8. Due To Related Parties

6 Months Ended

Jun. 30, 2014

Notes

8. Due To Related Parties

8.   Due to Related Parties

During the six months ended June 30, 2014 the Company received additional short-term advances from related parties and officers of the Company to cover operating expenses.  As of June 30, 2014, net advances to the Company were $419,575.  These advances are non-interest bearing in nature.  The Company has imputed interest on these sums at the rate of 5% per annum and has recorded interest expense related to these balances in the amount of $6,200.  Because the related parties do not expect the imputed interest to be repaid, the interest has been recorded as a contribution of capital at June 30, 2014.

Kush, a wholly-owned subsidiary of the Company, is a party to three individual license agreements with Steve Kubby.  Pursuant to the license agreements Kush owes a total of $3,060,000 in license fees to Mr. Kubby at various dates, all of which has been accrued as of June 30, 2014.  The table below represents the future payment schedule due Mr. Kubby related to license agreements:

Payment Date:	Amount Due:
September 30, 2014	$60,000
July 31, 2015	1,000,000
December 31, 2015	1,000,000
June 30, 2016	1,000,000
	$3,060,000

Under the terms of the agreements, in the event any such payment is not made in full when due, and if the stock of Licensee or its parent is publicly traded in the over-the-counter market or on a national exchange, Licensee may pay or the Licensor may elect to be paid the unpaid payment amount in the form of unregistered shares of such publicly traded stock of Licensee or its parent, which shares shall be valued at a 35% discount to the average closing price for such stock in the over-the-counter market or on a national exchange during the 30 trading days preceding the issuance of such shares.