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Business Plan Summary and Budgets <br />Not -For -Profit Operation <br />HSL's Corporate Bylaws explicitly require Not -For -Profit operation, stating: <br />This corporation is not for the profit of any individual or shareholder. <br />No part of this corporation's net earnings shall be distributed to, or inure <br />to the benefit of, any individual or shareholder. <br />The Board of Directors takes this mandate with the utmost seriousness. HSL's financial controls <br />prohibit any direct distribution of profit: no dividends, no draws, and no sales of equity to investors. HSL <br />financial controls then go one step further by ensuring there is no disguised distribution of profit in the <br />form of excessive management salaries or related party transactions. All management salaries are set <br />on the basis of salary surveys, performed by HSL's Certified Public Accounting firm, at reasonable levels <br />based on similar qualifications for similarjobs in similar markets. Any services provided to HSL by HHC <br />will be reimbursed on an at -cost basis, and will be explicitly identified in the financials submitted to the <br />City each quarter. <br />Start-up funding for HSL will be provided exclusively by Harborside Health Center and Dark Heart <br />Nursery, both of which are non-profit medical cannabis organizations. This funding will be provided <br />on a debt basis, at competitive interest rates. No financing will be accepted from any profit-making <br />entities, on a debt or any other basis. <br />Like all retail businesses, HSL prices will include a margin above cost of goods. Unlike profit-making <br />retailers, the HSL margin will be "reasonably calculated to cover overhead costs and operating <br />expense, 1122 minimizing net retained earnings (profits). All net retained earnings will be reserved <br />for any legal or financial contingencies, and fulfillment of the non-profit mandate. No net retained <br />earnings will be distributed as profit, per state and San Leandro law.23 While some dispensaries <br />choose to stretch the boundaries of this definition by affiliating with large, publicly traded, for-profit <br />corporations, HSL has interpreted California law more conservatively and operates on a strictly Not - <br />For -Profit basis. <br />The main means of fulfilling the Not -For -Profit mandate is HSL's pledge to donate 5% of gross revenue <br />to community benefit organizations serving San Leandro, and to the free patient services listed above. <br />As per HSL financial projections, the amount devoted to fulfillment of this mandate is expected to <br />reach a total of over $500,000 in the first three years. The HSL Advisory Board will solicit grant requests <br />from community benefit organizations serving San Leandro, and allocate funding to important needs <br />of the community. <br />Community service—not profit—has always been the primary goal of the Harborside collective. <br />For each of the past eight years, Harborside Oakland has submitted its complete financials to city <br />auditors, to confirm its strict compliance with California's Not -For -Profit requirements for medical <br />cannabis. The auditors have never raised a single question about the accuracy of those records, or <br />the veracity of Harborside's non-profit operation. <br />22 Attorney General Guidelines Section IV. B. 6. (p.9). <br />23 California Health and Safety Code § 11362.765(a); Attorney General Guidelines Section IV. B. 1 (p.9); <br />San Leandro Municipal Code Section 4-33-500(a)(5). <br />Application to Operate a Medical Cannabis Dispensary. Harborside Health Center -San Leandro. January 15, 2015. 8 <br />