Quarterly report pursuant to Section 13 or 15(d)

RIGHT TO USE ASSETS AND LEASE LIABILITY

v3.21.2
RIGHT TO USE ASSETS AND LEASE LIABILITY
9 Months Ended
Sep. 30, 2021
Disclosure Text Block [Abstract]  
Lessee, Operating Leases [Text Block]

NOTE 5 – RIGHT TO USE ASSETS AND LEASE LIABILITY

 

Operating leases:

 

On February 10, 2021 the Company entered into a Sixth Amendment to the Office Lease at 12424 Wilshire Blvd in Los Angeles dated August 9, 2011 – it is the Fourth Extended Term with respect to Suite 745 and the Expansion Term with respect to Suite 740 which is from July 1, 2021 until June 30, 2022 with a fixed monthly rent equal to $13,702 (down from $16,289); and the security deposit will be reduced by $5,448 so that the balance remaining shall be $27,404.

 

The Company determined that the Sixth Amendment was a lease modification and accordingly reassessed the lease classification, remeasured the lease liability and adjusted the right-to-use asset. At February 10, 2021 the Company removed the remaining right-to-use net assets of $60,881 and related lease liability of $63,076 and recorded right-to-use assets and related lease liability of $217,903.

 

On August 2, 2021, the Company exercised its option to extend its Rochester, Minnesota lease of approximately 1,400 square feet of office space for two additional years expiring on October 31, 2023 with a fixed monthly rate of $3,513, increasing to $3,618 for the second year.

 

The Company determined that the lease option exercised was a lease modification and accordingly reassessed the lease classification, remeasured the lease liability and adjusted the right-to-use asset. On August 2, 2021 the Company removed the remaining right-to-use net assets of $10,247 and related lease liability of $10,400 and recorded right-to-use assets and related lease liability of $89,629. At the lease modification date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 6.5%.

 

On August 3, 2021, the Company entered into a sublease agreement whereby the Company leased approximately 6,590 square feet of office space at 55 Greens Farms Road, Westport, Connecticut commencing September 1, 2021 and expiring December 31, 2024 (40 months) at the initial rate beginning January 1, 2022 of $14,828 with escalating payments. In connection with the lease, the Company paid a security deposit of $14,232. There is no option to extend the lease past its initial term. At the lease commencement date, the Company estimated the lease liability and right-to-use assets at present value using the Company’s incremental borrowing rate of 6.5% and determined their initial present values, at inception, of $492,876. In conjunction with the lease, the Company terminated, without penalty, the sublease at 54 Wilton Road, Westport, CT effective September 4, 2021 and removed the remaining right-to-use assets of $36,756 and related lease liability of $37,625 with a credit to rent expense of $868 relating to the lease termination.

 

As of September 30, 2021, the Company had outstanding five leases with aggregate payments of $17,315 per month, expiring through December 31, 2024.

 

Right to use assets is summarized below:

 

   

September 30,

2021

(000’s)

   

December 31,

2020

(000’s)

 

Right to use assets, net

  $ 803     $ 1,087  

Less accumulated amortization

    (110

)

    (781

)

Right to use assets, net

  $ 693     $ 306  

 

During the three and nine months ended September 30, 2021, the Company recorded $120,127 and $365,366 and $124,437 and $370,656 for the three and nine months ended September 30, 2020 as lease expense to current period operations, respectively.

 

Lease liability is summarized below:

 

   

September 30,

2021

(000’s)

   

December 31,

2020

(000’s)

 

Total lease liability

  $ 700     $ 314  

Less: short term portion

    (291

)

    (313

)

Long term portion

  $ 409     $ 1  

 

Maturity analysis under these lease agreements are as follows (000’s):

 

Remainder of 2021

  $ 52  

Year ended December 31, 2022

    304  

Year ended December 31, 2023

    220  

Year ended December 31, 2024

    191  

Total

    767  

Less: Present value discount

    (67

)

Lease liability

  $ 700  

 

Lease expense for the three months ended September 30, 2021 and 2020 was comprised of the following:

 

   

September 30,

2021

(000’s)

   

September 30,

2020

(000’s)

 

Operating lease expense

  $ 105     $ 115  

Short-term lease expense

    15       9  

Total

  $ 120     $ 124  

 

Lease expense for the nine months ended September 30, 2021 and 2020 was comprised of the following:

 

   

September 30,

2021

(000’s)

   

September 30,

2020

(000’s)

 

Operating lease expense

  $ 334     $ 342  

Short-term lease expense

    31       28  

Variable lease expense

    -       1  

Total

  $ 365     $ 371