9. LEASES

3 Months Ended

Mar. 31, 2019

Notes

9. LEASES

9.     LEASES

The Company elected the practical expedient under ASU 2018-11 “Leases: Targeted Improvements” which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date instead of at the earlies comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2019 but without retrospective application. In addition, the Company elected the optional practical expedient permitted under the transition guidance which allows the Company to carry forward the historical accounting treatment for existing lease upon adoption. No impact was recorded to the income statement or beginning retained earnings for Topic 842.”

We determine if a contract contains a lease by evaluating the nature and substance of the agreement. The only lease that we have is the real estate lease for our headquarters facility, which was originally executed on December 2, 1999, and which has been extended several times.  This lease has a remaining life of one year and based on previous experience, we expect to renew it for a term of five additional years.  We recognize lease expense for this lease on a straight-line basis over the lease term.

We used our incremental borrowing rate (8.5%), based on the information available at the date of adoption in determining the present value of the lease payments and a lease expiration date of December 31, 2024.  At March 31, 2019, the remaining future cash payments under our lease total approximately $1,373,092.

For the three months ending March 31, 2019, we amortized $36,634 and $32,557, of our operating right-of-use, or ROU, asset and liability, respectively.  At March 31, 2019, an operating ROU asset and liability of approximately $1,040,489 and $1,044,566, respectively, are included on our condensed consolidated balance sheet.  

For the three months ended March 31, 2019, our fixed operating lease cost was $59,522, which is included within operating costs and expenses in our condensed consolidated statement of operations.

For the three months ended March 31, 2019, cash paid for amounts included in the measurement of our lease liability included within our cash flows from operating activities was $55,445.

Future minimum lease payments under non-cancellable operating lease as of March 31, 2019, were as follows:

Year ending December 31,
2019 (excluding the three months ended March 31, 2019)	$    166,336
2020	228,305
2021	234,828
2022	241,351
2023	247,874
Thereafter	254,398
Total future minimum lease payments	1,373,092
Less imputed interest	(328,526)
Total liability	$ 1,044,566