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LEASES
 9 Months Ended
Sep. 30, 2022
Leases  
LEASES

NOTE 9 – LEASES

 

The Company elected the practical expedient under Accounting Standards Update (ASU) 2018-11 “Leases: Targeted Improvements” which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date instead of at the earliest comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2019, but without retrospective application. In addition, the Company elected the optional practical expedient permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing leases upon adoption. No impact was recorded to the beginning retained earnings for Topic 842. The Company has two operating leases for corporate offices. The following table outlines the details:

 

   Lease 1   Lease 2 
Initial Lease Term   December 2017 to December 2021    November 2018 to November 2023 
Renewal Term   January 2021 to December 2024    November 2023 to November 2028 
Initial Recognition of right-of-use assets at January 1, 2019  $534,140   $313,301 
Incremental Borrowing Rate   10%   10%

 

The Company entered into a new corporate office lease (Lease 1) on January 1, 2022. The Company determined that entering into a new lease required remeasurement of the lease liability resulting in the increase of the right-of-use asset and the associated lease liability by $977,220. The new lease is still classified as an operating lease. The Company also has an operating lease for copiers in the corporate office that is not included in the table below. The initial lease liability was $15,000 and the current and long-term lease amounts are included in the respective liability accounts.

 

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the operating lease liabilities recorded in the Consolidated Balance Sheet as of September 30, 2022.

 

Amounts due within twelve months of September 30, 2022    
2022  $291,537 
2023   300,286 
2024   309,294 
2025   318,573 
2026   122,912 
Thereafter   63,055 
Total minimum lease payments   1,405,657 
Less: effect of discounting   (291,713)
Present value of future minimum lease payments   1,113,944 
Less: current obligations under leases   188,558 
Long-term lease obligations  $925,386 

 

The difference to the balance sheet above is due to the current and long-term remaining lease obligations of the copier operating lease not included in the amount of $14,181 as of September 30, 2022.

 

For the nine-months ended September 30, 2022, and 2021, amortization of Right of Use Assets was $132,847 and $97,436, respectively and the amortization of the Lease Liability was $120,403 and $96,954, respectively.