COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Long-Term Financing Commitment

On January 21, 2014, the Company signed a Securities Purchase Agreement (the “SPA”) with Full Circle. The SPA provides that Full Circle will initially provide $7.5 million to the Company in the form of Senior Secured Convertible Notes, subject to certain named conditions. The Company can borrow an additional $22.5 million with the mutual agreement of Full Circle and the Company.

At least 95% of any loan proceeds will be used to acquire properties, which the Company will lease to licensed cannabis cultivators.

Full Circle will provide the Company with the initial $7.5 million when:


•	Full Circle agrees on the location of property to be purchased;


•	The specified property’s appraised value is satisfactory to Full Circle;


•	A Phase I environmental inspection is completed to the satisfaction of Full Circle; and


•	The Company is able to provide a first priority lien on the property in favor of Full Circle.

The six-year loan(s) will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% a year, payable monthly. The funding of the loan(s) is subject to the execution of additional documents between the parties. The initial loan can, at any time, be converted into shares of the Company’s common stock at a conversion price of $5.00 per common share. It is contemplated that further advances will be convertible at 110% of the market price of the Company's stock on the day of any advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower. As of June 30, 2015, no amounts have been funded to the Company pursuant to the SPA. In connection with the SPA, Full Circle purchased warrants from the Company for $500,000 (see Note 12).

Operating Leases

The Company rents office space for its corporate needs. The Company entered into a month-to-month lease agreement in July 2013 to lease 2,000 square feet for an annual rate of $12,000, paid monthly. This lease was terminated effective April 1, 2014. On April 2, 2014, the Company entered into a three-year lease agreement to lease 3,000 square feet for its corporate offices. The Company’s lease for office space at 4445 Northpark Avenue, Colorado Springs, Colorado, 80907 was canceled without penalty, effective November 1, 2014. The Company entered into a three-year agreement effective April 21, 2014 for a warehouse supply and distribution facility. The facility leased is 1,800 square feet and expires April 30, 2017.

Lease expense was approximately $3,200 and $10,197 for the three months ended June 30, 2015 and 2014, respectively, and $6,400 and $13,197 for the six months ended June 30, 2015 and 2014. The future obligations under this lease amount to approximately $6,500 for the remainder of 2015, $13,200 for 2016, and $4,500 for 2017.

Legal

To the best of the Company’s knowledge and belief, no legal proceedings of merit are currently pending or threatened against the Company.