Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

Highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents. Cash equivalents are stated at fair value.

Leases

At the inception of an arrangement of over 12 months duration, the Company determines whether it contains a lease based on the arrangement’s facts and circumstances. When the arrangement contains a lease of over 12 months duration, right-of-use assets and corresponding operating lease liabilities are recorded based on the present value of lease payments over the expected term. The Company uses its estimated incremental borrowing rate for collateralized assets as the basis for the discount rate used to determine the present value. Lease expense is recognized over the expected term on a straight-line basis.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-2, “Leases (Topic 842),” which requires substantially all leases, including operating leases, to be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability. ASU No. 2016-2 became effective for the Company’s interim and annual reporting periods beginning on January 1, 2019, which is the date the Company adopted the new standard. On the date of adoption, the Company had only one lease, which is for the Company’s principal executive office and the lease expires on June 30, 2019.

The Company elected to use the modified retrospective approach for the adoption of ASU 2016-2. The Company also elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the financial statements. The Company further elected practical expedients not to reassess prior conclusions about lease identification, lease classification and initial direct costs under the new standard. Results for reporting periods beginning January 1, 2019 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period.

Upon adoption of the new lease standard on January 1, 2019, the Company capitalized right of use assets of $101,000 and recognized a total of $109,000 of lease liabilities on its balance sheet. On December 31, 2018, prior to the adoption of ASU 2016-2, the Company had recognized $8,000 of lease liabilities on its balance sheet, therefore the adoption of the new lease standard resulted in an increase to the Company’s liabilities of $101,000 on the date of adoption.

The Company used a discount rate of 10%. As of January 1, 2019, minimum remaining lease payments aggregated $112,000, and as of March 31, 2019, minimum remaining lease payments aggregated $56,000.