LEASES

3 Months Ended

Aug. 31, 2022

NOTE 11 – LEASES

Colorado Lease: On January 1, 2022, the Company signed a lease for its office and facilities located in Denver, Colorado for a five year term. Monthly lease payments start at $6,000 and escalate to $7,293 in year five. Upon signing the lease, the Company recognized a lease liability and a right of use asset of $308,127 based on the two-year payment stream discounted using an estimated incremental borrowing rate of 10.0%. At August 31, 2022, the remaining lease term is 4.25 years. As of August 31, 2022, total future lease payments are as follows:

Future lease payments


For the year ended May 31,
Remaining 2023	$	55,500
2024		77,175
2025		81,033
2026		85,085
2027		51,052
Total		349,845
Less imputed interest		(66,605	)
Net lease liability		283,240
Current portion		(48,855	)
Long-term portion	$	234,385

For the three months ended August 31, 2022, rent expense of $19,715 was recognized for this lease.

California Lease: On July 14, 2022, the Company signed a lease for its office and facilities located in Cathedral City, California for a five year term. Monthly lease payments are $72,917. Upon signing the lease, the Company recognized a lease liability and a right of use asset of $3,505,897 based on the five-year payment stream discounted using an estimated incremental borrowing rate of 10.0%. At August 31, 2022, the remaining lease term is 4.8 years. As of August 31, 2022, total future lease payments are as follows:


For the year ended May 31,
Remaining 2023	$	802,087
2024		875,004
2025		875,004
2026		875,004
2027 and thereafter		947,921
Total		4,375,020
Less imputed interest		(986,349	)
Net lease liability		3,388,671
Current portion		(488,488	)
Long-term portion	$	2,900,183

For the three months ended August 31, 2022, rent expense of $72,917 was recognized for this lease. The lessor of the property is SMC Cathedral City Holdings, LLC, a company with which the Company has a convertible note payable due (See Note 5).

MJ Harvest, Inc. 10-Q