Note 16 - Lease (Including Related Parties)

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE

16

– LEASE (

INCLUDING RELATED PARTIES)

The Company leases

20

North Rear Road, a

10.4

acre site of land in Canada. This was through a sublease from a relative of the Company’s President until

October 2019,

when the lease was assigned to a

third

-party. 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. As further described in Note

6,

these improvements were fully impaired during

2018.

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 convertible notes payable 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 was treated as a deferred lease asset amortized over the

5

-year lease. However, in conjunction with the impairment, as further described in Note

6,

the remaining deferred lease asset was fully expensed in

2018.

As of

December 31, 2019,

the operating right of use asset was

$68,547

and the associated liability was

$65,467,

utilizing an

8%

discount rate. During

2019

and

2018,

lease expenses of

$33,369

and

$253,695,

respectively, related to this agreement were recognized within general and administrative expenses. This lease was assigned by the Lessor to Jamsyl Group, a

third

-party, in

October 2019.

The Company also leases office space in Windsor, Ontario from R&D Labs Canada, Inc., whose president is Bill Chaaban. This lease was subsequently assigned to RN Holdings Ltd, a

third

-party, on

May 8, 2019.

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. As of

December 31, 2019,

the operating right of use asset was

$160,737

and the associated liability was

$163,157,

utilizing an

8%

discount rate. During

2019

and

2018,

lease expenses of approximately

$26,000

and

$24,000,

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

Maturities of operating lease liabilities at

December 31, 2019

were as follows:

	Amount
2020	$	61,051
2021		61,051
2022		25,902
2023		31,320
2024		31,320
Thereafter		86,130
Total lease payments	$	296,774
Less imputed interest		68,150
Present value of lease liabilities	$	228,624