Bingo Nation Inc. (fka BLTO)

[236T568]

7. RENTAL INCOME

During the 3 and 9 months ended December 31, 2015, the company recorded $156,000 and $416,000, respectively, in rental income from a tenant who subleased one of our properties on May 1, 2015. However, lease payments were deferred until the tenant was able to sell their crops. This was originally expected to take place in Q1 of 2016.

However, there is an over-supply of cannabis in Washington State resulting in a significant drop in prices which will likely result in a further delay in receiving payment until late Q2 or Q3 when prices are expected to recover. Furthermore, the Company anticipates it will have to renegotiate the terms of the lease to account for lower prices and apply it retroactively to the amounts owed by the tenant. Therefore, the company has allowed for a 50% discount ($68,333 and $205,000 for the three and nine months ending December 31, 2015, respectively) off the current accounts receivable and applied it to Bad Debt Expense.

The outstanding lease payments are unsecured as the Company is unable, under State regulations, to take possession or sell the inventory of cannabis.

Under the sublease agreement with the tenant, the Company was required to build approximately 21,000 square feet of greenhouses so the tenant could produce year round. The Company was unable to meet this obligation thereby allowing the tenant to terminate the lease after December 31, 2015 without penalty.


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