LEASE OBLIGATIONS

12 Months Ended

Dec. 31, 2022

Lease Obligations

LEASE OBLIGATIONS

NOTE 17 - LEASE OBLIGATIONS

The Company has entered into a number of lease arrangements under which the Company is the lessee. These leases are classified as operating leases. In addition, the Company has elected the short-term lease practical expedient in ASC Topic 842 related to real estate leases with terms of one year. The following is a summary of the Company’s lease arrangements.

Operating Lease Agreements

On December 2, 2021, the Company entered into a 62-month lease for 4,141 square feet of office space in Florida, for $186,345 annually. The rent increases 3% annually. The lease commenced upon occupancy on June 13, 2022, and will expire on August 31, 2027.

For our facilities in Poole, England, we rent office and warehouse space of approximately 2,660 square feet for £30,000 annually or approximately USD $37,107, based on a yearly average exchange rate of 1.2369 GBP:USD. The Poole lease was renewed on October 6, 2022, and will expire October 31, 2023. This renewal is not representative in the table future minimum lease payments, for the year ended December 31, 2022.

The Florida lease does not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not have any leases classified as financing leases.

The rate implicit to the Florida lease is not readily determinable, and we therefore use our incremental borrowing rate to determine the present value of the lease payments. The weighted average incremental borrowing rate used to determine the initial value of right of use (ROU) assets and lease liabilities during the year ended December 31, 2022 was 3.75%. Right of use assets for operating leases are periodically reduced by impairment losses. We use the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment – Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize. As of December 31, 2022, we have not recognized any impairment losses for our ROU assets.

We monitor for events or changes in circumstances that require a reassessment of one of our leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.

NEXTPLAT CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17 - LEASE OBLIGATIONS (CONTINUED)

We recognized lease costs associated with all leases as follows:

	For the Year Ended December 31,
	2022		2021
Operating lease cost:
Fixed rent expense	$	100,818	$	35,112
Total Lease Costs	$	100,818	$	35,112

Supplemental cash flow information related to leases was as follows:

	For the Year Ended December 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	101,471	$	32,936
Total cash paid for lease liabilities	$	101,471	$	32,936

Supplemental balance sheet information related to leases was as follows:

	December 31, 2022			December 31, 2021
Operating leases:
Operating lease right-of-use assets, net	$	854,862		$	22,643
Operating lease liabilities:
Current portion		208,660			19,763
Long-term portion		649,895			-
	$	858,555		$	19,763
Weighted average remaining lease term (years)		5.50			0.58
Weighted average discount rate		3.75	%		6.00	%

Future minimum lease payments are as follows:

	Minimum
	Lease
Years Ending December 31,	Payment
2023	$	211,059
2024		194,814
2025		200,659
2026		206,679
2027		122,870
Total undiscounted future non-cancelable minimum lease payments		936,081
Less: Imputed interest		(77,526	)
Present value of lease liabilities	$	858,555
Weighted average remaining term		5.50