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

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Operating and Finance Leases Of Lessee Disclosure [Text Block]

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 operating right-of-use assets 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 assets include our rental agreements for our offices in Richardson and San Marcos, CA. 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 Richardson operating lease liability has a life of

five

years and

two

months as of

September 30, 2019.

The San Marcos operating lease liability has a life of

eighteen

months as of

September 30, 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 non-lease 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 tables for more information.

Schedule of Items Appearing on the Statement

of Operations

:

	Three Months Ended				Nine Months Ended
	September 30, 201 9		September 30, 201 8		September 30, 201 9		September 30, 201 8
Operating expense:
Amortization expense – Finance ROU		16		17		48		50
Lease expense – Operating ROU		82		65		244		197
Other expense:
Interest expense – Finance ROU		1		1		3		2

Future minimum lease obligations consisted of the following at

September

30

,

2019

(in thousands):

	Operating			Finance
Period ending September 30,	ROU Leases			ROU Leases			Total
2020	$	359		$	46		$	405
2021		362			31			393
2022		366			1			367
2023		378			—			378
2024		384			—			384
Thereafter		64			—			64
	$	1,913		$	78		$	1,991
Less Interest*		(247	)		(3	)
	$	1,666		$	75

*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.