CONTINGENCIES AND COMMITMENTS

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES AND COMMITMENTS

NOTE 10 – CONTINGENCIES AND COMMITMENTS

Office and warehouse space

Effective on April 1, 2013, the Company entered into a three year agreement to rent approximately 2,500 square feet of office space (the “Office Lease”) in Detroit, Michigan. The monthly rent under this lease was $2,200 per month.

Effective August 28, 2013, the Company and the landlord amended the Office Lease allowing the Company to move to a new location in downtown Detroit. The lease was for 3,657 square feet for monthly rent of $3,047. In November 2013, the Company was notified that the owner of the building (the Company’s landlord) was delinquent in their obligations to the mortgage holder of the building. In January 2014, due to the uncertainty of the Company’s Office Lease in Detroit, Michigan, the Company decided to relocate its administrative offices to West Palm Beach, Florida. Effective April 1, 2014, the Company has entered into a rent sharing agreement for the use of 1,300 square feet with a company controlled by the Company’s CFO. The Company has agreed to pay $1,350 per month for the space.

Effective May 15, 2013 through September 15, 2013, the Company leased warehouse space on a month to month basis for the shipping and logistics of the Company’s Chillo drink products for $250 per month. Subsequent to September 15, 2013, the Company compensates the landlord on a per pallet fee. As of September 30, 2014, the Company is no longer distributing the Chillo product and is not utilizing the warehouse space.

In April 2014, the Company entered into a ten year sublease agreement for the use of up to 7,500 square feet with a Colorado based oncology clinical trial and drug testing company and facility presently doing cancer research and testing for established pharmaceutical companies seeking FDA approval for new drugs. Pursuant to the lease as amended, the Company has agreed to pay $3,500 per month for the space, and it will be utilized to market, sell and distribute products to Colorado dispensaries, including managing the banking and credit card services described below.

Also in April 2014, the Company entered into a lease for an apartment located in Denver, Colorado for the use of Company personnel when traveling to Colorado on behalf of the Company. The Company has agreed to pay $2,700 per month for the apartment. The lease expired October 31, 2014 and the Company has not renewed the lease.

Rent expense for the three and nine months ended September 30, 2014 was $24,816 and $51,886, respectively, compared to $5,341 and $24,124 for the three and nine months ended September 30, 2013.

Leased properties

On April 28, 2014, the Company executed and closed a 10 year lease agreement for 20 acres of an agricultural farming facility located in South Florida following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing low grade marijuana specifically for the use of treating epilepsy and cancer patients.  Pursuant to the lease agreement, through November 1, 2014, the Company had an option to purchase the land for $1,100,000 (the option has expired) and maintains a first right of refusal to purchase the property for three years. The Company prepaid the first year lease amount of $24,000 and has recorded $9,561 and $15,935, respectively, of expense (included in leased property expenses) for the three and nine months ended September 30, 2014.

On July 11, 2014, the Company signed a ten year lease agreement for an additional 40 acres in Pueblo, Colorado. The lease requires monthly rent payments of $10,000 during the first year and is subject to a 2% annual increase over the life of the lease. The lease also provides rights to 50 acres of certain tenant water rights for $50,000 annually plus cost of approximately $2,400 annually. The Company paid the $50,000 in July 2014. The water rights ensure the Company’s non-interruption of operations on behalf of new tenants qualified as fully registered and licensed grow and manufacturing operations. The Company has recorded $37,317 of expense for the three and nine months ended September 30, 2014 (included in leased property expenses) related to the land and water rights.

Other

On July 1, 2014, the Company, along with its officers and directors and a company controlled by the Company’s CEO, was named in a Summons and Complaint. On July 18, 2014, the parties settled the complaint and paid $16,750 and the Summons and Complaint has been dismissed with prejudice. The Company applied the payment to amounts owed related parties.