NOTE

10.

COMMITMENTS AND CONTINGENCIES

MCC.

January 14, 2015,

we entered into an agreement to purchase a

52.6

acre parcel of undeveloped land in Freetown, Massachusetts. The property is located approximately

miles southeast of Boston. We are developing the property as the MCC. Plans for the

may

include the construction of sustainable greenhouse cultivation and processing facilities that will be leased or sold to Registered Marijuana Dispensaries under the Massachusetts Medical Marijuana Program. We paid the seller

$100,000

upon the signing of the agreement which amount will be applied toward the purchase price at the closing.

Between

August 2015

and

September 2016,

there were several amendments to the Agreement to extend the closing date to

October 14, 2016.

As consideration for the extensions, the Company, at closing, agreed to increase the purchase price to

$4,325,000

and paid the seller

$725,000,

which was be applied to the purchase price of the land if and when the Company closes on this transaction. As of

September 30, 2016,

the Company had paid

$925,000

that was to be applied to the purchase price of the land at closing. On

October 17, 2016,

the Company closed on the land purchase via a sales-leaseback transaction. See ‘Operating Leases' section below for additional information.

Operating Leases

Land

October 17, 2016,

the Company closed the acquisition of the

52.6

-acre parcel of undeveloped land in Freetown, Massachusetts. The deposits of

$925,000

previously paid by the Company to the seller, Boston Beer Company ("BBC"), were credited against the total purchase price of

$4,475,000.

The remaining balance of

$3,550,000

was paid to BBC by Massachusetts Medical Properties, LLC ("MMP"). The property is located approximately

miles southeast of Boston. In

August 2019,

the Company completed construction of Building

at MCC.

As part of a simultaneous transaction, the Company assigned the property rights to MMP for a nominal fee and entered a lease agreement pursuant to which MMP agreed to lease the property to the Company for an initial term of

fifty

(

) years. We have the option to extend the term of the lease for

four

(

) additional

ten

(

) year periods. The lease is a triple net lease, with the Company paying all real estate taxes, repairs, maintenance and insurance.

The lease payments will be the greater of (a)

$30,000

per month; (b)

$0.38

per square foot per month of any structure built on the property; or (c)

1.5%

of all gross monthly sales of products sold by the Company, any assignee of the Company, or any subtenant of the Company. The lease payments will be adjusted up (but

not

down) every

five

(

) years by any increase in the Consumer Price Index.

Effective

October 1, 2019,

the Company adopted Topic

842

and recorded ROU assets and lease liabilities of

$6,980,957

and

$4,256,869,

respectively. As part of the adoption, prepaid land lease balance of

$2,724,088

was classified as a component of the Company's ROU assets.

The Company constructed Building

on the leased land and on

September 1, 2019,

BASK, commenced its

-year sublease of Building

which includes a base rent plus

15%

of BASK's gross revenues. This sublease income is recorded as Rental income - related party on the Company's consolidated statements of operations.

As of

September 30, 2020,

the Company's right-of-use assets were

$6,914,080,

the Company's current maturities of operating lease liabilities were

$4,728,

and the Company's noncurrent lease liabilities were

$4,243,224.

During the year ended

September 30, 2020,

the Company had operating cash flows from operating leases of

$256,125.

The table below presents lease related terms and discount rates as of

September 30, 2020.

	As of September 30, 2020

Weighted average remaining lease term
Operating leases		46
Weighted average discount rate
Operating leases		7.9	%

The reconciliation of the maturities of the operating leases to the lease liabilities recorded in the Consolidated Balance Sheet as of

September 30, 2020

are as follows:

2021		341,500
2022		341,500
2023		341,500
2024		341,500
2025		341,500
Thereafter		14,001,500
Total lease payments		15,709,000
Less: Interest		(11,461,048	)
	$	4,247,952
Less: operating lease liability, current portion		(4,728	)
Operating lease liability, long term	$	4,243,224

Office space

The Company leases its office space located at

1555

Blake St., Unit

502,

Denver, CO

80202

for

$2,500

per month with a lease term of less than

months.

Lease expense for office space was

$18,303

and

$15,055

for the years ended

September 30, 2020

and

2019,

respectively.

Aggregate rental expense under all leases totaled

$401,021

and

$410,162

for the years ended

September 30, 2020

and

2019,

respectively.