General form of registration statement for all companies including face-amount certificate companies

RIGHT TO USE ASSETS AND LIABILITIES - OPERATING LEASES

v3.22.1
RIGHT TO USE ASSETS AND LIABILITIES - OPERATING LEASES
9 Months Ended 12 Months Ended
Feb. 28, 2022
May 31, 2021
Disclosure Text Block [Abstract]    
Lessee, Operating Leases [Text Block]

Note 9 Right to Use Assets and Liabilities Operating Leases

 

The Company has operating leases for offices and warehouses. The Company’s leases have remaining lease terms of 1 year to 10.5 years, some of which include options to extend.

 

The Company’s lease expense for the three and nine months ended February 28, 2022 was entirely comprised of operating leases and amounted to $73,874 and $323,218, respectively. The Company’s right of use (“ROU”) asset amortization for the three and nine months ended February 28, 2022 was $82,479 and $240,736, respectively. The difference between the lease expense and the associated ROU asset amortization consists of interest.

 

The Company has recorded total right to use assets of $4,112,876 and liabilities in the amount of $4,069,476 through February 28, 2022, resulting in gains in the amount of $28,511 during the year ended May 31, 2020 and $14,899 during the year ended May 31, 2021. During the year ended May 31, 2020, the Company entered into agreements to amend certain of its operating leases. The lease of the dispensary and administrative offices at 1800 Industrial Road was extended from June 30, 2023 to February 28, 2030, and the lease of the offices at 1718 Industrial Road was extended from August 31, 2020 to August 31, 2022. During the year ended May 31, 2021, the Company entered into an agreement to extend the lease of its cultivation and processing facility at 203 E. Mayflower Avenue through February 28, 2030.

 

On October 20, 2021, pursuant to the Quinn River Joint Venture Agreement (see note 4), the Company, through Kealii Okamalu, entered into a lease agreement (the “Quinn River Lease”) for approximately 30 acres of land for purposes of building and operating a facility to grow cannabis. The lease has a term of 10 years, with a 10-year renewal option, from the date of the initial harvest produced under the Quinn River Joint Venture Agreement, which is expected to occur in the first quarter of fiscal 2023. Rent is $3,500 per month. The initial amount of the right to use asset and operating lease liability under the Quinn River Lease was $221,469.

 

Right to use assets – operating leases are summarized below:

 

   

February 28,

2022

 

Amount at inception of leases

  $ 4,112,876  

Amount amortized

    (1,874,191

)

Balance – February 28, 2022

  $ 2,238,685  

 

Operating lease liabilities are summarized below:

 

Amount at inception of leases

  $ 4,069,476  

Amount amortized

    (1,787,472

)

Balance – February 28, 2022

  $ 2,282,004  

 

Warehouse and offices

  $ 2,055,145  

Land

    218,488  

Office equipment

    8,371  

Balance – February 28, 2022

  $ 2,282,004  
         
         

Lease liability

  $ 2,282,004  

Less: current portion

    (311,540

)

Lease liability, non-current

  $ 1,970,464  

 

Maturity analysis under these lease agreements is as follows:

 

Twelve months ended February 28, 2023

  $ 496,066  

Twelve months ended February 28, 2024

    499,103  

Twelve months ended February 28, 2025

    512,532  

Twelve months ended February 28, 2026

    526,358  

Twelve months ended February 28, 2027

    226,297  

Thereafter

    799,417  

Total

  $ 3,059,773  

Less: Present value discount

    (777,769

)

Lease liability

  $ 2,282,004  

NOTE 10RIGHT TO USE ASSETS AND LIABILITIES OPERATING LEASES

 

The Company has operating leases for offices and warehouses. The Company’s leases have remaining lease terms of 1 year to 4 years, some of which include options to extend.

 

The Company’s lease expense for the year ended May 31, 2021 was entirely comprised of operating leases and amounted to $495,114. The Company’s right of use (“ROU”) asset amortization for the year ended May 31, 2021 was $341,035. The difference between the lease expense and the associated ROU asset amortization consists of interest.

 

The Company has recorded total right to use assets of $2,703,821 and liabilities in the amount of $2,675,310 through May 31, 2020, resulting in a gain in the amount of $28,511. During the year ended May 31, 2020, the Company entered into agreements to amend certain of its operating leases. The lease of the dispensary and administrative offices at 1800 Industrial Road was extended from June 30, 2023 to February 28, 2030, and the lease of the offices at 1718 Industrial Road was extended from August 31, 2020 to August 31, 2022. During the year ended May 31, 2021, the Company entered into an agreement to extend the lease of its cultivation and processing facility at 203 E. Mayflower Avenue through February 28, 2030; a gain in the amount of $14,889 was recorded on this transaction. The modification resulted in an increase to right of use assets in the amount of $1,187,615 and an increase in lease liabilities in the amount of $1,172,726.

 

Right to use assets – operating leases are summarized below:

 

   

May 31,

2021

 

Amount at inception of leases

  $ 3,891,437  

Amount amortized

    (1,641,428

)

Balance – May 31, 2021

  $ 2,250,009  

 

Operating lease liabilities are summarized below:

 

Amount at inception of leases

  $ 3,848,038  

Amount amortized

    (1,581,619

)

Balance – May 31, 2021

  $ 2,266,419  

 

   

May 31,

2021

 

Warehouses and offices

  $ 2,250,009  

Lease liability

  $ 2,266,419  

Less: current portion

    (287,125

)

Lease liability, non-current

  $ 1,979,294  

 

Maturity analysis under these lease agreements is as follows:

 

Twelve months ended May 31, 2022

  $ 458,148  

Twelve months ended May 31, 2023

    449,071  

Twelve months ended May 31, 2024

    458,205  

Twelve months ended May 31, 2025

    471,732  

Twelve months ended May 31, 2026

    407,415  

Thereafter

    719,933  

Total

  $ 2,964,504  

Less: Present value discount

    (698,085

)

Lease liability

  $ 2,266,419