Annual report pursuant to Section 13 and 15(d)

RIGHT TO USE ASSETS AND LEASE LIABILITY

v3.20.4
RIGHT TO USE ASSETS AND LEASE LIABILITY
12 Months Ended
Dec. 31, 2020
Disclosure Text Block [Abstract]  
Lessee, Operating Leases [Text Block]

NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY

 

As of December 31, 2020, the Company had outstanding five leases with aggregate payments of $38,435 per month, expiring through December 31, 2022.

 

As of December 31, 2019, the Company had outstanding four leases with aggregate payments of $37,435 per month, expiring through October 31, 2021.

 

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.

 

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.

 

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 5% to 8% and determined their initial present values, at inception, of $1,087,075.

 

Right to use assets is summarized below:

 

   

December 31,

2020

   

December 31,

2019

 

Right to use assets, net

  $ 1,087,075     $ 1,084,715  

Less accumulated depreciation

    (780,591

)

    (370,373

)

Right to use assets, net

  $ 306,484     $ 714,342  

 

During the years ended December 31, 2020 and 2019, the Company recorded $492,844 and $413,763, as lease expense to current period operations.

 

Lease liability is summarized below:

 

   

December 31,

2020

   

December 31,

2019

 

Total lease liability

  $ 313,411     $ 723,419  

Less: short term portion

    (312,691

)

    (412,288

)

Long term portion

  $ 720     $ 311,131  

 

Maturity analysis under these lease agreements are as follows:

 

Year ended December 31, 2021

  $ 322,586  

Year ended December 31, 2022

    1,200  

Total

    323,786  

Less: Present value discount

    (10,375

)

Lease liability

  $ 313,411  

 

Lease expense for the year ended December 31, 2020 and 2019 was comprised of the following:

 

   

December 31,

2020

   

December 31,

2019

 

Operating lease expense

  $ 455,591     $ 345,667  

Short-term lease expense

    35,453       66,422  

Variable lease expense

    1,800       1,674  

Total

  $ 492,844     $ 413,763