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Operating Lease

12 Months Ended

Dec. 31, 2020

NOTE 11. OPERATING LEASE

On May 13, 2020, the Company entered into an operating lease for new warehouse and office space which will serve as its new principal executive office and primary business location. The original lease agreement was amended on August 28, 2020 to correct the footage under lease and monthly payment amounts resulting from such correction. The lease terms, as amended include no base rent for the first nine months and monthly payments ranging from $12,398 to $14,741 thereafter, with a termination date of December 2026. The Company is responsible for property taxes, utilities, insurance and its proportionate share of common area costs related to its new location. The Company took possession of the leased facilities on June 15, 2020. The remaining lease term for the Company’s office and warehouse operating lease as of December 31, 2020 was seventy-one months. The Company’s previous office and warehouse space lease expired in April 2020 and the Company paid holdover rent for the time period until it moved to and commenced occupying the new space on June 15, 2020.

The Company entered into an operating lease with a third party in October 2019 for copiers used for office and warehouse purposes. The terms of the lease include 48 monthly payments of $1,598 with a maturity date of October 2023. The Company has the option to Purchase the equipment at maturity for its estimated fair market value at that point in time. The remaining lease term for the Company’s copier operating lease as of December 31, 2020 was 34 months.

Lease expense related to the office space and copier operating leases were recorded on a straight-line basis over their respective lease terms. Total lease expense under the two operating leases was approximately $349,079 for the year ended December 31, 2020.

The discount rate implicit within the Company’s operating leases was not generally determinable and therefore the Company determined the discount rate based on its incremental borrowing rate on the information available at commencement date. As of commencement date, the operating lease liabilities reflect a weighted average discount rate of 8%.

The following sets forth the operating lease right of use assets and liabilities as of December 31, 2020:

Assets:
Operating lease right of use assets	$	753,175

Liabilities:
Operating lease obligations-current portion	$	113,484
Operating lease obligations-less current portion	$	723,272
Total operating lease obligations	$	836,756

The components of lease expense were as follows for the year ended December 31, 2020:

Selling, general and administrative expenses

349,079

Following are the minimum lease payments for each year and in total.

Year ending December 31:
2021	$	175,249
2022		184,145
2023		184,241
2024		171,642
Thereafter		333,705
Total undiscounted minimum future lease payments		1,048,982
Imputed interest		(212,226	)
Total operating lease liability	$	836,756