We leased our Tampa corporate office and paid annual rent of $99,485 in 2018. The term of the lease is for 5 years beginning in May 2014 and ending on June 30, 2019. We currently lease approximately 3,133 square feet and pay approximately $8,229 per month. We consider the condition of our leased property to be average and adequate for our current needs. In our Tampa office, we maintain clinical operations, business development, accounting, financial and regulatory reporting and other management information symptoms information systems, and provider and member service functions. During 2019, the Company renegotiated the Tampa office lease and verbally agreed to a three-year extension of the lease with no increase in payments.
We leased our Huntington Beach office and paid annual rent of $25,900 in 2018. The term of the lease is for 1 year beginning April 18, 2018 and ending April 30, 2019. We currently pay $3,700 per month. The lease has been extended on a month to month basis at a monthly rent of $4,000. We consider the condition of our leased property to be average and adequate for our current needs.
Throughout the year ended December 31, 2018, the Company continued its marketing and sales efforts with respect to agreements and relationships established during the first three quarters of 2018. It focused on establishing additional relationships within its existing market (referrals from occupational healthcare clinics) and establishing a foothold in other markets, such as pain clinics, behavioral healthcare and sports medicine.
The Company’s sales in 2018, while not increasing, stayed consistent with sales in 2017. However, as a result of its marketing efforts, a substantial number of new relationships were established in 2018 which management believes will, in combination with its existing accounts, produce substantial revenues in 2019. The overwhelming majority of its revenues in 2018 were generated principally through its relationship with one of the nation’s largest occupational healthcare providers, who referred a significant number of their patients to the Company for sleep apnea screening, testing and treatment. During 2018, that account was acquired by an even larger national healthcare provider, and throughout 2018, these providers actively engaged in the integration of their two systems.
Not seeking to cause any disruption in their integration process and in consultation with the provider, the Company all but totally suspended its marketing activities with respect to visiting the provider’s various clinics throughout the U.S. Those visits were, in management’s view, the main impetus for the Company achieving referrals from these clinics as it had done in 2017. Instead, the Company devoted a large amount of time to expanding its business to additional clinics and, as aforesaid, other markets with a view towards 2019. The Company anticipated that while its sales would decrease in 2018 as a result of the suspension of such marketing activities, once the integration of the two clinic chains was completed, those sales would not only return to their prior levels but will materially increase. In furtherance of that plan, the Company also pursued an opportunity with its existing clinic account designed to have the Company designated as the collective chains’ sleep apnea provider, nationwide.
Remarkably, the Company’s revenue from its existing clinic account did not materially decrease but continued, as before. Management believes this was a result of the Company’s prior successful efforts with this account, and the reputation it had established over the preceding three plus years. We believe the aforesaid integration process will soon be completed allowing the Company to resume its now well-established marketing efforts of, among other things, having its field representatives periodically visit the combined chain of clinics. We are also confident that the Company will be designated as the national sleep apnea provider for the combined clinic chain in 2019. The chain reportedly is in excess of 700 clinics, nationwide.
OSA services decreased to $524,172 in 2018 from $564,117 in 2017. The Company's sales in 2018 stayed consistent with the sales from 2017 while the Company worked on new contracts that will take effect in 2019.
Cost of revenues decreased to $261,170 from $286,332. The difference in amounts is a result of the timing of services performed to generate revenue during the periods.
Professional Fees decreased by $238,566. Legal fees decreased due to decreased litigation expenses. Accounting expenses were phased out completely at the parent level and solely done at the subsidiary level beginning 2018.
Board of Directors Fees accrue at the rate of $150,000 each year.
During the year ended December 31, 2018, we funded our operations from revenues and private borrowings. We will continue to fund our operations from these sources until we are able to produce operating revenue sufficient to cover our cost structure. In the event we are not able to secure such funding, our operations will be adversely affected.
Revenue recognition. The Company is on an accrual basis and revenue is recognized when billed, which is approximately when the testing service is performed or CPAP machine is shipped.
Stock-based compensation. We issue various stock-based compensation awards to our employees and members of our Board of Directors. We account for the awards in accordance with ASC 718 “Compensation - Stock Compensation” and measure compensation cost for stock options at fair value on the grant date and recognize compensation cost on a straight-line basis over the service period for those options expected to vest. We use the Black-Scholes option pricing model, which requires us to use certain variable assumptions for input, to calculate the fair value of a stock award on the grant date. These assumptions, which are set forth in Note 2 to our consolidated financial statements variables include the expected volatility of our stock price, award exercise behaviors, the risk-free interest rate, and expected dividends. We use significant judgment in estimating expected volatility of the stock, exercise behavior and forfeiture rates developing our assumptions as follows: