8.	COMMITMENTS AND CONTINGENCIES

Leases

We have noncancelable operating leases for offices and data centers expiring at various dates through

March 2024.

These operating leases are included in "Other long-term assets" on the Company's

September 30, 2019

Consolidated Balance Sheet and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are included in "other current liabilities" and "Long-term lease obligation" on the Company's

September 30, 2019

Consolidated Balance Sheet. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets and lease liabilities for operating leases of approximately

1,258,000

January 1, 2019.

Operating lease right-of-use assets and liabilities commencing after

January 1, 2019

are recognized at commencement date based on the present value of lease payments over the lease term. As of

September 30, 2019,

total right-of-use assets and operating lease liabilities were approximately

$997,000

Because the rate implicit in each lease is

not

readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The weighted average discount rate used to determine our lease liabilities was

5.5

percent as of

September 30, 2019.

The weighted average remaining lease term as of

September 30, 2019

was

1.4

years.

Legal Matters

On or about

July 9, 2019,

a securities class action complaint was filed in the United States District Court for the Eastern District of New York (Case

No.

1:19

-cv-

03949

) by Michael Skrzeczkoski, individually and on behalf of all others similarly situated, against the company, our executive officers, and each member of the Board of Directors. The complaint alleges, among other things, that certain of our press releases and SEC filings were misleading as a result of the failure to disclose alleged related party transactions affecting revenue recognition and the absence of disclosure regarding certain allegations against former director Parker H. Petit in connection with his former position with MiMedx, Inc. The complaint seeks to recover attorney’s fees and costs and unspecified damages on behalf of purchasers who acquired our stock during the period from

January 23, 2019,

through

May 29, 2019,

and purportedly suffered financial harm as a result of the alleged misleading statements. On

September 26, 2019,

the Court appointed Edgardo Canez as lead plaintiff on behalf of the putative class. We dispute these claims and intend to defend the matter vigorously. We have

not

determined the likelihood of loss to be probable nor is any potential loss estimable at this time, therefore we have

not

recorded any related liability as of

September 30, 2019.

There are

other pending or threatened legal proceedings against the company. However, in the ordinary course of business, from time to time we

may

be involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. We accrue for unpaid legal fees for services performed to date.