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Leases

3 Months Ended

Nov. 30, 2021

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability, measured on a discounted basis, on the balance sheet for all leases with terms longer than 12 months. The Company also elected to keep all leases with an initial term of 12 months or less off the balance sheet.

The Company did not have any leases until the acquisition of Allied Colombia during the year ended August 31, 2020. The acquisition resulted in the addition of $82,398 of operating lease assets and liabilities. During the year ended August 31, 2021, the Company re-measured its lease liabilities under this lease as the criteria has met for additional monthly payment when the Company started production as outlined in the lease agreement, resulting in additional lease liabilities of $70,705.

On August 10, 2021, the Company entered into another lease for additional land in Colombia with monthly payment of $2,647 (COP9,970,675) for 12.5 hectares which is intended for use of outdoor cultivation, resulting in addition of lease liabilities of $104,902. The lease is for 5 years, and expires in July 2026. The management has assessed the lease as an operating lease.

The Company entered into an agreement to lease the land described in 14(a) with a commencement date of June 1, 2020. The lease requires the Company to make monthly payments of $4,501 (CAD$5,870) per month. The lease is for a 10-year term, expiring on May 31, 2030, with one 10-year renewal option and an option for the Company to purchase the land for approximately $920,000 (CAD$1,200,000). Effective November 1, 2020, the Company terminated the lease. Pursuant to ASC 842-20 upon the termination of the lease, the Company derecognized the lease related asset and liability and included any consideration paid or received upon termination that was not already included in the lease payments in the gain or loss on termination of the lease. After recording the proceeds from the landlord and derecognizing the capitalized building costs as well as the right of use asset and liability, the Company recorded a loss of $65,565 on the termination of the lease.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. At November 30, 2021, the Company did not have any finance leases.

At November 30, 2021, the weighted average remaining operating lease term was 6.68 years and the weighted average discount rate associated with operating leases was 15%.

The components of lease expenses were as follows:

	$
Operating lease cost:
Amortization of right-of-use assets		5,810
Interest on lease liabilities		9,050

Total operating lease cost		14,860

The following table provides supplemental cash flow and other information related to leases for three months ended November 30, 2021:

			$
Lease payments			14,860

Supplemental balance sheet information related to leases as of November 30, 2021 are as below:

	$
Cost	282,273
Accumulated amortization	(13,240	)
Foreign exchange	(41,253	)

Net carrying value at November 30, 2021	227,780

Future minimum lease payments related to lease obligations are as follows:

	$
2022	42,767
2023	57,023
2024	57,023
Thereafter	206,234

Total minimum lease payments	363,047

Less: amount of lease payments representing effects of discounting	(135,267	)

Present value of future minimum lease payments	227,780

Less: current obligations under leases	(24,495	)

Lease liabilities, net of current portion	203,285