NOTE 10 — LEASES

Operating leases — The Company leases its office space under operating leases with unrelated entities.

The Company leased 21,293 square feet of office space for our headquarters in Torrance, California, at a base rental of $78,543 per month, which lease will expire on September 30, 2026. The Company also leased an additional 1,850 square feet office space in New York, New York, at a base rent of $8,479, which leases will expire on January 31, 2023.

In addition, the Company leased 1,322 square feet of office space in Tokyo, Japan, at a base rent of approximately $3,000, which the lease was expired on September 30, 2020. Upon the expiration of the lease, the lease was renewed and the new lease will expire on September 30, 2022.

The rent expense during the three months ended September 30, 2020 and 2019 amounted to approximately $286,000 and $280,000, respectively, and during the nine months ended September 30, 2020 and 2019 amounted approximately $ 895,000and $705,000, respectively.    

Future minimum lease payments under the lease agreements were as follows as of September 30, 2020 (in thousands):

The Company adopted Accounting Standard Update (“ASU”) 2016-02 – Lease (“Topic 842”) on January 1, 2019 using a modified retrospective approach and elected the transition method and the practical expedients permitted under the transition guidance, which allowed to carryforward the historical lease classification and our assessment on whether a contract is or contains a lease. The Company also elected to combine lease and non-lease components, such as common area maintenance charges, as single lease and elected to use the short-term lease exception permitted by the standard.

As a result of the adoption of Topic 842 on January 1, 2019, the Company recorded a $3.0 million in operating right-of-use asset and $3.3 million in lease liability and derecognized $287,000 of deferred rent as of the adoption date. These were calculated using the present value of the Company’s remaining lease payments using an estimated incremental borrowing rate. The Company also recorded a $29,000 cumulative effect increased on our accumulated deficit as of January 1, 2019. As of September 30, 2020, the Company had an operating lease right-of-use asset of $4.1 million and lease liability of $ 4.7 million in the balance sheet. The weighted-average remaining term of the Company’s leases as of September 30, 2020 was 5.7 years and the weighted-average discount rate was 12.75 %.