Quarterly report pursuant to Section 13 or 15(d)

RIGHT TO USE ASSETS AND LEASE LIABILITY

v3.20.1
RIGHT TO USE ASSETS AND LEASE LIABILITY
3 Months Ended
Mar. 31, 2020
Disclosure Text Block [Abstract]  
Lessee, Operating Leases [Text Block]

NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY


Operating leases:


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. The Company has an option to extend the lease for an additional 3-year (option) term.


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 October 1, 2019, the Company entered into a lease agreement whereby the Company leased approximately 1,400 square feet of office space in Rochester Minnesota commencing November 1, 2019 and expiring on October 31, 2021 at an initial rate of $3,411 per month with escalating payments. The lease agreement includes an option to extend the lease for two additional periods of two years each past its initial term.


On August 14, 2019, the Company entered into a lease agreement whereby the Company leased storage space in the same building as our Los Angeles, California facilities, commencing September 1, 2019, and expiring on June 30, 2021, at an initial rate of $235 per month with escalating payments.  In connection with the lease, the Company paid a security deposit of $250. There is no option to extend the lease past its initial term.


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 $1,084,715.


Right to use assets is summarized below:


   

March 31,

2020

   

December 31,

2019

 

Los Angeles, CA., Suite 740

  $ 218,875     $ 218,875  

Los Angeles, CA., Suite 745

    277,592       277,592  

Los Angeles, CA, Storage

    4,960       4,960  

Westport, CT, 54 Wilton Rd

    506,276       506,276  

Rochester, MN, 14 4th Street

    77,012       77,012  

Subtotal

    1,084,715       1,084,715  

Less accumulated depreciation

    (469,819

)

    (370,373

)

Right to use assets, net

  $ 614,896     $ 714,342  

During the three months ended March 31, 2020 and 2019, the Company recorded $119,408 and $60,127 as lease expense to current period operations.


Lease liability is summarized below:


   

March 31,

2020

   

December 31,

2019

 

Los Angeles, CA., Suite 740

  $ 99,779     $ 118,009  

Los Angeles, CA., Suite 745

    126,752       149,910  

Los Angeles, CA, Storage

    3,484       4,111  

Westport, CT, 54 Wilton Rd

    333,177       380,708  

Rochester, MN, 14 4th Street

    61,802       70,681  

Total lease liability

    624,994       723,419  

Less: short term portion

    (423,673

)

    (412,288

)

Long term portion

  $ 201,321     $ 311,131  

Maturity analysis under these lease agreements are as follows:


Year ended December 31, 2020

  $ 342,884  

Year ended December 31, 2021

    321,386  

 Total

    664,270  

Less: Present value discount

    (39,276

)

Lease liability

  $ 624,994  

Lease expense for the three months ended March 31, 2020 and 2019 was comprised of the following:


   

March 31,

2020

   

March 31,

2019

 

Operating lease expense

  $ 113,262     $ 46,451  

Short-term lease expense

    5,655       13,238  

Variable lease expense

    491       438  

Total

  $ 119,408     $ 60,127