LEASES

3 Months Ended

Mar. 31, 2022

LEASES

LEASES

NOTE 5. LEASES

On September 2, 2021, we entered into a commercial real estate lease with a related party (see Note 11) for retail space for our dispensary in Englewood, CO, with an initial term of five years and, at our option, two additional terms of three years each. Rent is $10,000 per month with 3% annual escalations during the initial term and 4% annual escalations during the option term. We also pay our portion of real estate taxes. We determined the present value of the future lease payments using a discount rate of 20% over a 11 year term, resulting in a right-of-use asset and lease liability of $602,140 which are being applied ratably over the term of the lease. As of March 31, 2022, the balance of the right-of-use asset and lease liability was $578,227 and $591,321, respectively.

Through the acquisition of Trees Englewood, we entered into a commercial real estate lease for office space in Denver, CO. This office space is our corporate office. The lease expires in November 2022. Rent is $7,150 per month with a 3% escalation beginning in November 2021. We also pay our portion of real estate taxes. We determined the present value of the future lease payments using a discount rate of 20% over a 15-month term, resulting in a right-of-use asset and lease liability of $98,211 which are being applied ratably over the term of the lease. As of March 31, 2022, the balance of the right-of-use asset and lease liability was $54,496 and $54,724, respectively.

Through the acquisition of Trees Portland, we entered into a commercial real estate lease in Portland, OR. The lease expires in April 2027. Rent is $5,124 per month with a 5% annual escalation beginning in May 2022. The rent includes payment of property taxes. We determined the present value of the future lease payments using a discount of 20% over a 5.5-year term, resulting in a right-of-use asset and lease liability of $229,501. As of March 31, 2022, the balance of the right-of-use asset and lease liability was $219,275 and $221,586, respectively.

Through the acquisition of Trees Waterfront, we entered into a commercial real estate lease in Portland, OR. The lease has an initial term of 5 years and, at our option an additional term of 5 years. The lease expires in March 2031. Rent is $6,683 per month with a 3% annual escalation. The rent includes payment of property taxes. We determined the present value of the future lease payments using a discount rate of 20% over a 10-year term, resulting in a right-of-use asset and lease liability of $381,272. As of March 31, 2022, the balance of the right-of-use asset and lease liability was $370,529 and $373,702, respectively.

Through the acquisition of Trees MLK, we entered into a commercial real estate lease in Portland, OR. The lease has an initial term of 3 years and at our option two additional terms of 3 years each. The lease expires in July 2029. Rent is $3,150 per month with a 5% annual escalation. The rent includes payment of property taxes. We determined the present value of the future lease payments using a discount rate of 20% over a 10-year term, resulting in a right-of-use asset and lease liability of $172,053. As of March 31, 2022, the balance of the right-of-use asset and lease liability was $166,297 and $168,227, respectively.

Future remaining minimum lease payments were as follows:

Year ending December 31,	Amount
2022 (remaining nine months)	$	575,503
2023		703,868
2024		721,314
2025		739,303
2026		758,193
Thereafter		5,121,992
Total		8,620,173
Less: Present value adjustment		(5,338,837)
Operating lease liability	$	3,281,336