LEASES

9 Months Ended

Jun. 30, 2022

Leases

LEASES

5. LEASES

The Company leases their office space through an operating lease in Lakeway, Texas and Carmel, California, and an office lease in Cincinnati, Ohio. The Company had a lease in Denver with a lease term into 2024 and deferred for some past due lease obligations over the amended lease term, but that leased property has been tendered back to the landlord. The Company still carries $88,008 in rent payable related to the Denver lease on the accompanying consolidated balance sheet. The Carmel lease is for a term that ends in June of 2023. The Company’s lease agreements obligate the Company to pay real estate taxes, insurance, and certain maintenance costs, which are accounted for separately. The Lakeway, Texas lease is for a term ending in January 2027. This lease obligates the Company to pay a share of certain common costs, including maintenance, insurance, property taxes and utilities.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet as right-of-use assets and lease liabilities for the lease term. Lease assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in general and administrative expenses.

Minimum future annual rental payments under non-cancelable operating leases having original terms in excess of one year are as follows:

Rental Payments
2022	$	87,429
2023		38,005
2024		38,924
2025		39,841
2026		23,555
Total undiscounted lease payments		227,754
Less imputed interest		(29,796	)
Present value of lease payments	$	197,958

The weighted average discount rate is 6% based Company’s expected borrowing rate and the remaining weighted average lease term is 2.79 years.

The Company incurred lease expense for its operating leases of $24,637 and $33,151 during the three and nine months ended June 30, 2022 and $102,784 and $241,167 during the three and nine months ended June 30, 2021 which was included in “General and administrative” expense on the accompanying consolidated statements of operations. Included in lease expense in fiscal year 2021 was unpaid rent of $66,000 which was relieved by the issuance of stock in lieu of unpaid rent in the amount of $66,000 during the nine months ended 2022.