Note 10 - Right-of-use Asset and Leasing Liabilities

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

OperatingAndFinanceLeasesOfLesseeDisclosureTextBlock

10 Right-of-use Asset and Leasing Liabilities

Under the new lease accounting standard, we have determined that we have leases for right-of-use (ROU) assets. We have both finance right-of-use assets and an operating right-of-use asset with a related lease liability. Our finance lease right-of-use assets consist of computer hardware and a copying machine. Our operating lease right-of-use asset is our rental agreement for our offices in Richardson. Both types of lease liabilities are determined by the net present value of total payments and are amortized over the life of the lease. Both types of lease obligations are designed to terminate with the last scheduled payment. All of the finance lease right-of-use assets have a

three

year life and are in various stages of completion. The operating lease liability has a life of

five

years and

nine

months as of

March 31, 2019.

Additional qualitative and quantitative disclosures regarding the Company's leasing arrangements are also required. The Company adopted ASC

842

prospectively and elected the package of transition practical expedients that does

not

require reassessment of: (

1

) whether any existing or expired contracts are or contain leases, (

2

) lease classification and (

3

) initial direct costs. In addition, the Company has elected other available practical expedients to

not

separate lease and nonlease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of

12

months or less.

As the implicit rate is

not

readily determinable for the Company's lease agreement, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. This discount rate for the lease approximates SVB's prime rate. See the following exhibits for more information.

Schedule of Items Appearing on the Statement

of Operations

:

	Three Months Ended
	March 3 1 , 20 19		March 31 , 20 18
Operating expense:
Amortization Expense – Finance ROU		16		17
Lease expense – Operating ROU		79		66
Other expense:
Interest Expense – Finance ROU		1		1

Future minimum lease obligations consisted of the following at

March

31,

201

9

(in thousands):

	Operating			Finance
Period ending March 31,	ROU Leases			ROU Leases			Total
2020	$	339		$	57		$	396
2021		350			44			394
2022		360			11			371
2023		372			—			372
2024		383			—			383
Thereafter		256			—			256
	$	2,060		$	112		$	2,172
Less Interest*		(293	)		(5	)
	$	1,767		$	107

*Interest is imputed for operating ROU leases and classified as lease expense and is included in operating expenses in the accompanying condensed consolidated statement of operations.