Operating Lease Right-Of-Use Assets and Operating Lease Liabilities

3 Months Ended

Mar. 31, 2020

Operating Lease And Right-of-use Assets And Operating Lease Liabilities

Operating Lease Right-Of-Use Assets and Operating Lease Liabilities

NOTE 4 – OPERATING LEASE AND RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is the incremental borrowing rate, estimated to be 6%, as the interest rate implicit in most of the Company’s leases are not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. During the three months ended March 31, 2020 and 2019, the Company recorded $3,945 as operating lease expense which is included in rent expenses on the condensed consolidated statements of operations.

The Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. The Company entered into an amended lease agreement commencing on July 20, 2017 through June 30, 2020 with base month rents of $1,252 from July 1, 2017 to June 30, 2018, $1,289 from July 1, 2018 to June 30, 2019, and $1,328 from July 1, 2019 to June 30, 2020. Under the terms of the lease there may be additional fees charged above the base monthly rental fee.

In adopting ASC Topic 842, Leases (“Topic 842”), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new guidance to short term leases (leases with a lease term of twelve months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $22,575.

Right-of- use assets at March 31, 2020 are summarized below:

	March 31, 2020
	(Unaudited)
Office lease (remaining lease term of 3 months)	$	22,575
Less accumulated amortization		(18,391	)
Right-of-use assets, net	$	4,184

Amortization on the right -of -use asset is included in rent expense on the condensed consolidated statements of operations.

Operating Lease liabilities are summarized below:

	March 31, 2020
	(Unaudited)
Office lease	$	4,223
Less: current portion		(4,223	)
Long term portion		-

Maturity of lease liabilities are as follows:

Year ending 2020	$	4,547
Less: Present value discount		(324	)
Lease liability	$	4,223

Right-of- use assets at December 31, 2019 are summarized below:

	December 31, 2019
Office lease (remaining lease term of 12 months)	$	22,575
Less accumulated amortization		(14,574	)
Right-of-use assets, net	$	8,001

Amortization on the right -of -use asset is included in rent expense on the condensed consolidated statements of operations.

Operating Lease liabilities are summarized below:

	December 31, 2019
Office lease	$	8,079
Less: current portion		(8,079	)
Long term portion		-

Maturity of lease liabilities are as follows:

Year ending 2020	$	7,968
Plus: Present value discount		111
Lease liability	$	8,079

The Company also has an operating lease for a house located in Palm Bay, Florida that it leases on a month-to-month basis for $1,300 per month. The Company uses the house to store equipment and gear and to provide temporary work-related living quarters for its divers, personnel, consultants and independent contractors involved in its exploration and recovery operations. The Company also pays a rental fee for a space in a park on an as needed basis.