We leased our Tampa corporate office and paid annual rent of $97,850 in 2019. The term of the lease is on a month to month basis. 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 $46,800 in 2019. The term of the lease is for 1 year beginning April 18, 2018 and ending April 30, 2019 at a monthly rent of $3,700 per month. The lease has been extended on a month to month basis. We currently pay a monthly rent of $4,000. We consider the condition of our leased property to be average and adequate for our current needs.
Forward-looking statements in this report, including without limitation, statements related to the Company’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, the following: (i) changes in the Company’s plans, strategies, objectives, expectations and intentions, which may be made at any time at the discretion of the Company; (ii) the impact of uncertainties in global economic conditions, including the impact on the Company’s suppliers and customers; (iii) changes in client needs and consumer spending habits; (iv) the impact of competition and technological changes on the Company; (v) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; (vi) currency fluctuations; (vii) increases in the cost of borrowings resulting from rising interest rates; (viii) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; and (ix) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission. For a more detailed discussion of these and other factors affecting the Company, see the Risk Factors set forth above in Item 1A of this Annual Report on Form 10-K.
During 2019, and into 2020, the Company successfully materially expanded its customer base. In October 2019, we entered into an exclusive three-year contract with Pinnacle National, a leading Third Party Administrator servicing approximately 1.2 million union employees and their dependents. All costs will be borne by Pinnacle National. We expect the program to launch in the first half of 2020.
We have also now established relations with the United States Postal Service in Indianapolis, Indiana; The Pacific Gas & Electric Power Company (PG&E) in California; a West Coast-based Workers’ Compensation organization with substantial national accounts; and, a significant number of third party payor labor organizations servicing both active and retired union members. Patient referrals have commenced from all but one of these new accounts.
Cost of revenues decreased to $145,254 from $261,170. The difference in amounts is a result of the sales decreasing. The cost of revenue decreased at the same percentage rate as the sales decrease.
Professional Fees increased by $342,892. Part of the increase was attributable to an increase of $135,442 in legal fees and an increase of $71,757 in audit-related fees. Legal fees increased in order to continue with various lawsuits.
Board of Directors Fees accrue at the rate of $150,000 each year
Travel expense was $4,180 lower. Travel expense was relatively the same from 2018 to 2019.
Advertising decreased $249. Advertising expense was relatively the same from 2018 to 2019.
A breakdown of the interest expense for the years ended December 31, 2019 and 2018 is as follows:
During the year ended December 31, 2019, 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.
Short Term: We funded our operations with revenues from sales and private borrowings.
Income taxes. Computing our provision for income taxes involves significant judgment and estimates particularly in relation to the determination of a valuation allowance for deferred tax assets (primarily from net operating loss carryforwards). See Note 16 to the consolidated financial statements.
Recent Accounting Standards Update - Recently various new ASUs were issued by the Financial Accounting Standards Board (FASB). Management has determined based on their review that the following ASU issued will be applicable to the Company. As new ASU are released, Management will assess if they are applicable and, if they are applicable, the effect will be included in the notes to the consolidated financial statements.
Our audited financial statements may be found beginning on Page 63, appearing elsewhere in this report.