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OPERATING LEASES

6 Months Ended

Jun. 30, 2022

NOTE 5 - OPERATING LEASES

The Company periodically enters into operating lease contracts for office space and equipment. Arrangements are evaluated at inception to determine whether such arrangements constitute a lease.

Right of use assets (“ROU assets”) represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities were recognized on the transition date based on the present value of lease payments over the respective lease term, with the office space ROU asset adjusted for deferred rent liability.

The Company has two active operating leases: an office space lease with a remaining lease term of 24 months and a facility lease with a remaining term of 2 months as of June 30, 2022. All other leases are short-term leases, which for practical expediency, the Company has elected to not recognize as ROU assets and lease liabilities.

Effective July 1, 2021, the Company assumed a facility lease pursuant to the Rochal asset purchase agreement (see Note 9). The Company intends to renew this lease prior to its expiration on August 31, 2022. The base monthly rent was $8,504 through August 31, 2021, then increased to $8,808 for the remainder of the lease. As the implicit rate in the lease was not determinable, the discount rate applied to determine the present value of lease payments was the 4% borrowing rate on the Company’s line of credit as of the assumption date. The office space lease agreement contains no renewal terms; therefore, no lease liability was recorded for periods beyond the termination date.

In accordance with ASC Topic 842, Leases, the Company has recorded ROU assets of $296,626 and a related lease liability of $308,337 as of June 30, 2022. The Company recorded lease expense of $126,815 for the six months ended June 30, 2022 for its leased assets and $75,476 for the six months ended June 30, 2021. Cash paid for amounts included in the measurement of operating lease liabilities was $127,777 for the six months ended June 30, 2022 and $76,178 for the six months ended June 30, 2021. The present value of the Company’s operating lease liabilities is shown below.

Maturity of Operating Lease Liabilities

SCHEDULE OF OPERATING LEASE LIABILITY

	June 30, 2022
Remainder of 2022		94,016
2023		154,271
2024		77,870
2025		-
2026		-
Thereafter		-

Total lease payments		326,157
Less imputed interest		(17,820	)
Present Value of Lease Liabilities	$	308,337

Operating lease liabilities – current		156,959
Operating lease liabilities – long-term		151,378

As of June 30, 2022, the Company’s operating leases have a weighted average remaining lease term of 1.9 years and a weighted average discount rate of 6.13%.