Operating Lease

12 Months Ended

Dec. 31, 2021

Operating Lease

Operating Lease

Note 7 – Operating Lease

The Company determines if a contract is, or contains, a lease at contract inception. Operating leases are included in operating lease right-of-use ("ROU") assets, current portion of operating lease liabilities and operating lease liabilities, net of current portion in the Company's consolidated balance sheets. Finance leases are included in property and equipment, current portion of finance lease obligations and finance lease obligations, net of current portion in the Company's audited consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. In addition, ROU assets include initial direct costs incurred by the lessee as well as any lease payments made at or before the commencement date and exclude lease incentives. The Company used the implicit rate in the lease in determining the present value of lease payments. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of one year or less are generally not included in ROU assets and liabilities.

Operating lease ROU assets and operating lease liabilities are recorded on the consolidated balance sheet as follows:

	December 31,
	2021
Operating Lease:
Operating lease right-of-use assets, net	$	98,008
Current portion of operating lease liabilities		46,593
Operating lease liabilities, net of current portion		55,906

As of December 31, 2021, the weighted-average remaining lease term of the operating lease was 2.1 years. The weighted-average discount rate for the operating lease was 6.75%.

The following table summarizes maturities of operating lease liabilities based on lease term as of December 31, 2021:

2022	$	51,800
2023		53,354
2024		4,457
Total lease payments		109,611
Less: Imputed interest		7,112
Present value of lease liabilities	$	102,499

At December 31, 2021, the Company had the following future minimum payments due under the non-cancelable lease:

2022	$	51,800
2023		53,354
2024		4,457
Total minimum lease payments	$	109,611

Consolidated rental expense for all operating leases was $100,009 and $143,307 for the years ended December 31, 2021 and 2020, respectively.

The following table summarizes the cash paid and related right-of-use operating lease recognized for the year ended December 31, 2021.

	Year Ended
	December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	50,292
Right-of-use lease assets obtained in the exchange for lease liabilities:
Operating leases		27,472

Effective October 15, 2020, the Company terminated the operating lease for its Atlanta, Georgia office that was set to expire in 2024. The lease termination agreement required the Company to forfeit its Letter of Credit and all of its furniture and fixtures to the landlord. The early termination resulted in a gain on lease termination of $25,174 for the year ended December 31, 2020, calculated as follows:

Current portion of operating lease liabilities at September 30, 2020	$	54,564
Operating lease liabilities, net of current portion at September 30, 2020		182,059
Less: Operating lease right-of-use assets, net at September 30, 2020		211,449
Gain on lease termination	$	25,174

The balance of the Letter of Credit of $100,000 was charged to rent expense and the book value of the assets abandoned of $53,198 was charged to loss on sale of assets for the year ended December 31, 2020.