Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.23.2
Leases
3 Months Ended
Mar. 31, 2023
Leases  
Leases

Note 11 – Leases

 

The Company leased its 12,400 square foot extraction facility under a non-cancelable real property lease agreement that commenced on January 1, 2022 and was to expire on December 31, 2027, at a monthly lease rate of 57,339,000 COP (approximately $15,290). The Company terminated the lease on September 30, 2022, resulting in termination fees of approximately $7,700. A gain of $20,148 was recognized on the early extinguishment of the lease for the year ended December 31, 2022.

 

On October 1, 2022, the Company entered into a five-year non-cancelable property lease, with an automatic five year extension, for a new extraction facility with combined office space, at a monthly lease term of 29,000,000 COP plus VAT and administration fees (approximately $6,300 in the aggregate), with annual escalation of lease payments equal to the consumer price index, plus 2%.

 

The Company also leases a residential premise under a non-cancelable real property lease agreement that commenced on September 1, 2021 and expires on August 31, 2024, at a monthly lease term of 3,800,000 COP (approximately $1,013), with approximately a 3% annual escalation of lease payments commencing September 1, 2022.

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The Company leases another residential premise under a non-cancelable real property lease agreement that commenced on June 1, 2022 and expires on May 30, 2024, at a monthly lease term of 1,900,000 COP (approximately $507), with an 8% annual escalation of lease payments commencing June 1, 2023.

 

In addition, the Company leases its corporate offices and operational facility in Colombia under short-term non-cancelable real property lease agreements that expire within a year. The Company doesn’t have any other office or equipment leases that would require capitalization. The office lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. In the locations in which it is economically feasible to continue to operate, management expects to enter into a new lease upon expiration. The extraction facility lease contained provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

 

The components of lease expense were as follows:

 

    2023     2022  
    For the Three Months Ended  
    March 31,  
    2023     2022  
Operating lease cost:                
Amortization of right-of-use assets   $ 22,242     $ 33,431  
Interest on lease liabilities     7,105       26,463  
Lease payments on short term leases     -       12,590  
Total operating lease cost   $ 29,347     $ 72,484  

 

Supplemental balance sheet information related to leases was as follows:

 

    March 31,     December 31,  
    2023     2022  
Operating lease:                
Operating lease assets   $ 403,727     $ 425,969  
                 
Current portion of operating lease liabilities   $ 88,612       86,235  
Noncurrent operating lease liabilities     318,556       341,680  
Total operating lease liability   $ 407,168     $ 427,915  
                 
Weighted average remaining lease term:                
Operating leases     4 years       4.25 years  
                 
Weighted average discount rate:                
Operating lease     6.75 %     6.75 %

 

 

ONE WORLD PRODUCTS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Supplemental cash flow and other information related to operating leases was as follows:

 

    2023     2022  
    For the Three Months Ended  
    March 31,  
    2023     2022  
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flows used for operating leases   $ 20,747     $ 26,497  
                 
Leased assets obtained in exchange for lease liabilities:                
Total operating lease liabilities   $ -     $ 1,535,706  

 

Future minimum annual lease commitments under non-cancelable operating leases are as follows at March 31, 2023:

 

    Operating  
    Leases  
       
2023 (for the nine months remaining)   $ 84,656  
2024     107,632  
2025     99,186  
2026     102,162  
2027     78,336  
Total minimum lease payments     471,972  
Less interest     64,804  
Present value of lease liabilities     407,168  
Less current portion     88,612  
Long-term lease liabilities   $ 318,556