NOTE 5 — RIGHT TO USE ASSETS AND LEASE LIABILITY

The Company leases its headquarters in Sunrise, Florida which consists of 4,860 square feet of space, which it leases at a current rent of approximately $82,620 per year. In September 2013, the Company amended its facility lease to extend the term until July 31, 2016. On February 4, 2016, the Company extended its facility lease to extend the term of the lease until August 31, 2019 at a monthly base rent of $7,306 plus a pro rata share of landlord’s operating expenses.

Effective September 1, 2019, the Company entered into a second amendment to the above described lease to extend the premises through August 31, 2014 with base rent beginning at $87,674 per year and escalating to $98,678 per year plus a pro rata share of the landlord’s operating expenses.

At lease commencement 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 8% and determined their initial present values, at inception, of $383,351. In determining the length of the lease term to its long-term lease, the Company determined there was not an option to extend the lease.

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 months or less. In determining the length of the lease term to its long-term lease, the Company determined there was not an option to extend the lease. At lease commencement 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 8% and determined the initial present value, at inception, of $274,180. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right to use assets of $56,734 and lease liability of $56,734.

Right to use assets is summarized below:

	September 30, 2019
Sunrise Facility	$	383,351
Less accumulated depreciation		(7,758	)
Right to use assets, net	$	375,593

During the three and nine months ended September 30, 2019, the Company recorded $34,560 and $105,885 as lease expense to current period operations, respectively.

Lease liability is summarized below:

	September 30, 2019
Sunrise, FL	$	376,045
Less: short term portion		(59,970	)
Long term portion	$	316,075

Maturity analysis under these lease agreements are as follows:

Three months ended December 31, 2019	$	21,919
Year ended December 31, 2020		88,551
Year ended December 31, 2021		91,208
Year ended December 31, 2022		93,944
Year ended December 31, 2023		96,762
Year ended December 31, 2024		65,786
		458,170
Less: Present value discount		(82,125	)
Lease liability	$	376,045

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

Operating lease expense	$	34,560
Variable lease expense		-
	$	34,560

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

Operating lease expense	$	105,200
Variable lease expense		685
	$	105,885