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The
Company leases office space in Irvine, California that houses its headquarters and manufacturing facility under a non-cancellable
operating lease. The lease term commenced on October 1, 2018 and expires in September 2023. The Company has the option to renew
the lease for two additional periods of five years each. The Company also leases office space in Mississauga, Ontario, Canada
for its software development personnel. The lease term commenced on August 1, 2018, expires in July 2019 and automatically renews
for successive one-year periods at the Company’s option. Both office leases are classified as operating leases in conformity
with the provisions of Topic 842. Aggregated information regarding the office leases as of and for the three months ended March
31, 2019 is as follows:
| Lease
cost (included in general and administrative expense) |
|
|
$ |
27,468 |
|
| Weighted-average
remaining lease term (months) |
|
|
|
53.14 |
|
| Weighted-average
discount rate |
|
|
|
6.7 |
% |
The
assumptions used in determining the foregoing information are as follows:
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Lease term –
Topic 842 provides that the lease term consists of: (a) the noncancelable period of the Irvine and Mississauga office leases;
and (b) the period covered by the Company option to extend each office lease for which the Company is reasonably certain to
do so. Based on the foregoing, management determined the lease term to extend to September 2023 for the Irvine office lease,
and to July 2020 for the Mississauga office lease. |
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● |
Discount rate –
Topic 842 provides that the discount rate is the rate implicit in the lease unless that rate cannot be determined, in which
case the lessee’s incremental borrowing rate shall be used. Because neither the rate implicit in the lease nor the Company’s
incremental borrowing rate were determinable, discount rates were obtained with reference to published U.S. High Yield CCC
corporate bond rates at the inception dates of each of the leases, which, with respect to the Irvine office lease was 6.7%,
and with respect to the Mississauga office lease was 6.9%. |
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