Lease

3 Months Ended

Mar. 31, 2023

Lease

Lease

Note 10 – Lease

The Company recorded its operating lease expense of $46,080 and $75,597 for the three months ended March 31, 2023 and 2022, respectively. This is included in general and administrative expenses.

On December 7, 2021, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-eight month commercial lease with a third party for an approximately 5,895 square foot office space. The lease commenced on December 25, 2021 and will end on February 28, 2025. The monthly rent is RMB70,097 (approximately $11,053) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term. This lease was terminated on February 22, 2023.

On January 16, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 2,017 square foot office space. The lease commenced on February 1, 2023 and will end on January 31, 2026. The monthly rent is RMB29,974 (approximately $4,365) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term.

On February 22, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space. The lease commenced on March 31, 2023 and will end on February 28, 2026. The monthly rent is RMB35,246 (approximately $5,133) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term.

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As of March 31, 2023 and December 31, 2022, operating lease right-of use assets and lease liabilities were as follows: 

	March 31, 2023		December 31, 2022
Operating lease right-of-use assets	$	270,481	$	253,336
Lease liabilities, current portion	$	82,388	$	113,058
Lease liabilities, less current portion	$	147,170	$	165,952

Lease term and discount rate:

	March 31, 2023		December 31, 2022
Weighted average remaining lease term
Operating lease		2.83 to 2.92 years		2.17 years
Weighted average discount rate
Operating lease		10%		10%

The minimum future lease payments are as follows:

	Amount
Year ending December 31, 2023	$	31,429
Year ending December 31, 2024		107,866
Year ending December 31, 2025		118,032
Year ending December 31, 2026		8,730
Total minimum lease payment		266,057
Less: imputed interest		(36,500	)
Present value of future minimum lease payments	$	229,557