Leases

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Leases

9. Leases

Adoption of ASC Topic 842, Leases

On January 1, 2019, the Company adopted Topic 842 using the modified retrospective method applied to leases that were in place as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. The Company's leases consists of operating leases that relate to real estate rental agreements. All of the value of the Company's lease portfolio relates to a real estate lease agreement that was entered into in May 2018.

Practical Expedients and Elections

The Company elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We also elected the short-term lease recognition exemption for all leases that qualify.

Discount Rate applied to property operating lease

To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the "incremental borrowing rate" or "IBR").

The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the average of (i) the risk free interest rate adjusted for a premium for Company and liquidity risk; (ii) the weighted average mortgage interest rate currently availed to the Company; and (iii) the fifteen year mortgage interest rate. The weighted average rate the Company determined was 4.76% as an appropriate incremental borrowing rate to apply to its real-estate operating lease.

Right of use assets

Right of use assets are included in the unaudited condensed consolidated Balance Sheet are as follows:

	June 30, 2019
Non-current assets
Right of use assets, operating leases, net of amortization	$	15,467,645

Total operating lease cost

Individual components of the total lease cost incurred by the Company is as follows:

	Six months ended June 30, 2019
Operating lease expense	$	1,068,624

Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease.

Maturity of operating leases

 The amount of future minimum lease payments under operating leases are as follows:

	Amount
Remainder of 2019	$	917.930
2020		1,882,422
2021		1,962,242
2022		2,042,062
2023 and thereafter		12,436,420
Total undiscounted minimum future lease payments		19,241,076
Deferred rental liability on straight line amortization		183,952
Imputed interest		(3,764,431	)
Total operating lease liability	$	15,660,597
Disclosed as:
Current portion	$	835,898
Non-current portion		14,824,699
	$	15,660,597