Annual report pursuant to Section 13 and 15(d)

Operating Lease Right-Of-Use (Rou) Assets and Operating Lease Liabilities

Operating Lease Right-Of-Use (Rou) Assets and Operating Lease Liabilities
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements [Abstract]  



In October 2019, the Company entered into an 18-month lease agreement for the lease of office and warehouse space under a non-cancelable operating lease through May 31, 2021. From the lease commencement date of December 1, 2019 until November 30, 2020, monthly rent shall be $4,444 and from December 1, 2020 to May 31, 2021, monthly rent shall be $4,577 per month.


In adopting ASC Topic 842, Leases (Topic 842) on January 1, 2019, the Company had elected the 'package of practical expedients', which permitted it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. Since the terms of the Company's operating lease for its office space prior to October 2019 was 12 months or less on the date of adoption, pursuant to ASC 842, the Company determined that the lease met the definition of a short-term lease and the Company did not recognize the right-of use asset and lease liability arising from this lease. Upon renewal of the lease in October 2019, the Company analyzed the new lease and determined it is required to record a lease liability and a right of use asset on its consolidated balance sheet, at fair value.


During the years ended December 31, 2019 and 2018, in connection with its operating lease, the Company recorded rent expense of $101,114 and $101,271, respectively, which is expensed during the period and included in operating expenses on the accompanying consolidated statements of operations.


The significant assumption used to determine the present value of the lease liability in October 2019 was a discount rate of 12% which was based on the Company's estimated incremental borrowing rate.


At December 31, 2019, right-of-use asset ("ROU") is summarized as follows:


    December 31,
Office leases right of use assets   $ 74,296  
Less: accumulated amortization into rent expense     (4,488 )
Balance of ROU assets as of December 31, 2019   $ 69,808  


At December 31, 2019, operating lease liabilities related to the ROU assets are summarized as follows:


    December 31,
Lease liabilities related to office leases right of use assets   $ 69,852  
Less: current portion of lease liabilities     (47,636 )
Lease liabilities – long-term   $ 22,216  


At December 31, 2019, future minimum base lease payments due under non-cancelable operating leases are as follows:


Year ended December 31,   Amount  
2020   $ 53,461  
2021     22,885  
Total minimum non-cancelable operating lease payments     76,346  
Less: discount to fair value     (6,494 )
Total lease liability at December 31, 2019   $ 69,852