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

6 Months Ended

Jun. 30, 2020

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

four

years and

five

months as of

June 30, 2020.

The San Marcos operating lease liability has a life of

nine

months as of

June 30, 2020.

The adoption of the lease accounting standard resulted in the recognition of an operating ROU asset of

$1,553

thousand and a related lease liability of

$1,744

thousand during the

first

quarter of

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.

Supplemental cash flow information includes operating cash flows related to operating leases. For the

six

months ended

June 30, 2020

and

2019,

the Company had

$179

thousand and

$88

thousand, respectively, in operating cash flows related to operating leases.

Schedule of Items Appearing on the Statement

of Operations

:

	Three Months Ended				Six Months Ended
	June 30, 20 20		June 30, 201 9		June 30, 20 20		June 30, 201 9
Operating expense:
Amortization expense – Finance ROU	$	11	$	16	$	21	$	32
Lease expense – Operating ROU		82		83		165		162
Other expense:
Interest expense – Finance ROU	$	—	$	1	$	1	$	2

Future minimum lease obligations consisted of the following at

June 30

,

20

20

(in thousands):

	Operating			Finance
Period ending June 30,	ROU Leases			ROU Leases			Total
2021	$	363		$	39		$	402
2022		363			5			368
2023		375			—			375
2024		384			—			384
2025		159			—			159
Thereafter		—			—			—
	$	1,644		$	44		$	1,688
Less Interest*		(183	)		(1	)
	$	1,461		$	43

*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.