Quarterly report pursuant to Section 13 or 15(d)

NOTE 5 - RIGHT TO USE ASSETS AND LEASE LIABILITY

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NOTE 5 - RIGHT TO USE ASSETS AND LEASE LIABILITY
6 Months Ended
Jun. 30, 2019
Disclosure Text Block [Abstract]  
Lessee, Operating Leases [Text Block]

NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY


On April 12, 2019, the Company entered into a sublease agreement whereby the Company leased approximately 4,343 square feet of office space in Westport, Connecticut commencing May 1, 2019 and expiring on October 31, 2021 at an initial rate of $18,277 per month, inclusive of a fixed utility charge, with escalating payments.  In connection with the lease the Company paid a security deposit of $68,764, of which $34,382 represents the last two months of the term. There is no option to extend the lease past its initial term.


On May 22, 2018, the Company entered into a fifth lease amendment agreement, whereby the Company agreed to extend the lease for the original office space and expand with additional space in Los Angeles, California, commencing June 14, 2018 and expiring on June 30, 2021 at an initial rate of $14,731 per month with escalating payments.  In connection with the lease, the Company is obligated to lease parking spaces at an aggregate approximate cost of $1,070 per month.  In addition, the Company entered into a lease for storage space with the Los Angeles, California building commencing on December 1, 2017 and expiring on August 31, 2019 for approximately $223 per month. The Company has an option to extend the lease for an additional 3 year (option) term.


On April 11, 2018, the Company extended a short-term lease agreement whereby the Company leased office space in Austin, Texas commencing on August 1, 2018 and expiring July 31, 2019 for $979 per month.


On October 1, 2018, the Company entered into a lease agreement whereby the Company leased office space in Norwalk, Connecticut commencing on October 1, 2018 and expiring September 30, 2019 for $2,000 per month.


In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. In determining the length of the lease term to its long term lease, the Company determined not to consider an embedded 3 year option in the Los Angeles lease primarily due to i) the renewal rate is at future market rate to be determined and ii) Company does not have significant leasehold improvements that would restrict its ability to consider relocation.


At lease commencement dates, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined their initial present values, at inception, of $1,002,743.


On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right to use assets of $418,838, lease liability of $422,215 and eliminated deferred rent of $3,377.


Right to use assets is summarized below:


   

June 30,

2019

 

Los Angeles, CA, Suite 740

  $ 218,875  

Los Angeles, CA, Suite 745

    277,592  

Westport, CT., 54 Wilton Rd

    506,276  

Subtotal

    1,002,743  

Less accumulated depreciation

    (188,753

)

Right to use assets, net

  $ 813,990  

During the three and six months ended June 30, 2019, the Company recorded $104,278 and $164,405 as lease expense to current period operations.


Lease liability is summarized below:


   

June 30,

2019

 

Los Angeles, CA, Suite 740

  $ 153,397  

Los Angeles, CA, Suite 745

    194,381  

Westport, CT., 54 Wilton Rd

    472,976  

Total lease liability

    820,754  

Less: short term portion

    (352,482

)

Long term portion

  $ 468,272  

Maturity analysis under these lease agreements are as follows:


Six months ended December 31, 2019

  $ 202,116  

Year ended December 31, 2020

    411,358  

Year ended December 31, 2021

    284,756  

 Total

    898,230  

Less: Present value discount

    (77,476

)

Lease liability

  $ 820,754  

Lease expense for the three months ended June 30, 2019 was comprised of the following:


Operating lease expense

  $ 83,584  

Short-term lease expense

    19,520  

Variable lease expense

    1,174  
    $ 104,278  

Lease expense for the six months ended June 30, 2019 was comprised of the following:


Operating lease expense

  $ 130,035  

Short-term lease expense

    32,758  

Variable lease expense

    1,612  
    $ 164,405