10. COMMITMENTS, CONTINGENCIES AND OTHER UNCERTAINTIES

Lease Agreements

We adopted Accounting Standards Update (ASU) No. 2016-02, Leases (“ASC 842”) as of January 1, 2019 using the modified retrospective method. The results for the year ended December 31, 2019 are presented under ASC 842. The results for the year ended December 31, 2018 and other prior period amounts were not adjusted and continue to be reported in accordance with historical accounting under prior lease guidance, ASC 840, Leases (Topic 840). We also elected the package of practical expedients under the transition guidance that will retain the historical lease classification and initial direct costs for any leases that existed prior to adoption of the new guidance and the practical expedient to not separate lease and non-lease components.

We determine if an arrangement includes a lease at inception. Right-of-use lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use lease asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. We apply a portfolio approach to the property leases to apply an incremental borrowing rate to leases with similar lease terms. The lease terms may include options to extend or terminate the lease. We recognize the options to extend the lease as part of the right-of-use lease assets and lease liabilities only if it is reasonably certain that the option would be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements due to the short term nature of our existing lease in Lynbrook, New York.

In December 2019, we recorded a right-of-use lease asset of $243,000, a short-term lease liability of $76,000, and a long-term lease liability of $167,000 associated with the lease of our new headquarters in Wilmington, Delaware.

The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our balance sheet as of December 31, 2019:

2020	$	75,352
2021		84,893
2022		87,428
Total lease payments		247,673
Less: Interest		(11,560	)
Total lease obligation	$	236,113

Operating lease expenses amounted to approximately $150,000 and $136,000 for the years ended December 31, 2019 and 2018, respectively.

Other

The extent of the impact and effects of the recent outbreak of the coronavirus (COVID-19) on the operation and financial performance of the Company’s business are unknown. However, the Company does not expect that the outbreak will have a material adverse effect on its business or financial results at this time.