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4. LEASES
 9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
LEASES

The Company periodically enters into operating lease contracts for office space and equipment. Arrangements are evaluated at inception to determine whether such arrangements constitute a lease. In accordance with the transition guidance of ASC 842, such arrangements are included in our balance sheet as of January 1, 2019.

 

Right of use assets, which we refer to as “ROU assets,” represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities were recognized at the transition date based on the present value of lease payments over the respective lease terms, with the office space ROU asset adjusted for deferred rent liability.

 

The Company has two operating leases: an office space lease with a remaining lease term of 57 months and a copier lease with a remaining lease term of 25 months as of September 30, 2019. In accordance with the transition guidance of ASC 842, such arrangements are included in our balance sheet as of January 1, 2019. All other leases are short-term leases for which practical expediency has been elected to not recognize lease assets and lease liabilities.

 

In March 2017, and as amended in March 2018, the Company executed a new office lease effective April 1, 2019 for office space located at 1200 Summit Ave., Suite 414, Fort Worth, TX 76102. On July 1, 2019, the Company amended its office lease agreement related to its current office space located at 1200 Summit Ave., Suite 414, Fort Worth, TX 76102. The amended lease became effective on August 22, 2019 upon completion by landlord of certain leasehold improvements (the “Commencement Date). Under the terms of the amended lease agreement, the Company leased an additional 1,682 rentable square feet of office space which brought the total square footage leased to 5,877. The amended lease agreement extends the original term of the lease for a period of 36 months through June 30, 2024. Upon the Commencement Date of the amended lease, the monthly base rental payments are as follows:

 

From Through Monthly Base Rental
Commencement Date June 30, 2020 $12,243.75
July 1, 2020 June 30, 2021 $12,488.63
July 1, 2021 June 30, 2022 $12,488.63
July 1, 2022 June 30, 2023 $12,733.50
July 1, 2023 June 30, 2024 $12,978.38

 

As the implicit rate in the leases is not determinable, the discount rate applied to determine the present value of lease payments is the borrowing rate on our line of credit. The office space lease agreement contains no renewal terms so no lease liability is recorded beyond the termination date. The copier lease can be automatically renewed but no lease liability is recorded beyond the initial termination date as exercising this option is not reasonably certain.

 

In accordance with ASC 842, the Company has recorded lease assets of $613,531 and a related lease liability of $624,440 as of September 30, 2019. Cash paid for amounts included in measurement of operating lease liabilities as of September 30, 2019 was $60,550 The present value of our operating lease liabilities is shown below.

 

Maturity of Operating Lease Liabilities

 

   

September 30,

2019

  
2019   $ 34,981  
2020     150,886  
2021     151,317  
2022     151,333  
Total lease payments     720,658  
Less imputed interest     (96,219 )
Present value of lease liabilities   $ 624,439  

 

As of September 30, 2019, our operating leases have a weighted average remaining lease term of 4.7 years and a weighted average discount rate of 6.25%.