Annual report pursuant to Section 13 and 15(d)

LEASES

v3.22.4
LEASES
 12 Months Ended
Dec. 31, 2022
Leases  
LEASES

NOTE 12 – LEASES

 

The components of lease cost for operating leases for the years ended December 31, 2022 and 2021 are as follows:

             
    2022     2021  
Lease Cost                
Operating lease cost   $ 524,036     $ 398,440  
Short-term lease cost     263,277       219,604  
Variable lease cost     –       –  
Sublease income     –       –  
Total lease cost   $ 787,313     $ 618,044  

 

Supplemental cash flow information related to leases for the years ended December 31, 2022 and 2021 are as follows:

             
    2022     2021  
Other Lease Information                
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flows from operating leases   $ 354,340     $ 323,162  
Amortization of right-of-use assets   $ 430,644     $ 367,213  

 

The following table summarizes the lease-related assets and liabilities recorded on the balance sheet at December 31, 2022 and 2021:

             
    2022     2021  
Lease Position                
Operating Leases                
Operating lease right-of-use assets   $ 1,505,987     $ 2,182,612  
Right-of-use liability operating lease - short- term     391,117       456,207  
Right-of-use liability operating lease - long-term     1,143,011       1,767,506  
Total operating lease liabilities   $ 1,534,128     $ 2,223,713  

  

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company recognized an initial right-of-use asset and lease liability of $1,128,609 for leases entered into during the year ended December 31, 2022.

       
Lease Term and Discount Rate   December 31, 2022  
Weighted-average remaining lease term (years)        
Operating leases     3.7  
Weighted-average discount rate        
Operating leases     6.67%  

 

The following table provides the maturities of lease liabilities at December 31, 2022:

       
    Operating  
    Leases  
       
2023   $ 458,572  
2024     471,638  
2025     485,702  
2026     340,591  
Total future undiscounted lease payments     1,756,503  
Less: Interest     (222,375 )
Present value of lease liabilities   $ 1,534,128  

 

The Company closed its Denver, Colorado, store location (the Company’s only store) in June 2022 and entered into a lease termination agreement in July 2022 to relieve the Company of its future obligations under the lease. The Company has recorded a loss of $148,322 in the year ended December 31, 2022 related to this facility which includes the write-off of prepaid rent, security deposit, right-of-use asset and liability and a loss on the write-off of leasehold improvements and fixtures and furniture of $46,289.

 

In July 2022, the Company entered into a new lease agreement for office space in Round Rock, Texas with the landlord of its current Round Rock facilities. The lease began in August 2022 and terminates in August 2026. In connection with signing this lease, the landlord has agreed to terminate the lease on one of the current facilities that would have expired in December 2023. The additional monthly rent after consideration of the rent on the facility being canceled is not significant. As discussed in Note 7 above, the Company terminated the lease, and related amendment, as of September 30, 2022 for a leased warehouse facility in conjunction with entering into the lease agreement for office space and the above does not include any amounts related to that lease. There was an insignificant impact to the Company’s operations for the year ended December 31, 2022 due to the termination of this lease.

 

The total loss on lease terminations for the year ended December 31, 2022 was 378,176.