NOTE 7: LEASES

The Company leases office space under agreements classified as operating leases that expire on various dates through 2022. All of the Company’s lease liabilities result from the lease of its corporate headquarters in Houston, Texas, which expires in 2021, and its Jacksonville, Florida office space, which expires in 2022. Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not act as a lessor or have any leases classified as financing leases.

The Company excludes short-term leases having initial terms of 12 months or less from the new accounting guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. During the fiscal year ended December 31, 2019, the Company had two lease agreements, an office at the Florida Atlantic Research and Development Authority and laboratory space located at the Texas Medical Center in Houston, which are included in short-term lease expense below.

At December 31, 2019, the Company had operating lease liabilities of approximately $484,000 and right of use assets of approximately $455,000, which were included in the consolidated balance sheet.

The following summarizes quantitative information about the Company’s operating leases:


	For the Year Ended
	December 31, 2019
Operating lease expense summary:
Operating lease expense	$	220,000
Short-term lease expense		100,000
Variable lease expense		90,000
Total	$	410,000

Other information:
Operating cash flows from operating leases for the twelve months ended December 31, 2019	$	225,000
Right of use assets exchanged for new operating lease liabilities as of adoption date	$	670,000
Weighted-average remaining lease term as of December 31, 2019 – operating leases		1.6
Weighted-average discount rate as of adoption date – operating leases		6.8	%

Maturities of the Company’s operating leases, excluding short-term leases, are as follows:




Year ended December 31, 2020	$	231,000
Year ended December 31, 2021		226,000
Year ended December 31, 2022		68,000
Total	$	525,000
Less present value discount		(41,000)
Operating lease liabilities included in the Consolidated Balance Sheet at December 31, 2019	$	484,000

Total rental expense under the Company’s operating leases was $220,000 and $175,600 for the years ended December 31, 2019 and 2018, respectively.