OPERATING LEASES – DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2022

Operating Leases Discontinued Operations

OPERATING LEASES – DISCONTINUED OPERATIONS

NOTE 11 – OPERATING LEASES – DISCONTINUED OPERATIONS

The Company adopted ASC 842 as of December 31, 2019. The Company had an operating lease for the Company’s warehouse and office and accounts for this lease in accordance with ASC 842. Adoption of the standard resulted in the initial recognition of operating lease ROU asset of $344,203 and operating lease liability of $344,203 as of December 31, 2019.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single lease component. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.

In December 2021, the Company confirmed with the landlord that as of that time and on a going forward basis, the Company has no rental obligation, or past due rental obligation or any other related liability on its office/ warehouse space located at 3017 Greene Street, Hollywood, Florida.

On October 22, 2021 the Company entered into a lease termination agreement (“Lease Termination”) with Canal Park Office to terminate the Company’s North Miami Beach, Florida office space. The Termination Agreement allows Canal Park Office to retain the security deposit of $24,799 and to be paid $21,000. The Company was released from any other obligations.

See Note 1 for impairment discussion as of December 31, 2021.

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

In accordance with ASC 842, the components of lease expense were as follows:

	Three Months Ended March 31,
	2022		2021
Operating lease expense	$	–	$	59,240
Short term lease cost		–		225
Total lease expense	$	–	$	59,465
Less: Rental income through sub-lease		–		(25,024	)
Net lease expense	$	–	$	34,441

In accordance with ASC 842, other information related to leases was as follows:

	Three Months ended March 31,
	2022		2021
Operating cash flows from operating leases	$	–	$	58,251
Cash paid for amounts included in the measurement of lease liabilities	$	–	$	58,251
Weighted-average remaining lease term—operating leases		–		2.20 years
Weighted-average discount rate—operating leases		–		8%

Operating lease cost was $0 and $59,240 (from discontinued operations) for the three months ended March 31, 2022 and 2021, respectively.