Operating Lease Right-Of-Use Assets and Operating Lease Liabilities

3 Months Ended

Mar. 31, 2019

Debt Disclosure [Abstract]

Operating Lease Right-Of-Use Assets and Operating Lease Liabilities

Note 12 – Operating Lease Right-Of-Use Assets and Operating Lease Liabilities

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 9.0%, as the interest rate implicit in most of our leases is not readily determinable.

On October 5, 2017, the Company agreed to lease from Mr. Friedman, a "420 Style" resort and estate property approximately one hour outside of Quebec City, Canada. The fifteen-acre estate consists of nine (9) unique guest suites, horse stables, and is within walking distance to a public golf course. A separate structure will serve as a small grow facility run by patient employees and caretakers on the property which may be toured by guests of the facility. Pursuant to the agreement, the Company will pay $8,000 per month in exchange for the Company being entitled to all rents and income generated from the property. For the three months ended March 31, 2019, the Company paid and recorded $19,000 of expense, included in leased property expense, related party in the consolidated statements of operations, included herein. The Company will be responsible for all costs of the property, including, but not limited to, renovations, repairs and maintenance, insurance and utilities.

In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $310,259.

Right-of- use assets and lease liabilities are summarized below:

	March 31, 2019
Right-of-use asset	$	293,111
Current lease liabilities		41,350
Non-current lease liabilities		251,761

Maturity of lease liabilities are as follows:

	Amount
For the nine months ending March 31, 2019	$	72,000
For the year ending December 31, 2020		96,000
For the year ending December 31, 2021		96,000
For the year ending December 31, 2022		80,000
Total	$	344,000
Less: present value discount		(50,889	)
Lease liability	$	293,111