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

6 Months Ended

Jun. 30, 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 and six month periods ended June 30, 2020 and 2019, the Company recorded $3,945 and $0 and $7,890 and $0, respectively, as operating lease expense, which is included in rent expenses on the 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 1, 2020 through July 31, 2023 with base month rents of $1,475 from July 1, 2020 to June 30, 2021, $1,519 from July 1, 2021 to June 30, 2022, $1,564 from July 1, 2022 to June 30, 2023 and $1,611 from July 1, 2023 to July 31, 2024. 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 June 30, 2020 are summarized below:

	June 30, 2020
	(Unaudited)
Office lease (remaining lease term of 3 months)	$	22,575
Less accumulated amortization		(22,575	)
Right-of-use assets, net	$	-

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:

	June 30, 2020
	(Unaudited)
Office lease	$	-
Less: current portion		-
Long term portion	$	-

Maturity of lease liabilities are as follows:

Six month period ended June 30, 2020	$	-
Less: Present value discount		-
Lease liability	$	-

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.