Related Party Transactions
|12 Months Ended|
Dec. 31, 2019
|Related Party Transactions [Abstract]|
|Related Party Transactions||
NOTE 19 – RELATED PARTY TRANSACTIONS
During 2019, the Company entered into several hemp seed sale transactions with GenCanna, a related party, whereby the Company acquired large quantities of top-grade feminized hemp seeds at volume discounts that it sold to GenCanna at market rates as previously disclosed in Note 1 – Organization and Description of Business.
As disclosed in Note 11 – Debt, the Company’s two mortgages with Bank of New England are personally guaranteed by the Company’s CEO and CFO.
In 2019, the Company granted five-year options to purchase 100,000 shares of common stock to each of the Company’s three independent board members at an exercise price of $0.99. The aggregate fair value of these options of approximately $191,000 is being amortized over the vesting period, of which approximately $189,000 was amortized at December 31, 2019. In 2018, the Company granted options to purchase 1.45 million shares of common stock to the Company’s board members at exercise prices ranging from $0.14 to $0.77 and expiring between December 2020 and December 2022. The aggregate fair value of these options of approximately $480,000 was fully amortized by June 30, 2018.
In 2019, options to purchase 200,000 and 132,499 shares of common stock were exercised by the Company’s CEO and an independent board member, respectively, at weighted average exercise prices of $0.11 and $0.08 per share, respectively. The independent board member’s options were exercised on a cashless basis with the exercise prices paid via the surrender of 3,108 shares of common stock. At December 31, 2019, the shares of common stock associated with the exercise by the Company’s CEO were not issued and reflected in Common Stock Subscribed But Not Issued on the balance sheet. In 2018, options to purchase 400,000 shares of common stock were exercised by an independent board member at exercise prices of $0.08 to $0.63 per share on a cashless basis with the exercise prices paid via the surrender of 98,000 shares of common stock.
In 2019 and 2018, options to purchase 117,501 and 200,000 shares of common stock, respectively, were forfeited by board members.
The Company’s current corporate offices are leased from a company owned by a related party under a 10-year lease that commenced August 2018 and contains a five-year extension option. Previous to this lease, the Company’s former corporate offices were also leased from a company owned by a related party. For the year ended December 31, 2019 and 2018, expenses incurred under these leases approximated $156,000 and $78,000, respectively.
The balance of Due To Related Parties at December 31, 2019 and 2018 of approximately $1,455,000 and $276,000, respectively, were comprised of amounts owed of approximately (i) $420,000 and $81,000, respectively, to the Company’s CEO and CFO, (ii) $975,000 and $135,000, respectively, to two companies partially owned by these officers, and (iii) $60,000 in both periods to two stockholders of the Company. Such amounts owed are not subject to repayment schedules.
The balance of Due From Related Parties at December 31, 2018 of approximately $120,000 was comprised of an advance to an entity partially owned by the Company’s CEO and CFO. This amount was entirely offset by payments made to the Company from the related entity. At December 31, 2019, there were no amounts due from related parties.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef