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LEASES.

6 Months Ended

Jun. 30, 2023

3. LEASES.

Accounting and reporting guidance for leases requires that leases be evaluated and classified as either operating or finance leases by the lessee and as either operating, sales-type or direct financing leases by the lessor. For leases with terms greater than 12 months, the Company records the related right-of-use (“ROU”) asset and lease obligation at the present value of lease payments over the term. Leases may include fixed rental escalation clauses, renewal options and / or termination options that are factored into the determination of lease payments when appropriate. The Company’s operating leases are included in ROU assets, lease liabilities-current portion and lease liability-long term portion in the accompanying consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. The Company’s leases do not usually provide a readily determinable implicit rate; therefore, an estimate of the Company’s incremental borrowing rate is used to discount the lease payments based on information available at the lease commencement date. The discount rate used was 5.5%.

The table below summarizes the right-of-use asset and lease liability for the six months ended June 30, 2023 and the year ended December 31, 2022:

	June 30, 2023			December 31, 2022
Right of Use Assets
Balance, January 1	$	167,222		$	217,267
Right of use assets, beginning balance	$	167,222		$	217,267
Depreciation		(25,687	)		(50,045	)
Balance, end of period	$	141,535		$	167,222
Right of use assets, ending balance	$	141,535		$	167,222

Lease Liability
Balance, January 1	$	167,222		$	217,267
Lease liability, beginning balance	$	167,222		$	217,267
Lease interest expense		3,353			8,566
Payments		(29,040	)		(58,611	)
Balance, end of period	$	141,535		$	167,222
Lease liability, ending balance	$	141,535		$	167,222

Short-term portion	$	58,800		$	58,080
Long-term portion		82,735			109,142
Total	$	141,535		$	167,222

Undiscounted rent payments for the next three years are as follows:

SCHEDULE OF UNDISCOUNTED RENT PAYMENTS


2023		29,040
2024		59,520
2025		61,020
Total	$	149,580
Impact of discounting		(8,045	)
Lease liability, June 30, 2023	$	141,535