Notes
to Condensed Consolidated Financial Statements
(Unaudited)
NOTE
1 - ORGANIZATION
Business
InnerScope
Advertising Agency, Inc. (“Company”, “Innerscope” or “ISAA”) is a Nevada Corporation incorporated
on June 15, 2012, with its principal place of business in Roseville, California. ISAA was formed to provide advertising and marketing
services to retail establishments in the hearing device industry. On June 20, 2012, ISAA entered into an Acquisition and Plan
of Share Exchange with InnerScope Advertising Agency, LLC (“ILLC”), a commonly owned entity, whereby ISAA acquired
100% of ILLC. On November 1, 2013, ISAA entered into an Acquisition and Plan of Share Exchange with Intela-Hear, LLC (“Intela-Hear”),
a commonly owned entity, whereby ISAA acquired 100% of the outstanding equity of Intela-Hear in exchange for 27,000,000 shares
of the Company’s common stock. This resulted in Intela-Hear becoming a wholly-owned subsidiary of the Company.
ISAA
provides a comprehensive range of services (including consulting services), grouped into four fundamental disciplines: advertising/marketing,
customer relationship management, public relations and specialty communications. The Company serves the retail hearing aid dispensing
community through generating traffic and consumer interest for hearing aid dispensing practices and providing consulting services
to hearing aid dispensaries. During the three months ended March 31, 2017, approximately 96.3% of revenues were from one customer
(see Note 8), and for the three months ended March 31, 2016, 100% of the Company’s revenue was generated from a related
party. On August 5, 2016, the Company and the related party agreed to cancel their Marketing Agreement as a result of the sale
by the related party of substantially all of their assets. See note 5.
On
August 5, 2016, the Company along with Mark Moore (“Mark”, the Company’s chairman), Matthew Moore (“Matthew”,
the Company’s Chief Executive Officer) and Kim Moore (“Kim”, the Company’s Chief Financial Officer) entered
into a Store Expansion Consulting Agreement (the “Expansion Agreement”). Mark, Matthew and Kim are herein referred
to collectively as the Moores. Pursuant to the Expansion Agreement, the Company and the Moores were responsible for all physical
plant and marketing details for new store openings during the initial term of six-months. The Expansion Agreement was cancelled
on January 6, 2017. The Company’s client has decided
to do their own marketing
in-house and eliminate this out-sourced contract, and has decided to open only one location and delay the opening of any other
new stores.
For the three months ended March 31 2017, the Company has recognized $100,000 of income for the
one new store, opened in January 2017, and $400,000 in other income for payments received for the Expansion Agreement pursuant
to the cancellation. The client also paid an additional $30,000 for the cancellation of the Store Expansion Agreement and a marketing
agreement.
Also
on August 5, 2016, the Company and the Moores entered into a Consulting Agreement (the “Consulting Agreement”) with
the same party as the store Expansion Agreement. Under the Consulting Agreement, including the Non-Compete provision covering
a ten mile radius of any retail store, the Company and the Moores will provide unlimited licensing of the Intela-Hear brand name,
exclusive access to the Aware Aural Rehab Program within 10 miles of retail stores, exclusive territory of all services within
10 miles of retail stores and 40 hours per month of various consulting services. The Consulting Agreement continues until January
31, 2019, unless terminated for cause, as defined in the Consulting Agreement. On May 2, 2017, the Company received a demand
that all monies paid pursuant to the Consulting Agreement be returned. The Company believes this threat by the third party is
frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated (See Note 9).
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Basis
of Presentation and Principles of Consolidation
The
accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management,
all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have
been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information
and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited
financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and
notes thereto included in Form 10-K filed with the SEC on March 31, 2017. Interim results of operations for the three months ended
March 31, 2017 and 2016 are not necessarily indicative of future results for the full year. Certain amounts from the 2016 period
have been reclassified to conform to the presentation used in the current period.
The
condensed consolidated financial statements of the Company
include the consolidated accounts
of Innerscope and its’ wholly owned subsidiaries ILLC and Intela-Hear, a California limited liability company. All intercompany
accounts and transactions have been eliminated in consolidation.
Emerging
Growth Companies
The
Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that
an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take
advantage of the benefits of this extended transition period.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses
during the reported period. Significant estimates relied upon in preparing these financial statements include collectability of
notes receivable from an officer, and through July 31, 2016, the allocation of our President’s compensation to the Company.
Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. These investments
are carried at cost, which approximates fair value. Cash and cash equivalent balances may, at certain times, exceed federally
insured limits. If the amount of a deposit at any time exceeds the federally insured amount at a bank, the uninsured portion of
the deposit could be lost, in whole or in part, if the bank were to fail.
Deferred
Commission and Commission Payable, Stockholder
The
Company records deferred commission when cash has been paid, but the related services have not been provided by the
party (stockholder). Commission expense will be recognized when the services are provided. As of March 31, 2017 and December
31, 2016, the Company had advanced $508,334 and $133,334, respectively. The Company also records commissions payable, stockholder, when services have been provided and the Company
has not yet paid for the services. As of December 31, 2016, the Company owed the stockholder $96,000, which was paid
in January 2017.
Notes
Receivable, Officer
The
Company records notes receivable when a recipient has issued a note to the Company in exchange for cash. The Company records as
a current asset, any portion of the note that is due in the subsequent twelve (12) months for the date of the balance sheet, and
any payments due in excess of twelve months of the balance sheet are classified as long term. As of March 31, 2017, $10,314 (includes
$64 of interest due) is due by March 31, 2018 and $5,125 is due after March 31, 2018.
Revenue
Recognition
The
Company recognizes revenue in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are
met (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed
or determinable and (4) collectability is reasonably assured. The Company recognizes revenue during the period in which the services
are performed. For the three months ended March 31, 2017, the Company received and recognized $100,000 of revenue related to the
Store Expansion Agreement and $30,000 from the cancellation of the Marketing and Store Expansion Agreements.
Deferred
Revenue
The
Company records deferred revenues from the Consulting Agreement when cash has been received, but the related services have not
been provided. Revenue will be recognized when the services are provided and the terms of the agreement have been fulfilled. As
of March 31, 2017, the Company has deferred revenue of $847,223 related to the Consulting Agreement. On May 2, 2017, the Company
received a demand that all monies paid pursuant to the Consulting Agreement be returned. The letter claims the Moore’s are
not able to render their services, as personally required, pursuant to the Consulting Agreement. Accordingly, effective January
1, 2017, the Company has not recognized revenue from the Consulting Agreement.
Fair
Value of Financial Instruments
The
Company's financial instruments consist primarily of cash, notes and interest receivable, officer and accounts payable and amount
due to a related party (MFHC). The carrying amounts of such financial instruments approximate their respective estimated
fair value due to the short-term maturities. The estimated fair value is not necessarily indicative of the amounts
the Company would realize in a current market exchange or from future earnings or cash flows.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized
to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A
valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred
tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and
rates of the date of enactment.
ASC
740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements
and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure
and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company
has not been assessed, nor paid, any interest or penalties.
Uncertain
tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition
threshold at the effective date may be recognized or continue to be recognized.
Earnings
(Loss) Per Share
The
Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per
share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the
weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing
net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities
outstanding during the period. As of March 31, 2017 and 2016, the Company did not have any outstanding common stock equivalents
or any other potentially dilutive securities.
Recent
Accounting Pronouncements
Recent
accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact
on the Company's present or future consolidated financial statements.
NOTE
3 – GOING CONCERN AND MANAGEMENT’S PLANS
The
accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a
going concern. During the three months ended March 31, 2017, the Company had net income of $56,911 and generated cash of $141,798
in operations. Through August 5, 2016, the Company was dependent on the Marketing Agreement with MFHC, (the Company and MFHC agreed
to cancel the Marketing Agreement which generated 100% of the Company’s revenues for the three months ended March 31, 2016,
as a result of the sale by MFHC of substantially all of their assets) and is now dependent on the Consulting Agreement with a
third party. On May 2, 2017, the Company received a demand that all monies paid pursuant to the Consulting Agreement be returned.
The letter claims the Moore’s are not able to render their services, as personally required, pursuant to the Consulting
Agreement. The Store Expansion and Marketing Agreements were cancelled January 2, 2017, retroactive to December 1, 2016 (see Note
6). These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Management’s
Plans
The
Company’s plans include the realization of the Consulting Agreement to provide the Company with working capital. The Company’s
plans also include setting up an alliance (the “Alliance”). On April 2, 2013, The Company executed a 10 Year Supply
Agreement with GN Hearing Care Corporation, DBA as GN Resound (“GN Resound”), one of the world’s leading manufacturers
of hearing devices. This supply agreement enables the Company to offer hearing aids to independent hearing aid practitioners at
a discount to the regular wholesale price, while still permitting the Company to profit from said sale between the independent
hearing aid practitioners and GN Resound. Alliance members will then be able to sell those hearing devices, whether private label
or GN Resound branded, manufactured and shipped by GN ReSound under the Alliance program to their clients. As of April 20, 2017,
we have work orders from 9 new clients, representing 36 locations to provide our marketing and advertising services. We are actively
pursuing additional clients and we are planning to launch the Alliance program.
NOTE
4 – NOTE RECEIVABLE, OFFICER
On
April 1, and June 25, 2013, in exchange for two notes receivable, the Company loaned the President of the Company $10,000 and
$10,500, respectively. The terms of the notes include an interest rate of 1.5% per annum and the notes, as amended are due on
their fifth year anniversary, with quarterly payment beginning October 1, 2016. Interest income, related party of $64 and $77
was recorded for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, and December 31, 2016, notes
and interest receivable, related party was $15,439 and $18,084, respectively.
NOTE
5 – RELATED PARTY TRANSACTIONS
The
Company loaned the President $20,500 during the year ended December 31, 2013 (see Note 4). The Company recorded interest income
of $64 and $77 for the three months ended March 31, 2017 and 2016.
Pursuant
to a Marketing Agreement (cancelled August 5, 2016), the Company provided marketing programs to promote and sell hearing aid instruments
and related devices to Moore Family Hearing Company (“MFHC”). MFHC owned and operated retail hearing aid stores. Based
on common control of MFHC and the Company, all transactions with MFHC are classified as related party transactions. On August
8, 2016, in consideration of $128,000 (the “Cancellation Fee”), MFHC and the Company agreed to cancel the Marketing
Agreement as a result of the sale by MFHC of substantially all of their assets (see Note 6). On August 11, 2016, MFHC paid $229,622
to the Company (inclusive of the balance owed as of June 30, 2016, the Cancellation Fee and other related party activity).
Pursuant
to the Marketing Agreement, beginning in January 2014, the monthly fee was increased from $2,500 to $3,200 per retail location.
For the three months ended March 31, 2016, there were 20 stores resulting in revenue of $192,000. The Company has offset the accounts
receivable owed from MFHC for expenses of the Company that have been paid by MFHC. As a result of these payments in addition to
MFHC’s payments to the Company during the year ended December 31, 2016, the balance due to MFHC as of March 31, 2017 and
December 31, 2016 was $22,548 and $13,048, respectively.
On
April 1, 2013, the Company entered into a five-year sublease agreement with MFHC to sublease approximately 729 square feet of
office space for $1,500 per month. The monthly rent reduced the amounts owed to the Company from MFHC for the marketing services
provided to MFHC. For the three months ended March 31, 2016, the Company expensed $4,500 related to this lease.
On
February 1, 2016, the Company entered into a one-year sublease agreement with MFHC to sublease approximately 2,119 square feet
of office space for $4,026 per month. The monthly rent reduced the amounts owed to the Company from MFHC for the marketing services
provided to MFHC. Effective April 30, 2016, MFHC released the Company from the sublease. For the three months ended March 31,
2016, the Company expensed $8,052 related to this lease.
Prior
to August 1, 2016, the Company’s President was being compensated from MFHC, as he also held a position with MFHC. During
that time the Company estimated the portion of the President’s salary that should be allocated to the Company, and subsequent
to August 1, 2016, the Company agreed to compensation of $225,000 per year. Effective August 1, 2016, the Company agreed to compensate
our Chief Financial Officer $125,000 per annum. On November 15, 2016, the Company entered into an employment agreement with our
CEO and CFO, which includes an annual base salary of $225,000 and $125,000, respectively. The Company has expensed $58,333 and
$10,166 for the President, for the three months ended March 31, 2017, and 2016, respectively and the Company recognized $29,167
of expense for the CFO for the three months ended March 31, 2017.
In
September 2016, the officers and directors of the Company formed a California limited liability company (the “LLC”),
for the purpose of acquiring commercial real estate and other business activities.
On December 24, 2016, the LLC acquired two retail stores from the buyer of the MFHC stores. On March 1, 2017, the Company entered
into a twelve month Marketing Agreement with each of the stores to provide telemarketing and design and marketing services for
$2,500 per month per store, resulting in $5,000 of revenues for the three months ended March 31, 2017.
In
November 2016, the Chairman formed a California Limited Liability Company (“LLC”), for the purpose of providing consulting
services to the Company.
The Company entered into
an agreement with the LLC and paid the LLC, $375,000 during the year ended December 31, 2016 for services performed and to be
performed. Of the $375,000 amount paid, $241,667 was recognized as consulting fees- stockholder for the year ended December 31,
2016, and the remaining $133,334 was recorded as deferred commissions- stockholder as of December 31, 2016. For the three months
ended March 31, 2017, the Company paid the LLC an additional $771,000 and expensed $300,000 ($60,000 as commissions and $240,000
as other expense) for services performed. As of March 31, 2017, the deferred commissions-stockholder is $508,334.
NOTE
6– COMMITMENTS AND CONTINGENCIES
Lease
Agreements
On
April 1, 2013, the Company entered into a five year sublease agreement with MFHC to sublease approximately 729 square feet of
office space for $1,500 per month. The monthly rent reduced the amounts owed to the Company from MFHC for the marketing services
provided to MFHC.
On
February 1, 2014, the Company entered into a two year sublease agreement for approximately 2,119 square feet of office space in
Roseville, Ca, for $3,000 per month.
On
February 1, 2017, the Company and MFHC terminated any remaining subleases with MFHC and the Company agreed to a month-to-month
lease directly with the landlord for $8,436 per month.
Consulting
Agreements
Effective
June 20, 2012, the Company entered into an eighteen month Business Consulting Agreement (the “BCA”). Pursuant to the
BCA, the consultant is to assist the Company in becoming a “public” company and the Company agreed to a monthly compensation
of $2,500 and the issuance of the amount of shares equal to 4.9% of the outstanding shares of the Company at all times until the
completion of the Transaction. The Company has issued the consultant 2,940,000 shares of common stock. The Company continues to
use the services of the consultant on a month-to-month basis at the rate of $2,500 per month. For the three months ended March
31, 2017 and 2016, the Company has recorded expenses of $7,500 in professional fees.
On
August 5, 2016, the Company along with Mark Moore (“Mark”, the Company’s chairman), Matthew Moore (“Matthew”,
the Company’s Chief Executive Officer) and Kim Moore (“Kim”, the Company’s Chief Financial Officer) entered
into a Store Expansion Consulting Agreement (the “Expansion Agreement”) Mark, Matthew and Kim are herein referred
to collectively as the Moores. Pursuant to the Expansion Agreement, the Company and the Moores will be responsible for all physical
plant and marketing details for new store openings during the initial term of six-months. The Expansion Agreement was cancelled
on January 6, 2017. The Company’s client has decided
to do their own marketing in-house
and eliminate this out-sourced contract, and has decided to delay the opening of any new stores.
For the three months
ending March 31, 2017, the Company has received and recognized $400,000 in other income for payments received for the cancellation
of the Expansion Agreement.
Also
on August 5, 2016, the Company and the Moores entered into a Consulting Agreement (the “Consulting Agreement”) with
the same party as the store Expansion Agreement. Under the Consulting Agreement, including the Non-Compete provision covering
a ten mile radius of any retail store, the Company and the Moores will provide unlimited licensing of the Intela-Hear brand name,
exclusive access to the Aware Aural Rehab Program within 10 miles of retail stores, exclusive territory of all services within
10 miles of retail stores and 40 hours per month of various consulting services. The Consulting Agreement continues until January
31, 2019, unless terminated for cause, as defined in the Consulting Agreement. On May 2, 2017, the Company received a demand letter
threatening litigation unless all monies paid pursuant to the Consulting Agreement are returned. The Company believes this threat
by the third party is frivolous and without merit, as well as not providing sufficient cause for the Agreement to be terminated
(See Note 9). However, effective January 1, 2017, the Company has not recognized revenue from the Consulting Agreement.
Effective
August 5, 2016, the Company entered into a Marketing Agreement (the “Marketing Agreement”). Pursuant to the Marketing
Agreement, the Company will provide marketing concepts and designs to promote its’ products and use the Company’s
advertising services for an initial six month period. Pursuant to the Marketing Agreement and the current structure, the Company
will receive $50,000 per month. On January 6, 2017, the Marketing Agreement was cancelled.
On November 17, 2016, the Company entered
into an Agreement with a Limited Liability Company, whose sole member is our Chairman. Pursuant to the Agreement, consulting services
are to be provided to the Company related to the physical plant and marketing of new store openings for hearing aid dispensaries
as well as the marketing and general operations of hearing aid dispensary business. During the three months ended March 31, 2017,
the Company paid the LLC $771,000. The Company recorded the payment as deferred commissions and recognizes commission expense-
shareholder, when the services are performed. A summary of the activity for the three months ended March 31, 2017 and for the
year ended December 31, 2016, is as follows:
Deferred commissions-stockholder
|
|
2017
|
|
2016
|
Beginning balance
|
|
$
|
133,334
|
|
|
$
|
—
|
|
Payments made
|
|
|
771,000
|
|
|
|
375,000
|
|
Reduction of commissions owed
|
|
|
(96,000
|
)
|
|
|
—
|
|
Commission expense recorded
|
|
|
(60,000
|
)
|
|
|
(241,666
|
)
|
Other expense recorded
|
|
|
(240,000
|
)
|
|
|
—
|
|
Ending balance
|
|
$
|
508,334
|
|
|
$
|
133,334
|
|
NOTE 7 –
STOCKHOLDERS’ EQUITY
COMMON STOCK
The Company has 225,000,000 authorized shares
of $0.0001 common stock. As of March 31, 2017 and December 31, 2016, there are 60,906,000 shares of common stock outstanding.
PREFERRED
STOCK
The
Company has 25,000,000 authorized shares of $0.0001 preferred stock. As of March 31, 2017 and December 31, 2016 there were no
shares of preferred stock issued and outstanding.
NOTE
8 – SALES CONCENTRATION AND CONCENTRATION OF CREDIT RISK
Cash
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash. The Company maintains cash balances at one financial institution,
which is insured by the Federal Deposit Insurance Corporation. As of March 31, 2017, the Company has approximately $405,000
in excess of the insurance limit at one financial institution. The Company has not experienced any losses in such accounts.
Sales
Concentration
Following
is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three months ended
March 31, 2017 and 2016:
Customer
|
|
|
2017
|
|
|
|
2016
|
|
|
|
Amount Due as of March 31, 2017
|
|
Customer A
|
|
|
89.9
|
%
|
|
|
—
|
|
|
$
|
—
|
|
Customer B, related party
|
|
|
—
|
|
|
|
100
|
%
|
|
$
|
—
|
|
NOTE
9 – SUBSEQUENT EVENTS
On
April 3, 2017, the Company entered into a one (1) year Financial Consulting Agreement (the FC Agreement”), included in this
filing as Exhibit 10.13, with a Consultant (the “FC Consultant”). Pursuant to the FC Agreement, the FC Consultant
will assist the Company in its’ public company filing requirements. The Company has agreed to compensate the FC Consultant
$4,500 per month and to issue 333,334 shares of restricted common stock of the Company. Under certain circumstances the monthly
fee can be reduced to $3,500 after the first six months of the FC Agreement.
On
April 7, 2017, the Company entered into a Consulting and Representation Agreement (the “CR Agreement”), included in
this filing as Exhibit 10.14, with a consultant (the “CR Consultant”). Pursuant to the CR Agreement the CR Consultant
will assist the Company to broaden its visibility to the investing public. The Company has agreed to compensate the CR Consultant
$700 per month and to issue 300,000 restricted shares of the Company’s common stock to the CR Consultant. The initial term
was for fifteen (15) days with an automatic extension for one hundred seventy (170) days.
On
May 2, 2017, the Company received a demand letter threatening litigation unless all monies paid pursuant to the Consulting Agreement
are returned on the basis that an injunction against certain Officers and Directors renders the Consulting Agreement impossible
to perform. The Company was not named as an enjoined party in such previous litigation, and the services contemplated under the
Consulting Agreement are not within the scope of the injunction, thus the Company believes this threat by the third party is frivolous
and without merit, as well as not providing sufficient cause for the Agreement to be terminated. The Company intends to vigorously
defend against any lawsuit filed against it in this matter, as well as take any required action to see that the obligations of
the third party in this matter are strictly enforced.
On
May 9, 2017, the Company and Moore Holdings, LLC, a California Limited Liability Company (“
Moore Holdings
”),
a related party, agreed to purchase certain real property from an unaffiliated party (Purchase Agreement). The Company agreed
to purchase and own 49% of the building (the “
Building Interest
”) and Moore Holdings will purchase and own
51%. The contracted purchase price for the building was $2,420,000 and the total amount paid at closing was $2,501,783 (the “Closing
Amount”), including, fees, insurance, interest and real estate taxes. The Company paid for their Building Interest by delivering
cash at closing of $209,971, being responsible for $1,007,930 as co-borrower on a $2,057,000 Small Business Administration Note
(the “SBA Note”) and credits for tenant deposits and prepaid rent of $8,135. The SBA Note carries a 25 year term,
with a 6% per annum interest rate and is secured by a first position Deed of Trust, (the “
Trust Deed
”) and
business assets located at the property. The Company is planning on relocating from their current office space and occupying space
in the building on or before July 1, 2017.