NOTE 5. LEASES

The Company leases its corporate headquarters office space and certain office equipment under arrangements classified as operating leases. 

The Company entered into its lease agreement to rent office space for a twelve-month period beginning July 1, 2022, with a monthly base rent of $9,744.  The lease did not contain renewal options and was considered a short-term lease at inception. In April 2023, the Company executed an amendment to extend the term of the lease from July 1, 2023, through September 30, 2026. The amended lease provides for monthly base rent of $9,744 through September 2024, with fixed escalating monthly base rent for each year thereafter, and no rent due for the months of July through September 2023.

The Company determined that the amendment results in a lease modification that is not accounted for as a separate contract.  Further, due to the extension of the lease term beyond the initial 12 months, the office lease can no longer be considered a short-term lease. The Company has recorded a right-of-use asset and lease liability as of April 17, 2023 (the effective date of the amendment) based on the modified terms and conditions of the amended lease.     

For the nine-month period ended September 30, 2024, total operating lease expense was $147,878, which included $61,104 of variable lease expense. For the three-month period ended September 30, 2024, total operating lease expense was $50,123 which included $21,198 of variable lease expense. For the nine-month period ended September 30, 2023, total operating lease expense was $130,346, of which $17,094 was attributable to variable lease expenses, and $65,375 was attributable to short-term lease expense. For the three-month period ended September 30, 2023, total operating lease expense was $31,710, of which $2,786 was attributable to variable lease expense.

Operating lease obligations recorded on the condensed consolidated balance sheet at September 30, 2024 are as follows:

Future lease payments included in the measurement of operating lease liabilities on the condensed consolidated balance sheet at September 30, 2024 are as follows:

The weighted average remaining lease term is 24 months, and the weighted average discount rate is 10%.