Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | Note 6—Commitments and Contingencies
Lease Commitments
On June 23, 2016, the Company entered into a thirty-eight-month lease agreement to lease office space commencing on September 30, 2016. The approximate base monthly rent in the first, second and third years is $3,500, $3,700, and $3,800, respectively. The base monthly rent in the final two months of the agreement is $3,900. The total base rent over the lease term equals $139,800.
On August 1, 2020, the Company entered into a twenty-nine-month lease for approximately 3,039 square feet of office space in San Diego, California commencing on August 1, 2020. The monthly base rent is $6,686 and increases by three percent (3%) on each anniversary of the Commencement Date.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases. Under this new guidance, at the commencement date, lessees will be required to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. This guidance is not applicable for leases with a term of 12 months or less. The Company adopted the new guidance effective January 1, 2020. The ASU is applicable to the Company’s new leased which commenced on August 1 ,2020.
Under the new ASU the Company determines if an arrangement contains a lease at inception. Right of use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
The Company’s only office facility is in San Diego, California. Effective August 1, 2020, the Company entered into a lease agreement for its office with an expiration date of December 31,2022. The lease agreement includes leasehold improvement incentives, escalating lease payments, renewal provisions and other provisions which require the Company to pay taxes, insurance, maintenance costs, or defined rent increases. Rent expense is recorded over the lease terms on a straight-line basis.
The Company estimated an appropriate discount rate. The Company considered the range of the term, the range of the lease payments, the category of the underlying asset and the Company’s estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments.
The lease agreement includes options to extend the lease. Based on management’s judgement the Company will review its leasing alternatives on a periodic basis. The ASU does not apply to leases with a term of 12 months or less. The Company recognizes lease expenses on a straight-line basis over the lease term. The Company adopted the new ASU as of January 1, 2020. Rent expense under the new ASU for the year ended December 31,2020 was $ 24,484.
Supplemental balance sheet information related to leases was as follows:
Supplemental cash flow and other information related to leases was as follows:
Total future minimum payments required under the lease obligations as of September 30, 2020 are as follows:
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