Quarterly report pursuant to Section 13 or 15(d)

Lease

v3.23.1
Lease
3 Months Ended
Mar. 31, 2023
Lease  
Lease

Note 10 – Lease

 

The Company recorded its operating lease expense of $46,080 and $75,597 for the three months ended March 31, 2023 and 2022, respectively. This is included in general and administrative expenses.

 

On December 7, 2021, Focus Universal (Shenzhen) Technology Co. LTD entered into 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 $11,053) 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. This lease was terminated on February 22, 2023.

 

On January 16, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 2,017 square foot office space. The lease commenced on February 1, 2023 and will end on January 31, 2026. The monthly rent is RMB29,974 (approximately $4,365) 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.

 

On February 22, 2023, Focus Universal (Shenzhen) Technology Co. LTD entered into a thirty-six month commercial lease with a third party for an approximately 3,449 square foot office space. The lease commenced on March 31, 2023 and will end on February 28, 2026. The monthly rent is RMB35,246 (approximately $5,133) 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 March 31, 2023 and December 31, 2022, operating lease right-of use assets and lease liabilities were as follows: 

             
    March 31, 2023     December 31, 2022  
Operating lease right-of-use assets   $ 270,481     $ 253,336  
Lease liabilities, current portion   $ 82,388     $ 113,058  
Lease liabilities, less current portion   $ 147,170     $ 165,952  

 

Lease term and discount rate:

             
    March 31, 2023     December 31, 2022  
Weighted average remaining lease term                
Operating lease     2.83 to 2.92 years       2.17 years  
Weighted average discount rate                
Operating lease     10%       10%  

 

The minimum future lease payments are as follows:

       
    Amount  
Year ending December 31, 2023   $ 31,429  
Year ending December 31, 2024     107,866  
Year ending December 31, 2025     118,032  
Year ending December 31, 2026     8,730  
Total minimum lease payment     266,057  
Less: imputed interest     (36,500 )
Present value of future minimum lease payments   $ 229,557