INVESTMENTS IN UNCONSOLIDATED AFFILIATES
|12 Months Ended|
Dec. 31, 2018
|Investments In Unconsolidated Affiliates|
|NOTE 6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES||
On October 26, 2017, the Company entered into joint venture agreements with NuLeaf Sparks Cultivation, LLC and NuLeaf Reno Production, LLC (collectively “NuLeaf”) to build and operate cultivation and production facilities for our IVXX brand of cannabis products in Nevada. The agreements were subject to approval by the State of Nevada, the City of Sparks and the City of Reno in Nevada. Under the terms of the agreements, the Company remitted to NuLeaf an upfront investment of $4.50 million in the form of convertible loans bearing an interest rate of 6.0% per annum. On June 28, 2018, the Company received approval from the State of Nevada. The remaining required approvals from local authorities were received in July 2018. As a result, the notes receivable balance was converted into a 50.0% ownership interest in NuLeaf. The investment in NuLeaf was recorded at cost and accounted for using the equity method. As of December 31, 2018, the $7.81 million investment in NuLeaf was recorded in other investments on the consolidated balance sheet. For the year ended December 31, 2018, the Company recorded $0.66 million loss in earnings in the consolidated statement of operations.
On August 28, 2018, the Company entered into a Subscription Agreement with Hydrofarm Holdings Group, Inc. (“Hydrofarm”), one of the leading independent providers of hydroponic products in North America, pursuant to which the Company agreed to purchase from Hydrofarm and Hydrofarm agreed to sell to the Company 2,000,000 Units, each Unit consisting of one share of common stock and one warrant to purchase one-half of a share of common stock for an initial exercise price of $5.00 per share, for $2.50 per Unit for an aggregate purchase price of $5.00 million. The investment in Hydrofarm was recorded at cost and is included in other assets on the consolidated balance sheet as of December 31, 2018.
If applicable, the fact that the fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value and the investor does not estimate fair value under either because (1) it is not practicable to estimate fair value or (2) the investor is exempt from estimating fair value. If applicable, the fact that the fair value of a cost method investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value and the investor does not estimate fair value under either because (1) it is not practicable to estimate fair value or (2) the investor is exempt from estimating fair value.
The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef