OPERATING LEASE RIGHT-OF-USE ASSET / OPERATING LEASE LIABILITY

6 Months Ended

Jun. 30, 2020

OPERATING LEASE RIGHT-OF-USE ASSET / OPERATING LEASE LIABILITY

OPERATING LEASE RIGHT-OF-USE ASSET / OPERATING LEASE LIABILITY

NOTE 7. OPERATING LEASE RIGHT-OF-USE ASSET / OPERATING LEASE LIABILITY

On May 13, 2020, we entered into a commercial real estate lease with a related party (see Note 13) for 17,000 square feet of greenhouse space in Boulder, CO, with an initial term of five years and, at our option, two additional terms of five years each.  Rent is $30,000 per month with 1.5% annual escalations, as well as our portion of real estate taxes.  We determined the present value of the future lease payments using a discount rate of 12% over a 15 year term, our incremental borrowing rate based on outstanding debt, resulting in an initial right-of-use asset and lease liability of $2,721,069 which are being applied ratably over the term of the lease.  As of June 30, 2020, the balance of the right-of-use asset and lease liability was $2,697,802 and $2,703,130, respectively.  Future remaining minimum lease payments were as follows:

Year ending December 31,	Amount
2020	$	180,000
2021		365,400
2022		370,881
2023		376,444
2024		382,091
Thereafter		4,319,535
Total		5,994,351
Less: Present value adjustment		(3,291,221)
Operating lease liability	$	2,703,130