NOTE 3 – LEASES



In February 2016, FASB issued ASU No. 2016-02, Leases (ASC Topic 842), which is intended to improve financial reporting of leasing transactions by requiring organizations that lease assets to recognize assets and liabilities for the rights and obligations created by leases that extend more than twelve months from the date of the balance sheet. This accounting update also requires additional disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leases. This standard is effective for financial statements issued for annual and interim periods beginning after December 15, 2018 for public business entities.



The Company adopted this standard as of January 1, 2019, the beginning of the period of adoption. The Company has elected the package of practical expedients permitted in ASC Topic 842. Adoption of the new standard resulted in the recording of right of use (“ROU”) assets and lease liabilities of approximately $280,000 and $259,000, respectively as of January 1, 2019. ROU assets represent our right to use an underlying asset for the lease term, while lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at the commencement date of a lease based on the present value of lease payments over the lease term. Because the rate implicit in each individual lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Adoption of the standard did not materially impact the Company’s consolidated balance sheets, consolidated statement of income (loss) and comprehensive income (loss) or consolidated statements of cash flows.



The Company has entered into operating leases for two office locations, including one in February 2019.  These leases have remaining lease terms of 5 to 8 years.  One of the leases includes two options to extend the lease for 5 years each, and the other lease includes an option to terminate the lease in 2022.  One of the leases includes a 3% rent adjustment on each anniversary of the lease. As of December 31, 2019, total ROU assets and operating lease liabilities were $368,000 and $360,000, respectively. All operating lease expense is recognized on a straight-line basis over the lease term. In the years ended December 31, 2019 and 2018, the Company recognized $124,000 and $223,000 in lease expense, respectively.  



Information related to the Company’s ROU assets and related lease liabilities were as follows:







Maturities of lease liabilities as of December 31, 2019 were as follows:







Future minimum lease commitments under operating leases based on accounting standards applicable as of December 31, 2018 were as follows:





As of December 31, 2019, the Company does not have any additional future operating lease obligations that have not yet commenced.