Annual report pursuant to Section 13 and 15(d)

Commitment and Contingencies

v3.20.1
Commitment and Contingencies
 12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENT AND CONTINGENCIES

NOTE 11 – COMMITMENT AND CONTINGENCIES

  

Leases

 

The Company has two operating lease agreements for its warehouse and office spaces both with remaining lease terms of 3 years. The Company also has another storage facility on a twelve-month lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its leases as a single lease component. Rent expense is recognized on a straight-line basis over the lease term.

 

Operating lease right-of-use ("ROU") assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company's incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

 

The components of rent expense and supplemental cash flow information related to leases for the period are as follows:

 

   

Twelve Months Ended

December 31,
2019

  
Lease Cost      
Operating lease cost (of which $102,461 is included in general and administration and $597,007 is included in cost of sales in the Company's statement of operations)   $ 699,468  
         
Other Information        
Weighted average remaining lease term – operating leases (in years)     3.4  
Average discount rate – operating leases     3.75 %

 

The supplemental balance sheet information related to leases for the period is as follows:

 

    At December 31,
2019		  
Operating leases      
Long-term right-of-use assets, net of amortization of $154,921   $ 2,186,775  
         
Short-term operating lease liabilities   $ 617,642  
Long-term operating lease liabilities     1,659,506  
Total operating lease liabilities   $ 2,277,148  

 

Maturities of the Company's lease liabilities are as follows (in thousands):

 

Year Ending   Operating Leases  
2020     692,977  
2021     720,922  
2022     746,752  
2023     272,057  
Total lease payments     2,432,708  
Less: Imputed interest/present value discount     (155,560 )
Present value of lease liabilities   $ 2,277,148  

  

Rent expense for the twelve months ended December 31, 2019 and 2018 was $864,688 and $388,766, respectively (including short-term and other rentals).

 

Legal Proceedings 

 

From time to time, the Company may be involved in general commercial disputes arising in the ordinary course of our business. The Company is not currently involved in legal proceedings that could reasonably be expected to have material adverse effect on its business, prospects, financial condition or results of operations.