Note 16 - Lease (Including Related Parties)

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Leases of Lessee Disclosure [Text Block]

NOTE

1

6

– LEASE (INCLUDING RELATED PARTIES)

The Company paid

$1,064,651

in

2014

in order to acquire

135

North Rear Road, which was intended to serve as an office and an experimental growing space for the Company. This amount was capitalized as an asset in the

2015

balance sheet as land.    In

September 2016,

this property was exchanged in a transaction to acquire a technology patent (see Note

8

for details).

The Company leases

20

North Rear Road, a

10.4

acre site of land in Canada, through a sublease from a relative of the Company’s President. There are

two

buildings on the site –

one

of

27,000

square feet and

one

of

53,000

square feet. There is also a

4,000

square foot vault for security purposes. The Company constructed improvements to this property, including structures and equipment for growing marijuana, security fencing required for licensing as a marijuana producer, and other infrastructure.

The

20

North Rear Road lease agreement began on

September 1, 2013

and required annual rent payments of CAD

$339,000,

including tax. At

December 31, 2016,

the balance sheet included accrued rent of

$552,934,

owed to Jamaal Shaban (“Lessor”), cousin of Bill Chaaban. Concurrently, the Lessor had fallen behind on a mortgage payable on the property. Effective

January 2017,

the Company entered into agreements to terminate the initial lease, enter into a convertible debt note with the Lessor’s creditor, and begin a new lease agreement for the same property. The new lease agreement calls for monthly rental payments of CAD

$4,000

plus taxes for a period of

five

years. In exchange, the Company issued a debt of

$824,446

in satisfaction of the accrued rent and future rent. The lease has been accounted for as an operating lease, and the amount of the note in excess of the accrued rent is treated as a deferred lease asset amortized over the

5

-year lease. During

2017,

lease expenses of

$105,332

related to this agreement were recognized within general and administrative expenses.

Amounts due at

December 31, 2017

for the remaining

four

years of the lease are as follows:

Year	Amount
2018	$	38,261
2019		38,261
2020		38,261
2021		38,261
Total	$	153,044

The Company also leases office space in Windsor, Ontario from R&D Labs Canada, Inc., whose president is Bill Chaaban. Under the lease agreement effective

October 1, 2017,

monthly rents of CAD

$2,608

are due through

September 2022,

at which point monthly rents of CAD

$3,390

are due. During

2017,

lease expenses of approximately

$6,000

related to this agreement were recognized within general and administrative expenses.

Amounts due at

December 31, 2017

for the next

five

years and thereafter of the lease are as follows:

Year	Amount
2018	$	24,946
2019		24,946
2020		24,946
2021		24,946
2022		26,816
Thereafter		154,024
Total	$	280,624