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Leases

3 Months Ended

Mar. 31, 2019

Note 3 - Leases

The Company adopted ASC 842 as of January 1, 2019, using a modified retrospective approach and applying the standard’s transition provisions at January 1, 2019, the effective date. The Company made an accounting policy election to exclude from balance sheet reporting those leases with initial terms of 12 months or less. At March 31, 2019, the Company has an operating lease for corporate office space and two finance leases for office equipment and furniture located at the corporate office space. In addition, the Company has auxiliary corporate office space that it rents on a month-to-month basis; this rental is accounted for as an operating lease with the same term as the Company’s main office in the same building. Upon adoption of ASC 842, the Company recognized $1.2 million of right-to-use assets as operating leases and $0.3 million of right-to-use assets as finance leases. The Company also recognized $0.2 million of long-term operating lease obligations, net of the current portion of $0.1 million and $0.9 million of long-term finance lease obligations, net of the current portion of $0.3 million.

The components of lease expense are as follows:

	Three months ended March 31, 2019
Operating lease expense	$	93,045

Finance lease cost
Amortization of right-to-use assets	$	20,324
Interest on lease liabilities	$	5,930
Total finance lease cost	$	26,254

Supplemental cash flow information and non-cash activity related to leases are as follows:

	Three months ended March 31, 2019
Cash flow information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	85,869
Operating cash flows from finance leases	$	5,930
Financing cash flows from finance leases	$	17,635

Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	1,107,139
Finance Leases	$	282,045

Weighted-average remaining lease terms are as follows:

		As of March 31, 2019
Weighted average remaining lease term:
Operating leases		3.5 years
Finance Leases		3.4 years

As most of the Company’s leases do not provide an implicit rate, the Company use its incremental borrowing rate based on the information available at adoption date in determining the present value of lease payment. Below is information of the incremental borrowing rate used:

Weighted average discount rate:
Operating leases	8	%
Finance Leases	8	%

Maturities of lease liabilities are as follows:

Year ending December 31,	Operating Leases			Finance Leases
2019 (excluding three months ended March 31, 2019)	$	272,802		$	70,695
2020		375,352			94,260
2021		377,714			94,260
2022		252,907			64,144
2023		-			3,912
Total lease payments	$	1,278,775		$	327,271
Less imputed interest		(164,461	)		(42,538	)
Present value of lease liabilities	$	1,114,314		$	284,733