Commitments and contingencies

6 Months Ended

Nov. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Note 10 – Commitments and contingencies

Leases

As discussed in Note 2 above, the Company adopted ASU No. 2016-02, Leases on June 1, 2019, which require lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the prior guidance. The Company entered into a lease agreement in connection with its office and warehouse facility in California under an operating lease on December 1, 2019 for 3 years. The lease expired on November 30, 2022. On November 9, 2022, the Company entered into a new lease agreement for two years, commencing on December 1, 2022 and expiring on November 30, 2024. The Company has to pay a monthly base rent of $6,098 for the first twelve months and $6,342 for the next twelve months, under the lease agreement.

The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.

The Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.

Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a remeasurement of lease liabilities. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

Pursuant to the standard, the Company computed an initial lease liability of $131,970 for the new lease agreement and an initial ROU asset in the same amount which will be recorded on books at the commencement of the lease on December 1, 2022. A lease term of two years and a discount rate of 12% was used. During the three months ended November 30, 2022 and 2021, the Company recorded a lease expense in the amount of $23,559 and $23,559, respectively, for the old lease which expired on November 30, 2022. During the six months ended November 30, 2022 and 2021, the Company recorded a lease expense in the amount of $47,117 and $47,117, respectively, for the old lease which expired on November 30, 2022. As of November 30, 2022, the lease liability balance was $0 and the right of use asset balance was $0.

Supplemental balance sheet information related to leases was as follows:

	November 30, 2022		May 31, 2022
Assets
Right of use assets	$	-	$	235,748
Accumulated reduction		-		(190,295	)
Operating lease assets, net	$	-	$	45,453
Liabilities
Lease liability	$	-	$	235,748
Accumulated reduction		-		(188,582	)
Total lease liability, net		-		47,166
Current portion		-		(47,166	)
Non-current portion	$	-	$	-

Contingencies

On November 23, 2020, the Company was served a copy of a complaint filed by Jacksonfill, LLC in the Fourth Circuit Court for Duval County, Florida. The complaint alleges breach of Agreement for non-payments for certain products against the Company. The allegations arise from alleged discrepancies discovered by the Company in the manufacturing of certain product. The Company has retained counsel and intends to vigorously defend the allegations. The product was delivered to the Company. However, the Company believes that the product was defective. The amount of the claim of $204,182 has been recorded as accounts payable, in the accompanying financial statements as of November 30, 2022.