LEASES

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

LEASES

5 LEASES

The Company entered into a real property lease for office and warehouse space located at 19355 Business Center Drive in Northridge California, Los Angeles County. The lease commenced on February 15, 2020 and expires on February 28, 2022, monthly rental expense is $3,945 per month with no escalations during the term of the lease.

The initial value of the right-of-use asset was $86,741 and the operating lease liability was $86,741. The Company monitors for events or changes in circumstances that require a reassessment of its lease. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding right-of-use asset unless doing so would reduce the carrying amount of the right-of-use asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative right-of-use asset balance is recorded as a loss in the statement of operations.

On March 22, 2021, the Company entered into a real property lease for an office located at 7677 Topaz Circle, Dublin, California. The lease commenced on April 1, 2021 and is for a twelve month period, terminating on April 1, 2022. The Company applied the practical expedient whereby operating leases with a duration of twelve months or less are expensed as incurred.

Discount Rate

To determine the present value of minimum future lease payments for operating leases at February 15, 2020, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the “incremental borrowing rate” or “IBR”).

The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the 5 year ARM interest rate at the time of entering into the agreement and compared that rate to the Company’s weighted average cost of funding at the time of entering into the operating lease. The Company determined that 10.00% was an appropriate incremental borrowing rate to apply to its real-estate operating lease.

Right of use assets

Right of use assets are included in the unaudited condensed Balance Sheet are as follows:

	March 31, 2021		December 31, 2020
Non-current assets
Right of use assets, operating leases, net of amortization	$	41,301	$	51,926

Total Lease Cost

Individual components of the total lease cost incurred by the Company is as follows:

	Three Months Ended March 31, 2021		Three months ended March 31, 2020
Operating lease expense	$	11,835	$	5,918

Maturity of Operating Leases

The amount of future minimum lease payments under operating leases are as follows:

	Amount
Undiscounted minimum future lease payments
Total instalments due:
Remainder of 2021	$	35,505
2022		7,890
		43,395
Imputed interest		(2,094	)
Total operating lease liability	$	41,301
Disclosed as:
Current portion	$	41,301
Non-current portion		-
	$	41,301

Other lease information:

	Three months ended March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(11,835	)
Remaining lease term – operating lease		11 months
Discount rate – operating lease		10.0	%