Operating Lease Right-of-use Asset and Operating Lease Liability

6 Months Ended

Jun. 30, 2021

Operating Lease Right-of-use Asset And Operating Lease Liability

Operating Lease Right-of-use Asset and Operating Lease Liability

Note 9 – Operating Lease Right-of-use Asset and Operating Lease Liability

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 15%, as the interest rate implicit in our lease is not readily determinable. During the six months ended June 30, 2021 and 2020, the Company recorded $32,590 and $32,590, respectively as operating lease expense.

The Company currently has a lease agreement for AVX’s operation for a monthly payment of $5,258 and shall increase by 3% every year. The lease commenced July 1, 2015 and expires on August 31, 2022. A security deposit of $5,968 was also held for the duration of the lease term.

In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients,’ which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. On March 15, 2019 when AVX was acquired, upon adoption of ASC Topic 842, the Company recorded a right-of-use asset.

Right-of-use asset is summarized below:

	June 30, 2021			December 31, 2020
Office lease	$	157,213		$	157,213
Less: accumulated amortization		(94,208	)		(70,655	)
Right-of-use asset, net	$	63,005		$	86,558

Operating Lease liability is summarized below:

	June 30, 2021			December 31, 2020
Office lease	$	69,443		$	94,671
Less: current portion		(58,491	)		(53,384	)
Long-term portion	$	10,952		$	41,287

Maturity of lease liability is as follows:

Year ending December 31, 2021	$	32,497
Year ending December 31, 2022		43,655
Total future minimum lease payment		76,152
Imputed interest		(6,709	)
Lease Obligation, net	$	69,443