Note 9 – Leases

The Company recorded its operating lease cost of $209,738 and $67,664 for the years ended December 31, 2022 and 2021, respectively. This included in general and administrative expenses.

On April 8, 2015, AVX Design & Integration Inc. entered an eighty-six-month commercial lease with a third party for an approximately 2,592 square foot office space. The lease commenced on July 1, 2015, and ended upon August 31, 2022, as AVX operations moved into our corporate headquarters in Ontario. The monthly rent is $4,536 with approximately a 3% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 15%. Lease expense for the lease is recognized on a straight-line basis over the lease term.

On December 7, 2021, Focus Universal (Shenzhen) Technology Co. LTD entered a thirty-eight-month commercial lease with a third party for an approximately 5,895 square foot office space. The lease commenced on December 25, 2021, and will end on February 28, 2025. The monthly rent is RMB70,097 (approximately $11,014) with approximately an 11.1% to 12.5% increase rate in each additional year. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar term, which is 10%. Lease expense for the lease is recognized on a straight-line basis over the lease term.

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As of December 31, 2022 and 2021, operating lease right-of use assets and lease liabilities were as follows: 

Lease term and discount rate:

The minimum future lease payments are as follows: