Quarterly report pursuant to Section 13 or 15(d)

RIGHT TO USE ASSETS AND LEASE LIABILITY

v3.20.2
RIGHT TO USE ASSETS AND LEASE LIABILITY
9 Months Ended
Sep. 30, 2020
Disclosure Text Block [Abstract]  
Lessee, Operating Leases [Text Block]

NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY

 

Operating leases:

 

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.

 

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.  

 

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:

 

   

September 30,

2020

   

December 31,

2019

 

Right to use assets, net

  $ 1,084,715     $ 1,084,715  

Less accumulated depreciation

    (674,733

)

    (370,373

)

Right to use assets, net

  $ 409,982     $ 714,342  

 

During the three and nine months ended September 30, 2020, the Company recorded $124,437 and $370,656; and $133,786 and $298,191 for the three and nine months ended September 30, 2019, as lease expense to current period operations.

 

Lease liability is summarized below:

 

   

September 30,

2020

   

December 31,

2019

 

Total lease liability

  $ 418,673     $ 723,419  

Less: short term portion

    (396,308

)

    (412,288

)

Long term portion

  $ 22,365     $ 311,131  

 

Maturity analysis under these lease agreements are as follows:

 

Year ended December 31, 2020

  $ 115,202  

Year ended December 31, 2021

    321,386  

 Total

    436,588  

Less: Present value discount

    (17,915

)

Lease liability

  $ 418,673  

 

Lease expense for the three months ended September 30, 2020 and 2019 was comprised of the following:

 

   

September 30,

2020

   

September 30,

2019

 

Operating lease expense

  $ 114,861     $ 102,394  

Short-term lease expense

    9,080       31,492  

Variable lease expense

    496       (100

)

Total

  $ 124,437     $ 133,786  

 

Lease expense for the nine months ended September 30, 2020 and 2019 was comprised of the following:

 

   

September 30,

2020

   

September 30,

2019

 

Operating lease expense

  $ 342,152     $ 232,427  

Short-term lease expense

    27,473       64,252  

Variable lease expense

    1,031       1,512  

Total

  $ 370,656     $ 298,191