Operating Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Operating Leases

Note 7 – Operating Leases

On June 16, 2016, the Company entered into a Standard Multi-Tenant Sublease (“Sublease”) with Bristol Capital Advisors, an entity controlled by the Company’s Chairman of the Board. The leased premises are owned by an unrelated third party and Bristol Capital Advisors passes the lease costs down to the Company. The term of the Sublease is for 5 years and 3 months beginning on July 1, 2016 commencing with monthly payments of $8,118. During the three months ended March 31, 2019 and 2018, the Company paid lease obligations of $25,837 and $25,085, respectively, under the Sublease.

We determine if an arrangement contains a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

Our leases consist of leaseholds on office space. We utilized a portfolio approach in determining our discount rate. The portfolio approach takes into consideration the range of the term, the range of the lease payments, the category of the underlying asset and our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above.

We recognize lease expense for these leases on a straight-line basis over the lease term. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred.

The components of lease expense were as follows:

	Three Months Ended March 31, 2019
Operating lease		26,909
Sublease income		(9,758	)
Total net lease cost	$	17,151

Supplemental cash flow and other information related to leases was as follows:

	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(25,837	)
ROU assets obtained in exchange for lease liabilities:
Operating leases	$	252,980
Weighted average remaining lease term (in years):
Operating leases		2.5
Weighted average discount rate:
Operating leases		12	%

The following table presents the maturity of the Company’s lease liabilities as of March 31, 2019:

Fiscal year ending December 31:
2019 (remainder of year)	$	79,062
2020		108,046
2021		83,054
		270,162
Less: Imputed interest		(35,874	)
Present value	$	234,288