provided in this Agreement.
(b) Events of Dissolution.
(i) The Partnership shall dissolve:
(A) upon the unanimous written
agreement of the Partners to dissolve the Partnership,
(B) as of December 31, 2015 unless
the Partners unanimously agree to extend the Partnership by a written addendum to this agreement.
(C) upon the dissolution of a
Partner,
(D) upon the occurrence of the
events described in Article VIII and the giving of the notice provided for in Section (b) thereof, or
(E) upon the occurrence of any
of the following: a Partner becomes insolvent or generally fails to pay, or admits in writing its inability to pay, debts as they
become due; or a Partner applies for, consents to, or acquiesces in the appointment of, a trustee, receiver or other custodian
for such Partner or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian is appointed for a Partner or for a substantial part
of its property and is not discharged within thirty days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding is commenced in respect of a Partner
and if such case or proceeding is not commenced by such Partner, it is consented to or acquiesced in by such Partner or remains
for thirty days undismissed.
(ii) Upon the dissolution of
the Partnership pursuant to either of Subsections (i)(A) or (i)(B) of this Article X, the Partnership and its business shall promptly
be wound up and terminated. Upon the dissolution of the Partnership caused by any other event set forth in Section (b) of this
Article X:
(A) the Partner as to whom the
event described in such sections has occurred (the "Withdrawing Partner") shall immediately cease to be a Partner,
and
(B) the business of the Partnership
shall not be wound up and terminated unless the remaining Partner shall so elect.
(iii) Subject to the provisions
of Section (c) of this Article X, in the event of the occurrence of an event set forth in Section (i)(C), (i)(D) or (i)(E) of this
Article X:
(A) the remaining Partner may
send such notices of the dissolution to such persons and entities as the remaining Partner may deem appropriate and necessary under
the circumstances,
(B) the remaining Partner shall
continue or promptly settle the business of the Partnership and account for the interest of the Partners selected by the remaining
Partner or a public sale of all or any part of the assets of the Partnership,
(C) the goodwill of the Partnership
(including the name, records and files) shall belong to and remain solely vested in the remaining Partner; and the remaining Partner
shall have the right at all times to continue the business and affairs of the Partnership,
(D) the prior written consent
of the remaining Partner shall be required prior to either (1) any disposition of the partnership interest of the Withdrawing Partner,
or (2) any act by any judge, trustee or court of bankruptcy which may adversely affect the property or the business of the Partnership,
and
(E) without limiting any other
right or remedy of the remaining Partner (hereinafter in this Subsection (E) called the "Purchasing Partner"),
the remaining Partner shall have the right and option to acquire the Partnership Interest of the Withdrawing Partner, which option
shall be exercised (if at all) by giving notice to the Withdrawing Partner setting forth the intention of the remaining Partner
to acquire such Partnership Interest, the purchase price that the Purchasing Partner is willing to pay for such Partnership Interest
and the date (which shall not be earlier than ^ nor later than ^ days from the date such notice is given) upon which such Partnership
Interest shall be transferred by the Withdrawing Partner to the Purchasing Partner. The Withdrawing Partner shall be bound by the
provision of such notice relating to such purchase price and such date, unless within 60 days after the date of such notice the
Withdrawing Partner gives the Purchasing Partner notice that such purchase price is unacceptable. If the Withdrawing Partner gives
such notice as to unacceptability, the purchase price shall be the fair market value of such Partnership Interest (after taking
into consideration any reduction in the Selling Partner's Partnership Interest or the value thereof as a result of the operation
of or the events described in Article VIII) determined by arbitration pursuant to Article XI.
(c) Continuing Conduct of the Partnership.
During the pendency of any arbitration or request for arbitration or of the enforcement of any claim against a Partner for a breach
of or for default under the terms of this Agreement, the business and affairs of the Partnership shall be conducted so as to maintain
and preserve the value of the Partnership as a going concern. During any period of winding up, the business and affairs of the
Partnership shall be conducted so as to maintain and preserve the assets of the Partnership in a manner consistent with the winding
up of the affairs thereof. Each Partner will indemnity the Partnership and the other Partner against any claim, loss or damage
to the Partnership or such other Partner which may result from the Partner's breach of this Section 10(c).
(d) Liquidation and Distribution
Procedure. In the event of any liquidation and distribution as a result of the termination of the Partnership, the assets
of the Partnership shall be distributed in accordance with the provisions of the Colorado Limited Partnership Act except as otherwise
provided herein.
(e) Survival of Claims.
Notwithstanding anything to the contrary contained in this Agreement, any claim of any Partner against another Partner hereunder
and any claim asserted by any Partner on behalf of the Partnership against another Partner hereunder shall survive any dissolution
or termination of the Partnership.
ARTICLE XI
ARBITRATION
Either Partner may cause
to be submitted to arbitration all disputes, controversies or questions of interpretation arising out of this Agreement or any
breach or default hereunder by giving to the other Partner notice to that effect. The arbitration shall be held in Colorado and
shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association as in effect at
the time of such arbitration except as follows. The Partner desiring arbitration shall include in its notice to the other Partner
the name of the arbitrator chosen by it. Within twenty days after receipt of such notice the Partner receiving notice shall, by
written notice to the Partner desiring arbitration, name the arbitrator chosen by it and within twenty days after the appointment
of the second arbitrator an additional arbitrator shall be selected by the two arbitrators theretofore appointed; provided, however,
if one of the Partners shall have failed to appoint an arbitrator as hereinabove provided, the sole arbitrator appointed by the
other Partner shall arbitrate the matter alone. If the two arbitrators shall have failed to select an additional arbitrator within
the above stated time, the two selected arbitrators shall proceed to arbitration. No arbitrator shall be an employee or former
employee of the Partnership, either Partner, or an Affiliate of either Partner. After their selection, the arbitrators (or sole
arbitrator as the case may be) shall proceed promptly with the arbitration proceedings and shall come to a decision and shall deliver
a written report thereof to both Partners no later than ninety days after the selection of the last of their number (or in the
case of a sole arbitrator, 110 days after his selection). Each Partner shall pay the cost and expenses of the arbitrator appointed
by it and shall share equally the other costs and expenses of the arbitration, including the costs and expenses of the additional
arbitrator. If only one arbitrator is involved the parties shall equally share the fees and expenses of such arbitrator.The right
of either Partner to seek or obtain any remedy pursuant to this Article XI shall be in addition to the remedies provided for in
Article X hereof and shall survive the dissolution of the Partnership or the sale and purchase of a Partner's Interest in the Partnership
pursuant to Article X hereof.
ARTICLE XII
GENERAL
(a) Notices. All notices,
demands or requests required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have
been given when delivered personally or when deposited in the United States Mail, postage prepaid, by registered or certified mail,
with return receipt requested, addressed as follows:
If to MaryJane, to:
Joel Schneider
910 16th Street,
Suite 412
Denver, Colorado 80202
or at such other address as MaryJane may have
furnished WTR by notice;
If to WTR, to:
Vanessa Roberts
PO Box 1550
Durango, CO 81302
or at such other address as WTR may have furnished
MaryJane by notice.
(b) Amendment. This Agreement
may not be amended except by a written instrument executed by both Partners.
(c) Applicable Law. This
Agreement and the performance of the Partners hereunder shall be interpreted, construed and enforced in accordance with the laws
of the State of Colorado and no presumption shall be deemed to exist in favor of or against either Partner as a result of the preparation
and/or negotiation of hereof.
(d) Entire Agreement. This
Agreement constitutes the entire agreement between the parties hereto relating to the subject matter hereof and there are not other
understandings, representations or warranties, oral or written, relating to the subject matter of this Agreement, which shall be
deemed to exist or to bind any of the parties hereto, their respective successors or assigns except as referred to herein.
(e) Further Assurances.
Each Partner shall execute such deeds, assignments, endorsements and other instruments and evidences of transfer, give such further
assurances and perform such acts as are or may become necessary or appropriate to effectuate and to carry out the provisions of
this Agreement. All such deeds, assignments, endorsements and other instruments and evidences of transfer and all other acts of
any kind which are to be as of the date of this Agreement shall be delivered or taken as soon as possible following the date of
this Agreement.
(f) Third Parties. No person
not a party to this Agreement (including any employee of either Partner or its Parent or the Partnership) shall have or acquire
any rights by reason of this Agreement nor shall any party hereto have any obligations or liabilities to such other person by reason
of this Agreement.
(g) Admission of Additional Partners.
Except as provided in Article IX hereof, no additional Partners may be admitted to the Partnership except upon the unanimous consent
of the Partners and upon such terms and conditions as the Partners may agree upon.
(h) Severability. If any
provisions of this Agreement or the application thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of the Agreement and the application of such provisions to other persons or circumstances shall
not be affected thereby and shall be enforced
to the greatest extent permitted by law.
(i) Binding Agreement.
Subject to the restrictions on transfers and other dispositions set forth herein, this Agreement shall inure to the benefit of
and be binding upon the undersigned Partners and their respective successors and assigns.
(j) Headings. The headings
of Sections in this Agreement are for convenience only and are not a part of this Agreement.
IN WITNESS WHEREOF, the
parties hereto have executed and delivered this Agreement in the State of Colorado by their duly authorized officers, effective
as of the date and year first above written.
The MaryJane Group, Inc.
By: /s/ Joel C. Schneider________________
Joel C. Schneider, CEO
Wilderness Trails Ranch,
LLC.
By: /s/ Vanessa Roberts________________
Vanessa Roberts, CEO
CONSULTING AGREEMENT
THIS AGREEMENT, made
as of the 25th day of May, 2015 by and between Cultivating Spirits, LLC, a Colorado limited liability company, located at
252 Warren Avenue, Silverthorne, Colorado 80497 (“CS”), Philip Wolf, the principal shareholder of Cultivating
Spirits and The MaryJane Group, Inc. a Nevada corporation located at 910 16th Street, Suite 412, Denver, Colorado
80202 (hereinafter referred to as the “Company”).
WHEREAS, the Company has
entered into a Venture Agreement with the owners of Wilderness Trails Ranch to engage in the operation of an adult camp/ranch concept
resort from July 1, 2015 through no later than October 15, 2015 to be located at the ranch entitled Wilderness Trails Ranch located
in Bayfield, Colorado; and
WHEREAS, The Company is
desirous of hiring the services of CS and Philip Wolf to create, operate and manage all cannabis related activities to be hosted
at the adult camp/ranch.
WHEREAS, CS and Philip
Wolf are desirous of rendering such services to the Company.
NOW, THEREFORE, in consideration
of the mutual covenants and conditions herein contained and the acts herein described, it is agreed between the parties as follows:
| 1. | Term of Agreement. The Company hereby engages and retains
CS and Philip Wolf and CS and Philip Wolf hereby agree to render consulting services to the Company for the period commencing on
May 21, 2014 and ending on October 15, 2015. If CS and/ or Philip Wolf willfully and
continuously fail or refuse to comply with the obligations as a Consultant of the Company and after thirty (30) days' written notice
of such failure or refusal has been furnished by the Company to CS, “CS” has failed to cure such failure or default.
In the event CS and/or Philip Wolf fail to cure such failure or default within the thirty (30) day cure period, the Company shall
have the right to terminate this Agreement. Additionally, CS and/or Philip Wolf shall have only one (1) thirty (30) day right to
cure during any one (1) calendar year, and if a second notice of failure or default is given to “CS” in the same calendar
year, the Company shall have the right to terminate the Shareholder's employment without providing any opportunity to
cure. |
| | |
| 2. | Services to be Rendered. The services to
be rendered by Consultant shall consist of business advice concerning the operation of the Company’s
adult camp/ranch business and as further outlined in the attached Exhibit “A.” Consultant,
when reasonably requested by the Company, shall devote only such time as Consultant may deem necessary
to the matters of the Company, and shall not by this agreement be prevented or barred from rendering
services of the same or similar nature, as herein described, or services of any nature whatsoever for
or on behalf of persons, firms or corporations other than the Company. |
| | |
| 3. | Consideration. The consideration shall
be broken down as follows: |
A. | During the pre-opening period from May 21, 2015 through June
30, 2015 the Company shall pay Philip Wolf an aggregate of $3,000, of which $1,000 has been paid to date. |
B. | During the operation of the Camp from July 1, 2015 through October
15, 2015 the Company shall pay Philip Wolf $2,000 per month for his personal services related to the operation of the adult camp/ranch. |
C. | From June 1, 2015 through October 1, 2015 or the closing date of
the adult camp/ranch whichever be sooner the Company will pay CS $4,000 per month for their services relating to the operation
of the adult camp/ranch and as further outlined in the attached Exhibit “A”. |
D. | During the term of this Agreement, the Company shall reimburse Philip
Wolf for all travel expenses directly related to the services performed pursuant to this Agreement. Notwithstanding the foregoing
any expenses in excess of $250.00 must be approved in advance by the Company. |
E. | At the end of this Agreement CS and/or Philip Wolf, as designated
by Philip Wolf shall receive 15% of the net profits earned by the Company from the operation of the adult camp/ranch. |
4. Exclusions. This
Agreement specifically excludes financial responsibility by CS and Philip Wolf for any fees incurred on behalf of the Company related
to legal, accounting, printing, filing, shipping, or any other ancillary costs which may be incurred to consummate their services
for the Company. Philip Wolf agrees to inform the Company’s management of all foreseeable fees and the Company agrees to
pay the incurred fees as directed by the Consultant.
5.
Indemnification and Insurance. The Company agrees to defend, indemnify, assume liability for and hold CS and Philip Wolf
harmless from any and all claims, demands, damages, losses, suits, proceedings, penalties, expenses or other liabilities, including
attorney’s fees and court costs, arising out of or resulting from the performance of this Agreement, regardless of the basis
(except in the event of gross negligence on the part of CS and or Philip Wolf. The Company, will use its best efforts to add CS
and Philip Wolf to its general liability insurance policies as an additional insured party.
6.
Cannabis and Alcohol and Assumption of Risk. CS has no licenses to provide cannabis or alcohol to the Company or any of
its guests at the camp/ranch, and CS will not provide the Company or any guests at the camp/ranch with any cannabis or alcohol.
Company hereby agrees not to request alcohol or cannabis from CS. Company understands that consumption of alcohol and/or cannabis
carries inherent risks, and Company hereby assumes all risks associated with any consumption of alcohol and/or cannabis by Company’s
employees or any guest of the camp/ranch. Consumption of alcohol and/or cannabis by the Company’s employees or guests of
the camp/ranch shall be entirely at their own risk. CS shall bear no responsibility for anything resulting from or relating to
the consumption of cannabis and/or alcohol by the Company’s employees or any guest of the camp/ranch (unless caused by the
gross negligence of CS. The Company hereby understands that the possession, sale, transfer, and consumption of cannabis remains
illegal under federal law.
7. Entire
Agreement. This instrument contains the entire agreement of the parties.
There are no representations or warranties
other than as contained herein. No waiver or modification hereof shall be valid unless executed in writing with the same formalities
as this Agreement. Waiver of the breach of any term or condition of this Agreement shall not be deemed a waiver of any other or
subsequent breach, whether of like or of a different nature.
8. Colorado Law. This Agreement
shall be construed according to the laws of the State of Colorado (exclusive of the conflicts of law provisions thereof) and shall
be binding upon the parties hereto, their successors and assigns.
9. Venue. CS and Philip Wolf
and the Company each agree that any legal or equitable action or proceeding with respect to this Agreement shall be brought in
any Federal or State court of competent jurisdiction located in the County of Denver, State of Colorado, and, by execution and
delivery of this Agreement, each accepts for themselves and their property, generally and unconditionally, the exclusive jurisdiction
of the aforesaid courts and any related appellate court with respect to this Agreement, and irrevocably agree to be bound by any
judgment rendered thereby in connection with this Agreement, and irrevocably waive any obligation they may not or hereafter have
as to the venue of any such action or proceeding brought in such a court or that such court is an inconvenient forum. The Company,
CS and Philip Wolf each consent to the service of process of any of the aforementioned courts in any such action or proceeding
by mailing of copies thereof by registered mail, postage prepaid, such service to become effective three business days after such
mailing. In any such proceeding, the prevailing party shall be entitled to an award of fees and disbursements of counsel.
10. Independent Contractor. Cs
and Philip Wolf agree to perform their consulting duties hereto as independent contractors. Nothing contained herein shall be considered
as to creating an employer-employee relationship between the parties to this Agreement.
11. Waive Jury Trial. The Company
and CS and Philip Wolfe each hereby waive trial by jury in any judicial proceeding brought by either of them with respect to this
agreement.
12.
Equity Option. The Company shall grant CS or Philip Wolf an option to purchase 15% of "Cannacamp" exercisable
for 60 days after the completion of this year’s camp. “Cannacamp” for the purposes of this Agreement is defined
as any camp/resort/retreat operated by the Company in future years. The option will be exercisable for $1.00. Upon exercise CS
or Philip Wolf will become a 15% equity partner with the attendant financial responsibility. By way of example if Cannacamp
needs a $100,000 financial contribution to open for the 2016 season CS or Philip Wolf will be responsible for $15,000.
13.
Intellectual Property. The Company, CS
and Philip Wolf each owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights,
inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated
to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s
knowledge threatened, which challenges the right of the Company or CS and/or Philip Wolf with respect to any Intellectual Property
necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future);
to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services
and processes do not
infringe
on any Intellectual Property or other rights held by any person; to the best of the CS’s and Philip Wolf’s knowledge,
CS”s current and intended products, services and processes do not infringe on any Intellectual Property or other rights held
by any person; and the Company, CS and Philip Wolf are unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company, CS and Philip Wolf as the case may be have taken reasonable security measures to protect the secrecy, confidentiality
and value of their respective Intellectual Property. In addition any Intellectual Property developed by the Company, CS and/or
Philip Wolf during the term of this Agreement shall remain the property of the developer and such usage at the camp/ranch shall
be pursuant to a use license during the term of the camp/ranch.
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement the day and year first above written.
|
|
CULTIVATING SPIRITS, LLC |
|
|
By: |
/s/ Philip Wolf |
|
|
|
Philip Wolf |
|
|
|
|
|
|
|
/s/ Philip Wolf |
|
|
|
Philip Wolf, Personally |
|
|
|
|
|
|
|
THE MARYJANE GROUP, INC. |
|
|
By: |
/s/ Joel Schneider |
|
|
|
Joel Schneider, CEO |
|
EXHIBIT A
SCOPE OF WORK
|
1. |
To develop a
Cannabis program fit for a resort, for the Company/“Bud and Breakfast Mountain Resort”. The program will be licensed
by Cultivating Spirits. This Cannabis program will be allowed for use by the company as long as Cultivating Spirits holds onto
their equity into the “Bud and Breakfast Mountain Resort” |
|
|
|
|
2. |
To provide the
Company with schedules for Cannabis activities, to assist the Company in the proper setup of Cannabis related activities and the
overall “vibe” of the resort. To assist the Company in determining its cost of development |
|
|
|
|
3. |
To use “CS”
best efforts to cultivate and grow relationships in the Durango Cannabis Industry, To represent the Company in an outstanding way.
To negotiate employees pay and create contracts and deals with Industry partners. |
|
|
|
|
4. |
To be responsible
of making sure employees are running all Cannabis activities are running and executed to an acceptable level. |
|
|
|
|
5. |
Assist our current
staff on training them with all Cannabis related topics. To insure that there is quality controls put in place to insure the resort
produces only the highest quality Cannabis experience. |
|
|
|
|
6. |
To generally
assist the Company in its efforts to enhance its visibility as a premier Cannabis Resort through Co-Branding Cultivating Spirits
and using all of our industry and media connections to grow awareness for all parties involved |
|
|
|
|
7. |
To assist in
creating an everlasting “Bud and Breakfast Mountain Resort” model that we will use for the foreseeable future. |
|
|
|
|
8. |
To assist in
creating website content and marketing material that brand the “Bud and Breakfast Mountain Resort” in ways previously
discussed |
|
|
|
|
9. |
To gather educational
tools for customers at the “Bud and Breakfast Mountain Resort” |
|
|
|
|
10. |
To allow the
Company to Co-Brand the “Bud and Breakfast Mountain Resort” with Cultivating Spirits |
|
|
|
|
11. |
To create a Cannabis guide book for all of our activities at
the “Bud and Breakfast Mountain Resort”. This guide book will be licensed to Cultivating Spirits and known “CS”
Intellectual Property. |
|
|
|
|
12. |
To assist with public relationships |
|
|
|
|
13. |
To assist in taking bookings for the camp/ranch through the Cultivating Spirits
website. |
|
|
|
|
14. |
Ongoing future development of the Cannabis program for the “Bud and Breakfast Mountain Resort”. |
Exhibit
21.00
Subsidiaries
of the registrant
| ● | Capital
Growth Corporation, a Colorado corporation |
| | |
| ● | Mary
Jane Entertainment, LLC, a Colorado limited liability company |
| | |
| ● | Mary
Jane Events, LLC, a Colorado limited liability company |
| | |
| ● | Mary
Jane Hospitality, LLC, a Colorado limited liability company |
| | |
| ● | Bud
& Breakfast, LLC, a Colorado limited liability company |
| | |
| ● | MJ
Ranch, LLC, a Colorado limited liability company |
| | |
| ● | SA
Hotel, LLC, a Colorado limited liability company |
Exhibit
31.1
CERTIFICATION
PURSUANT TO
SECTION
302 OF
THE
SARBANES-OXLEY ACT OF 2002
I,
Joel C. Schneider, certify that:
| (1) | I
have reviewed this Annual Report on Form 10-K of The MaryJane Group, Inc.; |
| | |
| (2) | Based
on my knowledge, this report does not contain any untrue statements of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report |
| | |
| (3) | Based
on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
| | |
| (4) | The
registrants other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| | |
| a. | Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared; |
| | |
| b. | Designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles; |
| | |
| c. | Evaluated
the effectiveness of the registrants disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluations;
and |
| | |
| d. | Disclosed
in this report any change in the registrants internal control over financial reporting
that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
| | |
| (5) | The
registrants other certifying officer(s) and I have disclosed, based on our most
recent evaluation of the internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions): |
| | |
| a. | All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information;
and |
| | |
| b. | Any
fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
July 27, 2015 | |
/s/ Joel C. Schneider |
| |
Joel C. Schneider |
| |
Chief Executive Officer/Chief Financial Officer |
| |
Principal Executive Officer |
| |
Chief Accounting Officer |
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report of The MaryJane Group, Inc. (the Company) on Form 10-K for the year ended April
30, 2015, as filed with the Securities and Exchange Commission (the Report), I, Joel C. Schneider, Chief Executive
Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §
906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
of the Company. |
/s/ Joel C. Schneider |
|
Joel C. Schneider |
|
Chief Executive Officer/Chief Financial Officer |
|
July 27, 2015 |
|
A signed
original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.