OPERATING LEASES

12 Months Ended

Dec. 31, 2021

Operating Leases

OPERATING LEASES

NOTE 7 - 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, which we refer to as “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 30 months and a facility lease with a remaining term of eight months as of December 31, 2021. 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 an office lease pursuant to the Rochal asset purchase agreement. This lease expires 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 our line of credit as of the assumption date. Additionally, the Company assumed the subleasing of a portion of the office space to a subtenant at a monthly rate of $975. Sublease income is recognized on a straight-line basis over the term of the sublease agreement, whose expiration corresponds to that of the master lease agreement, and presented as a reduction of general and administrative expense in the Company’s Statement of Operations. Sublease income totaled $5,850 during the fiscal year ended December 31, 2021.

In accordance with ASC Topic 842, the Company has recorded lease assets of $412,770 and a related lease liability of $425,443 as of December 31, 2021. The Company recorded lease expense of $202,498 for the year ended December 31, 2021 for its leased assets. Cash paid for amounts included in the measurement of operating lease liabilities as of December 31, 2021 was $203,555. The present value of our operating lease liabilities as of December 31, 2021 is shown below.

Maturity of Operating Lease Liabilities

	For the Years Ended
2022	$	221,793
2023		154,271
2024		77,870
2025		-
2026		-
Thereafter		-
Total lease payments		453,934
Less imputed interest		(28,491	)
Present Value of Lease Liabilities	$	425,443
Operating lease liability - current		203,292
Operating lease liability – long term		222,151

As of December 31, 2021, our operating leases have a weighted average remaining lease term of 2.2 years and a weighted average discount rate of 5.9%.