Quarterly report pursuant to Section 13 or 15(d)

Leases

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Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
LEASES

NOTE 9 – LEASES

 

On January 1, 2019, we adopted ASU 2016-02 using the optional transition method resulting in a cumulative-effect adjustment to our Consolidated Balance Sheets. Comparative financial statements of prior periods have not been adjusted to apply the new method retrospectively. The new method of accounting was applied only to leases that have ongoing minimum lease commitments after January 1, 2019, excluding short-term leases.

 

The Company has applied the practical expedient for leases less than 12-months for the following lease, and as such has excluded it from the calculation of right of use assets and lease liabilities. Conversion Labs PR utilizes office space in Puerto Rico which is subleased from Mr. Schreiber (the Company's President and CEO) and incurs expense of approximately $4,000 per month for this office space.

 

In February 2018, the Company entered into a 3-year agreement to lease office space in Huntington Beach, CA beginning on March 2, 2018. The rent is payable on a monthly basis in the amount of $2,106 for the first twelve months, $2,149 for the second twelve months and $2,235 for the third twelve months. The Company has recognized a right of use asset and lease liability of $30,287 as of January 1, 2019 for adopting ASC 842, and has classified this lease as an operating lease. The lease did not contain any interest for use in the present value calculation, as a result, the Company used the third-party interest rate from similar borrowings of 7%. The Company has paid a security deposit of $2,235 was paid for this lease. The lease payments for this lease were $6,382, and the implied interest for such lease was $4,241.

 

Rent expense, including short-term lease, for the three and six months ended June 30, 2019, was approximately $30,000 and $87,000, respectively. Rent expense, including short-term lease, for the three and six months ended June 30, 2018, was approximately $14,000 and $45,000, respectively. These amounts are included in the Company's accompanying statement of operations as general and administrative expenses.