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18. Commitment and Contingencies | 9 Months Ended
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Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract] |
Commitment and Contingencies | Note 18: Commitment and Contingencies In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases.” The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. For practically all leases, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. In July 2018, the FASB issued Topic 842, Targeted Improvements, which allows for an additional optional transition method where comparative periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases. Management will use this optional transition method. As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306. As of September 30, 2020, weighted-average lease term for operating leases equals to 81.91 months. Weighted-average discount rate equals to 10%. On February 6, 2018, the Company entered into an operating lease for 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to a 91-month lease that commenced on May 25, 2018. We pay rent of $364,130 annually, subject to annual escalations of 3.5%. On September 11, 2020, the parties to the lease entered into a surrender agreement whereby the lease was terminated, and the office was turned back over to the landlord. Per the terms of the surrender agreement, the lease deposit of $325,000 was forfeited and the Company paid $25,000. The surrender resulted in a loss of $85,676. On December 28, 2018, the Company entered into a lease for 5,765 square feet of general office space at 8383 Wilshire Blvd., Suite 412, Beverly Hills, CA 90211 pursuant to a 6-month lease that commenced January 28, 2019. We paid rent of $24,501 monthly through August 31, 2019. Effective January 21, 2019, the Company entered into a sublease for the 6,969 square feet of general office space located at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to an 83-month sublease that commenced on February 4, 2019. The subtenant will pay us rent of $422,321 annually, subject to annual escalations of 3.5%. Since on or about April 2020, the subtenant has failed to make any rent payments. Consequently, the Company, which had been passing through the subtenant’s rental payments to the landlord declined to pay the rent due. On September 11, 2020, the parties to the lease entered into a surrender agreement whereby the lease was terminated, and the office was turned back over to the landlord. Per the terms of the surrender agreement, the sublease deposit of $131,000 was forfeited. The surrender resulted in a loss of $256,384. On January 30, 2019, the Company entered into an operating lease for 5,838 square feet of general office space at 190 N. Canon Drive, 4th FL, Beverly Hills, CA 90210 pursuant to a 96-month lease that commenced on September 1, 2019. We pay rent of $392,316 annually, subject to annual escalations of 3.5%. Due to government mandated “work-from-home” orders pertaining to non-essential businesses, we are currently in discussions with our landlord with regard to rent payments and have not paid rent since March 2020. In addition, the Company has contractual commitments for employment agreements of certain employees. Rental expenses incurred for operating leases during the three months ended September 30, 2020 and September 30, 2019 were $141,962 and $210,062, respectively. Rental expenses incurred for operating leases during the nine months ended September 30, 2020 and September 30, 2019 were $557,640 and $531,519, respectively. During the three months ended September 30, 2020, we received sub-lease income of $78,277. During the nine months ended September 30, 2020, we received sub-lease income of $316,762. The following is a schedule of future minimum contractual obligations as of September 30, 2020, under the Company’s operating leases and employment agreements:
|  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |  |  | 2024 |  |  | Thereafter |  |  | Total |
Operating Leases |  | $ | 170,255 |  |  | $ | 347,785 |  |  | $ | 429,984 |  |  | $ | 447,183 |  |  | $ | 465,071 |  |  | $ | 1,330,866 |  |  | $ | 3,191,144 |
Employment Contracts |  | $ | 309,494 |  |  | $ | 421,629 |  |  | $ | 322,950 |  |  | $ | 282,581 |  |  | $ | – |  |  | $ | – |  |  | $ | 1,336,654 |
Consulting Contracts |  | $ | 265,000 |  |  | $ | 323,333 |  |  | $ | 150,000 |  |  | $ | – |  |  | $ | – |  |  | $ | – |  |  | $ | 738,333 |
|  | $ | 744,749 |  |  | $ | 1,092,747 |  |  | $ | 902,934 |  |  | $ | 729,764 |  |  | $ | 465,071 |  |  | $ | 1,330,866 |  |  | $ | 5,266,131 |

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