|3 Months Ended|
Mar. 31, 2019
Note 13 - Leases
The Company currently has three office leases. The first operating lease is for its administrative office in Palo Alto, California, effective October 1, 2014, for five years. The initial lease rate was $14,225 per month with escalating payments. In connection with the lease, the Company is obligated to pay $8,985 monthly for operating expenses for building repairs and maintenance. The second operating lease is for its administrative office in Encino, CA. This lease was effective June 1, 2014 and will end on July 31, 2021. The current lease rate is $6,984 per month and $276 per month for the common area maintenance. The third operating lease is for its administrative office in Coquitlam, Canada, from October 1, 2016 through September 30, 2021. The initial lease rate was $8,931 CAD per month with escalating payments. In connection with the lease, the Company is obligated to pay $6,411 CAD monthly for operating expenses for building repairs and maintenance. The Company has no other operating or financing leases with terms greater than 12 months.
The Company adopted ASC Topic 842, Leases (“ASC Topic 842”) effective January 1, 2019 using the prospective approach. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use asset of $641,992, lease liability of $683,575 and eliminated deferred rent of $41,583. The Company determined the lease liability using the Company’s estimated incremental borrowing rate of 8.0% to estimate the present value of the remaining monthly lease payments.
Right-of-use assets is summarized below (in thousands):
During the three months ended March 31, 2019, the Company recorded $91,667 as rent expense to the right-of-use assets.
Lease liability is summarized below (in thousands):
Maturity analysis under the lease agreement is as follows (in thousands):
The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef