Quarterly report pursuant to Section 13 or 15(d)

LEASES

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LEASES
9 Months Ended
Dec. 31, 2020
Leases [Abstract]  
LEASES [Text Block]

NOTE 7 - LEASES

The Company adopted ASC 842 on April 1, 2019 which requires lessees to recognize right-of-use ("ROU") asset and lease liability for all leases. The Company elected the package of transition practical expedients for existing contracts, which allowed us to carry forward our historical assessments of whether contracts are or contain leases, lease classification and determination of initial direct costs.

The Company leases property under operating leases. The Company extended its short-term lease for a warehouse, originally due to expire on March 31, 2020 to March 2021, thus the Company adopted ASC 842 for this lease at the time of the extension in January 2020.  The lease rate for the extension was $3,938 per month starting April 1, 2020.

 

As of July 1, 2020, the Company entered into a lease for 14,530 square feet of warehouse space from a third party through December 2021 at a rate of $7,992 per month for the first twelve months, then at a rate of $8,231 per month for the last six months of the lease.  The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $130,989 and the lease liability for this lease was $138,266, at inception of this lease, respectively.

 

As of October 1, 2020, the company entered into a lease for 9,166 square feet of corporate office and warehouse space from a third party through September 2023 at a rate of $10,083 per month for the first twelve months, then at a rate of $10,385 for the next 12 months, and $10,697 for the final 12 months of the lease. The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $337,932 and the lease liability for this lease was $337,932, at inception of this lease, respectively. Previously, the Company leased its corporate office space with a size of 3,352  square feet leased from a third party which leased through November 2020 at the current rate of $7,891 per month. 

 

As of November 1, 2020, the company entered into a lease for 2,390 square feet of corporate office space from a third party through January 2024 at a rate of $5,280 per month for the first twelve months starting January 2021, then at a rate of $5,377 for the next 12 months, and $5,497 for the final 13 months of the lease. The Company determined this lease was an operating lease under ASC 842 and using an interest rate of 7%, the Company determined that the ROU for this lease was $177,629 and the lease liability for this lease was $177,629, at inception of this lease, respectively.

 

At inception the ROU and Lease Liability was calculated based on the net present value of the future lease payments over the term of the lease. When available, the Company uses the rate implicit in the lease discount payments as the incremental borrowing rate to calculate the net present value; however, the rate implicit in the lease is not readily determinable for our corporate office lease. In this case, the Company estimated its incremental borrowing rate as the interest rate it could borrow an amount equal to the lease payments over a similar term, with similar collateral as the lease, and in a similar economic environment. The Company estimated its rate using available evidence such as rates imposed by third-party lenders to the Company in recent financings or observable risk-free interest rate and credit spreads for commercial debt of a similar duration, with credit spreads correlating to the Company's estimated creditworthiness.

For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. The Company records the straight-line lease expense and any contingent rent, if applicable, in general and administrative expenses on the condensed consolidated statements of operations. The corporate office, lease also requires the Company to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in the general and administrative expenses on the condensed consolidated statements of operations.

Operating Lease expense for the three and nine months ended December 31, 2020 was $64,225 and $158,440, respectively. Operating lease expense for the three and nine months ended December 31, 2019 was $23,534 and $70,043, respectively.

 

Operating Leases:  

December 31, 2020

 
Operating lease right-of-use asset - current portion $ 270,871  
Operating lease right-of-use asset - non-current portion   310,991  
       
Total Operating lease right-of-use asset $ 581,862  
       
Operating lease liability - current portion $

260,528

 
Operating lease liability - non-current portion  

334,262

 
       
Total Operating lease liability $ 594,790  
       
Weighted average remaining lease term (in years):      
  Operating leases   1.25  
       
Weighted average discount rate:      
  Operating leases   7 %  

 

Supplemental cash flow information related to leases is as follows:

 

Maturities of undiscounted lease liabilities as of December 31, 2020 are as follows:

 

    Operating Leases  
Year ending March 31, 2021   81,875  

Year ending March 31, 2022

 

259,821

 

Year ending March 31, 2023

 

191,379

 

Year ending March 31, 2024

 

119,150

 
  Total lease payments   652,225  
Less: Imputed interest   (57,435 )
  Total lease obligations   594,790