Operating Lease Right-of-Use (''ROU'') Assets and Operating Lease Liabilities

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Operating Lease Right-of-Use ("ROU") Assets and Operating Lease Liabilities

Note 9 – Operating Lease Right-of-Use (“ROU”) Assets and Operating Lease Liabilities

On October 5, 2017, the Company entered in to a lease agreement with Mr. Friedman who served as an officer of the Company and currently a consultant. The Company leased a fifteen-acre “420 Style” resort and estate property near Quebec City, Canada. Pursuant to the lease agreement, the Company will pay a monthly rent of $8,000 per month to Mr. Freidman. The Company is responsible for all costs of the property, including, but not limited to, renovations, repairs and maintenance, insurance and utilities. During the six months ended June 30, 2019, the Company incurred $48,000 of rent expense of which $28,000 was accrued and included in the due to related party (see Note 10 and Note 12).

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 (see Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $310,259.

For the six months ended June 30, 2019, lease costs amounted to $48,000 which included base lease costs, all of which were expensed during the period and included in general and administrative expenses on the accompanying condensed consolidated statements of operations.

The significant assumption used to determine the present value of the lease liability was a discount rate of 9% which was based on the Company’s estimated incremental borrowing rate.

Right-of-use asset (“ROU”) is summarized below:

	June 30, 2019
Operating lease	$	310,259
Less accumulated reduction		(34,683	)
Balance of ROU asset as of June 30, 2019	$	275,576

Operating lease liability related to the ROU asset is summarized below:

	June 30, 2019
Operating lease	$	310,259
Total lease liabilities		310,259
Reduction of lease liability		(34,683	)
Total		275,576
Less: short term portion as of June 30, 2019		(74,210	)
Long term portion as of June 30, 2019	$	201,366

Future base lease payments under the non-cancelable operating lease at June 30, 2019 are as follows:

	Amount
Six months ended December 31, 2019	$	48,000
Year ending - 2020		96,000
Year ending - 2021		96,000
Ten months ended October 31, 2022		80,000
Total minimum non-cancelable operating lease payments		320,000
Less: discount to fair value		(44,424	)
Total lease liability at June 30, 2019	$	275,576