On May 14, 2019, the Company signed a land lease in central California for 602 acres at $1,000 per acre to grow hemp for fiber usage. The lease is for 10 years with annual costs of $602,000 with the initial payment of $301,000 on March 30, 2020 and second payment of $301,000 on June 30, 2020 with the balance of the annual payments being made on April 1 of each subsequent year. The lease holder is a related party to one of the directors of the Company. As of September 30, 2020 the Company has accrued $602,000 of unpaid lease payments as accounts payable. The lease terminates in May 2029. As of September 30, 2020 the Company recorded a right of use asset of $3,796,290 and operating lease liability of $4,022,210 with a lease expense for the year of $601,920, respectively.

The yearly rental obligations including the lease agreements are as follows:

Fiscal Year ended September 30,

2021	$	602,000
2022	$	602,000
2023	$	602,000
2024	$	602,000
2025 and years thereafter	$	3,010,000
Total lease payments	$	5,418,000
Less present value discount	$	(1,395,790	)
	$	4,022,210
Less operating lease short term	$	(301,720	)
Operating lease liability, long term	$	3,720,490

As noted in the recent accounting pronouncements the Company adapted ASC 842 on October 1, 2019 using the modified retrospective approach and has elected the practical expedient package by allowing for historical lease classification for this lease as the date of transition. The present value calculation discount rate used is the rate of 7% at which the Company can borrow funds.