Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases (“ASC 842”), which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of and lease liabilities for operating lease of $1,219,000 and $1,230,000, respectively. There was no cumulative-effect adjustment to retained earnings.

In February 2019, the Company entered into a new lease agreement to move and expand the Company’s corporate headquarters (the “Original Lease”). In March 2019, the Company elected to exercise its right to extend the term of the Original Lease by an additional 24 months, for a total of 89 months (the “Extension”). In July 2019, the Company amended the Original Lease (the “Amended Lease”; and, together with the Original Lease and the Extension, the “Lease”). The Lease is for approximately 6,700 square feet of new construction space, comprised of approximately 4,880 square feet (the “Initial Premises”) and approximately 1,850 square feet (the “Must-Take Space”) located at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663, on the Balboa Peninsula. The Lease has a term of 89 months, beginning on the date that the Company occupies the Must-Take Space.

The Lease commenced in August 2019 with respect to the Initial Premises and the Company anticipates that it will take control of the Must-Take Space in January 2020. Thus, the Company believes that the total term of the Lease will be 94 months.

The average monthly base rent for the first 12 months of the Lease is approximately $13,000 after rent abatement. For the next 82 months of the Lease, the average monthly base rent will be approximately $39,000. Pursuant to ASU 2016-02, the Company expects to record approximately $2.4 million as a right-of-use asset and corresponding liability once the Company takes possession and control of the leased premises.

The Company has four leases in American Fork, Utah related to the operation of Verb Direct with an aggregate lease payment of $31,000 per month. The lessor is JMCC Properties, which is an entity owned and controlled by the former shareholders and certain current officers of Verb Direct.