NOTE 19 – RELATED PARTY TRANSACTIONS

In July 2021, the Company granted five-year options to purchase up to 100,000 shares of common stock to each of the Company’s three independent board members at an exercise price of $0.88 per share.

In December 2021, the CEO and CFO each exercised options to purchase 100,000 shares of common stock on a cashless basis. The exercise price of $0.63 per share was paid via the surrender by each individual of 73,256 shares of common stock.

The Company’s corporate offices are leased from an entity in which the Company’s CFO has an investment interest. This lease expires in October 2028 and contains a five-year extension option. During the three months ended March 31, 2022 and 2021, expenses incurred under this lease approximated $39,000 in both periods.

The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s COO. The aggregate purchases from this entity during the three months ended March 31, 2022 and 2021 approximated $872,000 and $825,000, respectively.

The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the Company’s COO and its SVP of Sales under a royalty agreement. This agreement was amended effective January 1, 2021 whereby, among other modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies products to (i) 3.0% and 10.0% of wholesale sales of existing products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively, and (ii) 0.5% and 1.0% of wholesale sales of future developed products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively. The aggregate royalties due to this entity in the three months ended March 31, 2022 and 2021approximated $56,000 and $83,000, respectively.

During the three months ended March 31, 2022 and 2021, one of the Company’s majority-owned subsidiaries paid aggregate distributions of approximately $11,000 and $9,000, respectively, to the Company’s CEO and CFO, who own minority equity interests in such subsidiary. During the three months ended March 31, 2022, another of the Company’s majority owned subsidiaries paid distributions of approximately $3,000 to a current employee who owns a minority equity interest in such subsidiary.

During the three months ended March 31, 2022 and 2021, the Company purchased fixed assets and consulting services of approximately $392,000 and $265,000, respectively, in the aggregate from two entities owned by two of the Company’s general managers.

During the three months ended March 31, 2022 and 2021, the Company purchased fixed assets of approximately $82,000 and $310,000 from an entity owned by an employee.

The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the Company’s CEO and CFO.