On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), and the related amendments (collectively “ASC 842”). We used the optional transition method of adoption, in which the cumulative effect of initially applying the new standard, as of January 1, 2019, to our existing leases was approximately $2.0 million and $2.2 million to record the operating lease right-of-use asset and the related liabilities, respectively, all of which relate to our corporate office lease. Under this method of adoption, the comparative

information in the condensed consolidated financial statements has not been revised and continues to be reported under the previous applicable lease accounting guidance (ASC 840). Leases with terms of 12 months or less are not recorded on the balance sheet.

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and if it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement of the lease.

As of December 31, 2018, leases classified as capital leases under ASC 840 were included in Property and equipment, net and represented almost fully depreciated office equipment with a negligible book value. At December 31, 2018, capital lease obligations of $2,597 were included in Deferred revenue and other current liabilities.

We lease certain equipment to a customer under a lease arrangement that expires in 2020. The capital lease receivable amounts are approximately $5,000 at December 31, 2019, which is included in Prepaid expenses and other current assets.

The table below presents the lease related assets and liabilities recorded on the balance sheet. Right-of-use assets and related liabilities related to finance leases at December 31, 2019 are de minimis.

	As of December 31,
	2019		2018
Operating Leases
Right-of-use operating lease asset:
Property and equipment, net and other assets	$	1,595,044	$	—

Lease Liabilities:
Accounts payable and accrued liabilities	$	627,896	$	—
Other long-term liabilities		1,136,583		—
Total operating lease liabilities	$	1,764,479	$	—

For the years ended December 31, 2019 and 2018, we recorded $602,587 and $609,295, respectively, of fixed cost operating lease expense. Our operating lease expense is offset by a minimum annual incentive received from a local Economic Development Council, which is accrued monthly and will continue over the term of the lease through August 2022. This minimum annual incentive is $63,000, which will increase to $93,600 for the annual incentive period starting September 2020 through the remainder of the lease term.

Effective December 1, 2019, we subleased a portion of our corporate office space to a single tenant. The sublease agreement is accounted for as an operating lease and we recognize sublease income as an offset to operating lease expense on a straight-line basis over the term of the sublease agreement through August 2022. Sublease income, net of amortized leasing costs, for the year ended December 31, 2019 was approximately $4,000.

Cash paid for operating leases approximated operating lease expense and non-cash right of use asset amortization for the year ended December 31, 2019. We did not obtain any new operating lease right-of-use assets in the year ended December 31, 2019.

We lease corporate office space in The Colony, Texas under an 84-month, non-cancelable operating lease. The lease expires in October 2022. Our office lease had a remaining term of 2.75 years as of December 31, 2019, and we used an effective interest rate of 2.456%, which was our incremental borrowing rate in effect at the inception of the lease as our lease does not provide a readily determinable implicit rate.

The future minimum lease payments required under our office lease as of December 31, 2019 were as follows:

Year Ending December 31,	Amount
2020	$	664,200
2021		664,200
2022		498,150
Total lease payments		1,826,550
Less: Interest		62,071
Present value of lease payments		1,764,479