Marwynn Holdings, Inc. Leases Disclosure

NOTE 11 — LEASE

 

Operating lease

 

On June 25, 2019, KZS entered into a lease agreement with the landlord to lease a showroom located in a shopping center in Santa Clara, California, with a lease term of five and half years, and an option to renew the lease for another five years. The lease commenced on August 1, 2019 and will expire on January 31, 2030 including the five-year option as the Company believes it is more than likely they will exercise the lease renewal option. The Company received a six-month rent abatement, which was considered in calculating the present value of the operating lease ROU asset. The monthly rental payment is $21,168 for the period from February 1, 2020 to January 31, 2021, with a 2% rental payment increase for each year thereafter.

 

On February 1, 2021, KZS entered into a sublease agreement with the landlord to lease a warehouse in Union City, California, with a lease term of 30 months, commencing on March 1, 2021, and with the expiration date on August 31, 2023. The Company received a two-month rent abatement, which was considered in calculating the present value of the operating lease ROU asset. The initial monthly rental payment is $38,500 for the period from May 1, 2021 to August 31, 2021, with an approximately 3% rental payment increase starting on September 1, 2021 for each 12 months. On March 20, 2023, the Company terminated the sublease agreement and signed a new lease agreement directly with landlord to lease the same property with expanded space for a lease term of 61 months. The new lease commenced on September 1, 2023, and will expire on September 30, 2028. The Company received a one-month rent abatement, which was considered in calculating the present value of the operating lease ROU assets. The initial monthly rental payment is $70,400 for the period from October 1, 2023 to August 31, 2024, with an approximately 4% rental payment increase starting on September 1, 2024 for each 12 months thereafter.

 

On January 19, 2024, FuAn entered into a sublease agreement with the landlord to lease an office in Irvine, California with a lease term of 27 months. The lease commenced on February 1, 2024, and will expire on April 30, 2026. The monthly rental payment is $3,825 for the period from February 1, 2024 to January 31, 2025, $3,978 for the period from February 1, 2025 to January 31, 2026, and $4,137 for the period from February 1, 2026 to April 30, 2026.

 

Total lease expenses amounted to $1.21 million and $1.03 million for the years ended April 30, 2025 and 2024, respectively. The Company’s ROU assets and lease liabilities are recognized using an effective interest rate of the range 3.38% to 10.50%, which was determined using the Company’s incremental borrowing rate.

 

For the years ended April 30, 2025 and 2024, the average remaining term of the lease is 3.80 years and 2.37 years, respectively.

 

The Company’s operating ROU assets and lease liabilities were as follows:

 

		April 30, 2025				April 30, 2024
Operating ROU:
Operating lease right-of-use assets		$	6,038,660				6,038,660
Less: accumulated amortization of ROU assets			(2,240,408	)			(1,357,870	)
ROU assets, net		$	3,798,252			$	4,680,790
Operating lease liabilities:
Operating lease liabilities, current		$	967,924			$	1,122,059
Operating lease liabilities, non-current			3,107,642				3,818,544
Total lease liabilities		$	4,075,566			$	4,940,603

As of April 30, 2025, future maturity of the Company’s operating lease liabilities is as follows:

 

Years Ending April 30,		Operating lease liabilities
2026		$	1,232,091
2027			1,225,596
2028			1,268,869
2029			714,193
2030			227,679
Total lease payments			4,668,428
Less: imputed interest			(592,862	)
Total lease liabilities		$	4,075,566

 

Finance lease

 

Effective August 15, 2022, the Company entered a 36-month lease with an unrelated vendor to lease a forklift with monthly payment of $804 and lease expiration date on July 15, 2025. At the lease expiration date, the Company has the option to renew on a month-to-month basis at the same monthly lease payment or purchase the equipment.

 

Effective January 2, 2025, the Company entered a 60-month lease with an unrelated vendor to lease a forklift with monthly payment of $1,207 and lease expiration date on January 2, 2030. At the lease expiration date, the Company has the option to purchase the equipment at $1.

 

The Company’s finance ROU assets and lease liabilities were as follows:

 

		April 30, 2025
Finance ROU:
Finance lease right-of-use assets		$	58,128
Less: accumulated amortization of ROU assets			(3,875	)
ROU assets, net		$	54,253
Finance lease liabilities:
Finance lease liabilities, current		$	12,249
Finance lease liabilities, non-current			45,940
Total lease liabilities		$	58,189

 

The components of lease costs, lease term and discount rate with respect of the forklift lease with an initial term of more than 12 months are as follows:

 

		For the years Ended April 30, 2025				For the years Ended April 30, 2024
Finance lease expense		$	1,700			$	903
Weighted average remaining lease term (years) – finance leases			4.54				1.21
Weighted average discount rate - finance leases			5.50	%			5.50	%

The following is a schedule, by years, of maturities of finance lease liabilities as of April 30, 2025:

 

For the 12 months ending		Finance Leases
2026		$	16,892
2027			14,480
2028			14,480
2029			14,480
2030			10,860
Total undiscounted cash flows			71,192
Less: imputed interest			(13,003	)
Total finance lease liabilities		$	58,189