The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term.

NuZee JAPAN Co., Ltd is the lessee of certain equipment under a capital lease extending through 2020. The asset and liability under the capital lease are recorded at the lower of the present value of the minimum lease payments, or the fair value of the asset. Leased equipment is depreciated over a 6-year life. The leased equipment is reported in the accompanying consolidated balance sheets in property and equipment of $11,465 as of September 30, 2017. The capital lease liability is included in other current liabilities on the consolidated balance sheets.

Future minimum lease payments under capital lease as of September 30, 2017 for each of the remaining years are as follows:

2017	$	4,271
2018	$	4,271
2019	$	4,271
2020	$	1,068
Total Minimum Lease Payments	$	13,881

The Company leases office space under leases expiring on May 31, 2020. Rent expense included in general and administrative expense for the year ended September 30, 2017 and 2016 was $88,903 and $49,592 respectively.

Future minimum rents as of September 30, 2017 for each of the remaining years are as follows:

2017	$	56,784
2018	$	58,488
2019	$	39,760
Total Minimum Lease Payments	$	155,032