4. LEASES

6 Months Ended

Jun. 30, 2020

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 term, 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 48 months and a copier lease with a remaining lease term of 13 months as of June 30, 2020. 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 which for practical expediency the Company has elected to not recognize as 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 the office lease agreement which became effective on August 22, 2019 upon completion by the landlord of certain leasehold improvements. 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. The monthly base rental payments under the amended lease agreement are as follows:

From		Through		Monthly Base Rental
	August 22, 2019		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 Company’s incremental borrowing rate of 6.25%. 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 Topic 842, the Company has recorded lease assets of $527,371 and a related lease liability of $541,804 as of June 30, 2020. Cash paid in 2020 for amounts included in measurement of operating lease liabilities as of June 30, 2020 was $74,709. The present value of our operating lease liabilities is shown below.

Maturity of Operating Lease Liabilities

	June 30, 2020
Remainder of 2020	$	76,178
2021		151,317
2022		151,333
2023		154,271
2024		77,870
Thereafter		-
Total lease payments		610,969
Less imputed interest		(69,165	)
Present Value of Lease Liabilities	$	541,804

As of June 30, 2020, our operating leases have a weighted average remaining lease term of 4.0 years and a weighted average discount rate of 6.25%.