6. OPERATING LEASE LIABILITY The Company’s executive offices are located at 244 Fifth Avenue 2nd Floor New York, NY 10001 and Vancouver, British Columbia. The total premises in Vancouver are 2,000 square feet and are leased at a monthly rate of $2,500 under a lease agreement between the Company and the Secretary of the Company’s board of directors who is also the stockholder of the Company, which expires October 1, 2023. The Company shares the space with AEC, a reporting company under the Securities Exchange Act of 1934. Our major stockholder and officer own approximately 81% of AEC’s outstanding shares of common stock. AEC is responsible for 50% of the rent or $1,250 each month. The office in New York is rented at the rate of $360 each year and shares with AEC. In addition, the Company maintains an office at Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan, and the Company pays no rent. The Company’s lease does not provide an implicit rate, and therefore the Company uses an estimated incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company uses an incremental borrowing rate of 5% for operating leases. On October 1, 2019, the Company commenced a lease with a stockholder from October 1, 2019 to September 30, 2021 with a monthly payment of approximately $1,250. As such, the Company recorded $28,492 of right-of-use assets and related operating leases liabilities on October 1, 2019. This asset was fully amortized as of September 30, 2021. On October 1, 2021, the Company commenced a new lease with the same stockholder from October 1, 2021 to September 30, 2023 with a monthly payment of approximately $1,250. As such, the Company recorded $28,492 of right-of-use assets and related operating leases liabilities on October 1, 2021. For the three and six months ended June 30, 2022, the Company amortized $3,495 and $6,945 of right-of-use assets as compared to $3,673 and $7,300 for the three and six months ended June 30, 2021 , respectively. The following table reconciles the undiscounted future minimum lease under the non-cancelable operating leases with terms of more than one year to the total lease liabilities recognized on the consolidated balance sheet as of June 30, 2022: 2022 – remaining six months | | $ | 7,500 | | 2023 | | | 11,250 | | Total undiscounted future minimum lease payments | | | 18,750 | | Less: Difference between undiscounted lease payments and discounted lease liabilities | | | (611 | ) | Total operating lease liabilities | | | 18,139 | | Less current portion | | | (14,421 | ) | Long-term lease liabilities | | $ | 3,718 | |
Total rent expense under operating leases for the three and six months ended June 30, 2022 was $3,750 and $7,500, as compared to $3,750 and $7,500 for the three and six months ended June 30, 2021, respectively.
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