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10 Post Tax Net Income (Line 74) – Net income after taxes shall remain in the corporation as retained earnings. 1.B Interest and Tax Calculations Interest - DSWC will be issued a loan of approximately $1.4M in start-up capital with all funds coming exclusively from members of its Board of Directors. Each member of the Board of Directors has already submitted to the background check requirements of this application and has executed the relevant attestations to the City. The loan will be paid back over a 5-year term at a fair-market interest rate equal to the Published Daily Wall Street Journal Prime Rate or equivalent interest rate benchmark. Principle and interest payments will begin once operating income stabilizes, projected to be Q1 2018. The assumed interest rate in our 3-year Pro Forma projections (Section 1.A) is 3%. California Sales Tax – DSWC will collect sales tax on all retail sales at the time of sale using the San Leandro-specific tax rate (currently 10%). Sales tax will be paid quarterly to the California Board of Equalization. Sales tax was not explicitly included in the Pro Forma in Section 1.A because of its net-zero effect on cash flow. State Income Tax – DSWC is formed as a California Mutual Benefit Corporation in order to comply with the Attorney General’s recommendations for Cannabis businesses. DSWC will file as a California C- Corporation using Form 100 and will be subject to existing State tax rates (currently 8.84%). California tax liabilities are determined based on Pre Tax Net Income. State Excise Tax / Special Assessment – The recently passed Medical Marijuana Regulation and Safety Act does not include any explicit provisions for excise taxes or special assessments on Cannabis operators. However, there are currently two bills in the California legislature, Senate Bill 987 McGuire and Assembly Bill 2243 Wood, which in some form are expected to pass in November 2016. SB 987 McGuire is primarily an excise tax of 15% charged at the retail level. AB 2243 Wood is essentially a flat rate tax collected at the distributor level with tiered tax rates; tax breaks for small operators, standard tax for medium operators and increased tax for large operators; also includes “flat rate tax” on different product types. DSWC will comply with these additional regulations if/when they are implemented. Federal Income Tax - DSWC will use IRS Form 1120 to file federal income taxes. Federal income taxes are calculated based on Pre Tax Net Income with 280e Allocation. Federal 280e allocations are determined based on a portion of staff payroll and overall marketing expenses. 1.C Employee Benefits DSWC will be a significant employer of San Leandro and East Bay residents and all employees will receive compensation above San Leandro’s living wage standards. A description of staffing and compensation levels for the proposed dispensary is given in Exhibits 6-8. DSWC will work closely with Stepping Stones Growth Center to identify and educate local individuals for employment at the proposed dispensary. Employees will be required to submit information for an employee background check by our third-party security consultants from Intervention Group. DSWC reserves the right to disqualify applicants convicted of serious and/or violent criminal offense. Having a knowledgeable and well-trained staff is essential to establishing a trusting and caring relationship with the patients we serve. Qualified prospects will be hired on a ninety-day probationary status. During this time, they will be rigorously trained and evaluated for their ability to perform in a restricted-access environment. All staff will be tested on their knowledge at the end of their ninety-day period to ensure they have absorbed the proper information and are capable of performing their tasks safely and effectively. Costs of training will be covered by DSWC. 474