Note 5 – Lease

The Company leased 14,782 square feet of office and laboratory space located in Austin, Texas. CE+T Energy Solutions, Inc. (“CE+T Energy”) subleased approximately seventy-five (75%) percent of this space from the Company. This lease and sublease expired concurrently on May 31, 2021.

During the three and six months ended June 30, 2021, CE+T Energy made payments of $35,529 and $88,822, respectively,to the Company related to the subleased premises. The payments included CE+T Energy’s share of rent as well as its proportionate share of operating costs for the building under the master lease. The Company recognized these payments as a reduction in general and administrative expenses.

In March 2021, the Company entered into a lease agreement for 4,070 square feet of office and laboratory space located in Austin, Texas. The commencement of the lease occurred on June 1, 2021 and the term of the lease is 63 months. The actual base rent in the first year of the lease is $56,471 and is net of $18,824 in abated rent over the first three months of the lease term. The annual base rent in the second year of the lease is $77,330 and increases by $2,035 in each succeeding year of the lease. In addition, the Company is required to pay its proportionate share of operating costs for the building under this triple net lease. The lease contains a 5-year fair market renewal option. It does not contain a termination option. The Company recognized a right of use asset of $339,882 and a corresponding lease liability for this lease upon lease commencement.

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For purposes of calculating the right of use asset and lease liability included in the Company’s financial statements, the Company estimated its incremental borrowing rate at 6% per annum.

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Future minimum payments under the lease are as follows:

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At June 30, 2021, the remaining lease term was 62 months.

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For the three months ended June 30, 2021 and 2020, operating cash flows for lease payments totaled $39,534 and $48,658, respectively, and for the six months ended June 30, 2021 and 2020, operating cash outflows for lease payments totaled $89,423 and $96,699, respectively. For the three months ended June 30, 2021 and 2020, operating lease cost, recognized on a straight-line basis, totaled $38,664 and $48,487, respectively, and for the six months ended June 30, 2021 and 2020, operating lease cost, recognized on a straight-line basis, totaled $87,152 and $96,975, respectively.