RESTATEMENT OF PRIOR FINANCIAL INFORMATION
|6 Months Ended|
Jun. 30, 2020
|Accounting Changes and Error Corrections [Abstract]|
|RESTATEMENT OF PRIOR FINANCIAL INFORMATION||
Subsequent to the Company’s external auditor’s periodic review of the Form 10-Q for the Periods Ended September 30, 2019 and March 31, 2020, annual audit for the year ended December 31, 2019 and, in the process of review, the current Form 10-Q for the Period Ended June 30, 2020, the Company conducted further reviews of the consolidated financial statements. Based on such reviews, the following determinations were made:
Error in Accounting for Operating Lease Right-of-Use Asset and Operating Lease Liabilities
During the second quarter of fiscal 2020, the Company has determined that the commercial lease with Skybar Holding, LLC is not in compliance with current laws or regulations in the City of Delray Beach and does not represent an enforceable contract and was void from the moment of execution. Therefore, the accounting treatment for the recognition of the operating lease right-of -use asset and operating lease liabilities upon adoption of ASC 842 related to this commercial lease was incorrect. As a result of a detailed review of this commercial lease, the Company has made an assessment in the second quarter of fiscal 2020 that the lease is unenforceable and should not have been accounted for under ASC 842. Additionally, the Company reversed previously recorded accrued expenses related to this commercial lease agreement.
In accordance with the guidance provided by the Accounting Standards Codification (“ASC”) 250 – “Accounting Changes and Error Corrections” (“ASC 250”), SEC’s Staff Accounting Bulletin 99, Materiality (“SAB 99”) and Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), the Company has determined that the impact of adjustments relating to the corrections of this accounting error are not material to previously issued annual audited and unaudited financial statements and as such no restatement was necessary. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant files the prior year financial statements. Accordingly, these misstatements were corrected during the period ended June 30, 2020 and will be disclosed prospectively.
The effect on these revisions on the Company’s consolidated balance sheets is as follows:
The effect on these revisions on the Company’s consolidated statements of operations is as follows:
The revisions had no effect in the cash used in operating activities on the Company’s consolidated statements of cash flows.
The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef