Note 13 - Related Party Transactions

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE

13

– RELATED PARTY TRANSACTIONS

The Company has received loans from several related parties, as described above in Notes

8

and

10.

There are advances of

$775,328

to CEN Ukraine as of both

March 31, 2018

and

December 31, 2017.

CEN Ukraine was founded by Bill Chaaban. Prior to

December 3, 2017,

Bill Chaaban directly owned

51%

of CEN Ukraine. Subsequent to

December 3, 2017,

Mr. Chaaban directly owned

25.5%

of CEN Ukraine. CEN Ukraine was founded to seek agricultural and pharmaceutical opportunities in Ukraine. Bill Chaaban personally funded the establishment and initial phases of CEN Ukraine. On

December 14, 2017,

the Company entered into a controlling interest purchase agreement with Bill Chaaban and another shareholder of CEN Ukraine for

51%

of the outstanding equity interests of CEN Ukraine. The consideration will be paid by issuing common shares of the Company. The agreement, which is subject to certain conditions, has

not

closed as of

May 21, 2018.

On

July 12, 2017,

the Company’s Shareholders elected individuals to serve as Directors on the Board. These individuals hold long-term convertible notes payable issued prior to the election. All notes payable bear interest at

5%

per annum and are convertible to common shares with various maturity dates. They became related parties when they were elected.

During the

three

-months ended

March 31, 2018,

the Company incurred payroll and consulting fees with certain Board Members and Officers totaling

$31,200.

No

such payroll and consulting fees were incurred during the

three

-months ended

March 31, 2017.

As of

March 31, 2018

and

December 31, 2017,

$35,601

and

$11,986,

respectively, was payable to these related parties for payroll and consulting charges.

During

2017,

the Company purchased equipment from R&D Labs Canada, Inc., whose president is Bill Chaaban, in exchange for a

$300,000

note payable. This equipment was then sold to CEN Ukraine for a loss of

$255,141

in exchange for a

$44,859

note receivable, payable in

10

equal installments through

2026.

Due to the related party relationship between CEN and R&D Labs Canada, Inc. via Bill Chaaban, the loss on the transaction was considered to be an equity transaction and therefore was included as a distribution of paid-in capital within the consolidated statements of shareholders’ equity during

2017.

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 each of the

three

-months ended

March 31, 2018

and

2017,

lease expenses of approximately

$23,000

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