Leases

ASC 842, “Leases”, requires that a lessee recognize the assets and liabilities that arise from operating leases, A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transaction, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. The Company adopted ASC 842, January 1, 2020, using the effective date method and elected certain practical expedients allowing the Company not to reassess:

The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less.

The Company recorded operating lease expense of $301,321 and $185,831 for the years ended December 31, 2022 and 2021, respectively. 

The Company has operating leases with future commitments as follows: 

Employees

The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive granted in December 2021 and 2022 to the Chief Executive Officer based on his employment agreement since July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chief Executive Officer $300,000 per year. The total outstanding accrued compensation as of December 31, 2022 and 2021 were $1,870,500 and $1,385,000, respectively.

The Company agreed to pay $360,000 per year and a $200,000 of target annual incentive in December 2021 and 2022 to the Chairman of the Board based on his employment agreement since July 1, 2020 of which currently 50% is paid in cash and 50% is accrued. The Company previously paid the Chairman of the Board $300,000 per year. The total outstanding accrued compensation as of December 31, 2022 and December 31, 2021 were $1,863,000 and $1,400,000, respectively.

The Company agreed to pay $120,000 per year to the Chief Operating Officer based on his amended employment agreement executed on May 15, 2019. In the third quarter of 2021, the Chief Operating Officer received 61,000 shares of series B preferred stock in exchange for accrued salaries of $244,000. In September 6, 2022, the Chief Operating Officer received 18,750 shares of series B preferred stock in exchange for services. On October 10, 2022, the Company issued 18,750 shares of series B preferred stock at the fair value of $1 per share in exchange for the accrued salaries of $159,000 resulting in a gain on accrued compensation settlement of $140,250. The total outstanding accrued compensation as of December 31, 2022 and December 31, 2021 was $0 and $159,000, respectively.

The Company agreed to pay $156,000 per year to the previous Chief Financial Officer based on his amended employment agreement executed on May 15, 2021. The total outstanding accrued compensation as of December 31, 2022 and December 31, 2021 was $17,057.

The Company entered into a Management Agreement effective May 31, 2021 for compensation to the principals of Nova in the form of an annual base salaries of $372,000 to one of the 3 doctors, $450,000 to the second, and $372,000 to the third doctor.

Collectively, as a group, such principals will receive an annual cash bonus and stock equity set forth below, which will be conditioned upon the Company achieving 100% of the annual objectives of financial performance goals as set forth below. 

On May 31, 2019, Platinum Tax Defenders entered into an employment agreement with a manager with a term of 5 years, whereby Platinum Tax Defenders provides for compensation of $17,333 per month along with a bonus incentive if financial performance measures were met. The contract was terminated December 31, 2021.