Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitment

Commitments and Contingencies

Note 9: Commitments and Contingencies

Employment Agreement

In December 2017 (the “Effective Date”), the Company entered into an employment agreement with Daniel Davis and Mark Adams (the “Executive”). As of the Effective Date, and for one year of the date therefrom, the Executive’s annual salary shall be equal to $180,000 and $120,000, respectively, per annum (the “Annual Salary”). The Annual Salary shall be paid to the Executive in equal installments in accordance with the Company’s usual payroll practices.

On May 31, 2019, the Company entered into a consulting agreement with Daniel Davis related to his departure from employment with the Company. The agreement requires Daniel. Davis to provide limited consulting services to the Company for a period of up to three years beginning May 1, 2019 in exchange for $165,000 per year. During the year ended December 31, 2020, the Company and Daniel Davis agreed to accelerate the payment of a portion of the consulting agreement, with the maturity period ending three months earlier than the original agreement. The Company paid off Daniel Davis as of December 31, 2022. In addition, the Company entered into a lock up agreement with Daniel Davis that restricts the number of shares Daniel Davis can otherwise publicly sell for a period of up to three years to one third of the volume limits set forth under SEC Rule 144. Daniel Davis also agreed to a standstill agreement that provides that for a period of up to three years Daniel Davis will not seek to influence the governance of the Company, including by participation in any solicitation of other shareholders, promotion of any extraordinary transaction, nomination of any candidate to the Board or by seeking the removal of any existing directors.

Leases

The Company entered into a lease agreement for office space on February 2, 2022, for a term beginning February 15, 2022 through February 28, 2025. The lease requires payments of $3,267 per month through the lease term, increasing by 4% each year, with an option to renew. The Company recognized an initial right of use asset and lease liability of $105,822, based on the present value of the minimum lease payments. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise those options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial right-of-use (“ROU”) asset or lease liability. The Company’s lease agreements do not contain any material restrictive covenants.

The components of lease cost for operating leases for the years ended December 31, 2022 and 2021 were as follows:

	Years Ended
	December 31,  2022		December 31,  2021
Operating lease cost	$	36,866	$	-
Short-term lease cost		24,220		111,043
Variable lease cost		—		—
Sublease income		—		—
Total lease cost	$	61,086	$	111,043

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at December 31, 2022 and 2021:

Lease Position	December 31, 2022		December 31, 2021
Operating Leases
Operating lease right-of-use assets	$	77,677	$	-
Right of use liability operating lease current portion	$	34,007	$	-
Right of use liability operating lease long term		46,233		-
Total operating lease liabilities	$	80,240	$	-

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company estimated its incremental borrowing rate to be 10%. The lease has a remaining term of 2.42 years and a weighted average rate of 10%.

The following table provides the maturities of lease liabilities at December 31, 2022:

	Operating
	Leases
2023	$	40,511
2024		42,123
2025		7,065
2026		-
2027 and thereafter		-
Total future undiscounted lease payments		89,699
Less: Interest		(9,459	)
Present value of lease liabilities	$	80,240

Lawsuit

The Company has a pending lawsuit with one of its previous suppliers regarding defected cartridges. The Company is still evaluating the case and determining the impact of the case on the Company and as of the date of this report the amount or range of possible losses is not reasonably estimable.