Commitments

9 Months Ended

Sep. 30, 2015

a)	The Company entered into a lease for office premises which originally commenced April 2, 2007. On October 27, 2010 and November 1, 2013, the Company entered into amendment agreements to extend the term of the lease. Under the terms of the November 1, 2013 amendment agreement, the term was extended to October 31, 2018, and the Company must pay base rent of $25,600 in the first 2 years of the lease, $27,200 in the next 2 years of the lease, and $28,800 in the last year of the lease.

b)	The Company entered into a Shopping Center Lease Agreement which commenced April 1, 2014, and terminates on March 31, 2019. The minimum base rent due under the lease agreement is $5,235 per month for the first year, $5,413 per month for the second year, and $5,568 per month for the remaining term.

c)	Beginning January 1, 2015, the Company entered into a management contract with Green Sky, Inc., a company wholly-owned by Steve Brandt, to build out a warehouse located in Denver, Colorado for cultivation purposes. As part of that agreement, the Company assumed the rent liability of the warehouse along with other associated build-out costs, estimated to be $500,000. Under the agreement, costs or expenses exceeding $720,000 through August 1, 2015 will be Green Sky's responsibility. The assumed rent liability provides for the Company to pay Green Sky $20,000 per month to June 30, 2015, $51,200 per month from July 1, 2015 to August 30, 2015, at which point, Green Sky will assume liability of the rent payments going forward.

At September 30, 2015, the Company had owed past due rental payments that are expected to be paid upon the sale of the building. Refer to Note 15(a)

d)	Total lease commitments based on the minimum base rent due, excluding common area maintenance charges, over the next five years are as follows:

2015	$	22,906
2016		93,551
2017		94,283
2018		90,816
2019		16,704

Total	$	318,260

e)	On July 27, 2014, the Company entered into a Professional Relations and Consulting Agreement for consulting services effective on July 29, 2014 and ending on July 29, 2015. For the first 6 month period, the Company agreed to pay $12,500 per month and issue $150,000 worth of restricted common stock of the Company, determined by dividing $150,000 by the closing share price on the day preceding the execution of the agreement. For the remaining 6 month period, the Company agreed to pay $12,500 per month and issue $150,000 worth of restricted common stock of the Company, determined by dividing $150,000 by the average closing share price for the 5 trading days preceding January 15, 2015. The agreement was terminated in April 2015, resulting in the forfeiture of the unvested stock award.

f)	On January 14, 2015, the Company entered into a two-year employment agreement (the "Employment Agreement") with each of Jeremy N. Stout and Josh Field for an annual base salary of $120,000 each. Each individual will also be entitled to a bonus based upon the TBT's annual net income for 2015 and 2016 as follows: (i) $2,500 for every $10,000 of net income generated between $400,000 and $460,000, and (ii) $15,000 plus 7.5% of net income over $460,000. The agreement prohibits the individuals from competing with the business of the Company during the term of the agreement and for one year thereafter, except if the employee is terminated without cause or as a result of a constructive termination.

g)	On June 24, 2015, the Company entered into a five-year consulting agreement with FSST Pharms, LLC, a limited liability company organized under the laws of the Flandreau Santee Sioux Tribe ("FSST"). The term of the Consulting Agreement will automatically renew for subsequent one-year terms unless terminated by either party upon 30-days' prior written notice to the other party. The Company will serve as FSST's exclusive independent contractor to provide consulting services to FSST related to medicinal and recreational marijuana and marijuana-related products. In addition, FSST may purchase nutrients, lights, equipment and other supplies from the Company at a 25% discount to the retail prices offered by the Company. Either party may terminate the Consulting Agreement for cause in accordance with the terms of the Consulting Agreement.

As consideration for the consulting services provided by the Company, FSST will pay the Company a consulting fee equal to a percentage of total net revenues generated by the sale of marijuana and/or marijuana products by FSST. "Total Net Revenues" is defined in the Consulting Agreement as total gross revenues minus the cost of goods sold, other expenses directly related to the cultivation, processing, and sale of inventory, depreciation, and taxes. The consulting fee shall be paid monthly and no later than 30 days' following receipt of total gross revenues by FSST. As of the date of this filing, construction of the facility was completed and cultivation processes were initiated. However, due to legal uncertainties, cultivation was halted and further growing activities until FSST and Monarch can perform a proper risk analysis and determine the best way to proceed.

If FSST structures, leads to the structuring, or assists with the structuring of a consulting or other development agreement between the Company and another tribe, tribally owned company, or any other type of business entity, the Company agrees to pay FSST a percentage of all revenue generated as a result of such agreement by the Company, to be paid to FSST in cash within 10 business days of receipt by the Company; provided, however, that if FSST decides to utilize such proceeds to purchase common stock of the Company, it will be entitled to a purchase price discount of the then volume weighted average price of the common stock for the 20 days prior to receipt by the Company of such notification by FSST.

h)	On July 21, 2015, the Company entered into an arrangement with a Board Member, Kevin Malone, who will be entitled to $3,000 per month as long as he serves in that capacity.

i)	On July 21, 2015, the Company added Robert Shepherd to the Board of Directors. Since January 2015, the new director was entitled to receive $5,000 in shares of common stock, based on the volume weighted average for the previous 20 days, and $1,500 in cash on a monthly basis. As a result of the execution of the consulting agreement described in Note 13(g) the director shall be entitled on a monthly basis to receive (1) $5,500 in shares of common stock and (2) $5,500 in cash. The director is expected to represent the Company at no less than five conferences during the year at a cost of $3,000 per conference to the Company.

Monarch America, Inc. 10-Q