11.

Leases

The Company is a lessee under certain operating leases for office space and equipment. Prior to adopting ASC

842,

SPAR followed the lease accounting guidance as issued in ASC

840.

Under ASC

840,

SPAR classified its leases as operating or capital leases based on evaluation of certain criteria of the lease agreement. For leases that contained rent escalations or rent holidays, ASC

840

requires that total rent expense during the lease term be recorded on a straight-line basis over the term of the lease and record the difference between the rents paid and the straight-line rent expense as deferred rent on the balance sheet. Any tenant improvement allowances received from the lessor would also be recorded as a reduction to rent expense over the term of the lease.

ASC

842

requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding ROU, subject to certain permitted accounting policy elections.

Under ASC

842,

SPAR determines, at the inception of the contract, whether the contract is or contains a lease based on whether the contract provides SPAR the right to control the use of a physically distinct asset or substantially all of the capacity of an asset.

Many of SPAR's equipment leases are short-term or cancellable with notice. SPAR’s office space leases have remaining lease terms between

one

and approximately

eleven

years, many of which include

one

or more options to extend the term for periods thereafter. Certain leases contain options to terminate the lease early, which

may

include a penalty for exercising the option. Many of the termination options require notice within a specified period, after which the option is

longer available to SPAR if

not

exercised. The extension options and termination options

may

be exercised at SPAR’s sole discretion. SPAR does

not

consider in the measurement of ROU assets and lease liabilities an option to extend or terminate a lease if SPAR is

not

reasonably certain to exercise the option. As of

March 31, 2019,

SPAR has

not

included any options to extend or terminate in its measurement of ROU assets or lease liabilities.

The reported results for

2019

reflect the application of ASC

842

guidance, whereas comparative periods and their respective disclosures prior to the adoption of ASC

842

are presented using the legacy guidance of ASC

840.

As a result of adopting the new standard, SPAR recognized ROU assets and liability of

$5.7

million. There was

adjustment to deferred taxes as a result of SPAR’s adoption of ASC

842.

The adoption of ASC

842

did

not

have a material impact on SPAR’s results of operations or cash flows, nor did it have an impact on any of SPAR's existing debt covenants.

Certain of SPAR’s leases include covenants that oblige SPAR, at its sole expense, to repair and maintain the leased asset periodically during the lease term. SPAR is

not

a party to any leases that contain residual value guarantees nor is SPAR a party to any leases that provide an option to purchase the underlying asset.

Many of SPAR's office space leases include fixed and variable payments. Variable payments relate to real estate taxes, insurance, operating expenses, and common area maintenance, which are usually billed at actual amounts incurred proportionate to SPAR's rented square feet of the building. Variable payments that do

not

depend on an index or rate are expensed by SPAR as they are incurred and are

not

included in the measurement of the lease liability.

Some of SPAR's leases contain both lease and non-lease components. Fixed and variable payments are allocated to each component relative to observable or estimated standalone prices. SPAR measures its variable lease costs as the portion of variable payments that are allocated to lease components.

SPAR measures its lease liability for each leased asset as the present value of lease payments, as defined in ASC

842,

allocated to the lease component, discounted using an incremental borrowing rate specific to the underlying asset. SPAR's ROU assets are equal to the lease liability, SPAR estimates its incremental borrowing rate based on the interest rate SPAR would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

The components of SPAR's lease expenses for the fiscal quarter ended

March 31, 2019,

which are included in the condensed consolidated income statement, are as follows (in thousands):

Lease Costs	Classification	March 31, 2019
Operating lease cost	Selling, General and Administrative Expense	$	532
Short-term lease cost	Selling, General and Administrative Expense		29
Variable costs	Selling, General and Administrative Expense		290
Total lease cost		$	851

Supplemental cash flow information related to SPAR’s leases for the fiscal quarter ended

March 31, 2019

is as follows (in thousands):

	March 3 1 , 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	509

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	5,736	(a)

(a)

Amounts for the

three

months ended

March 31, 2019

include the transition adjustment for the adoption of ASU

2016

discussed in Note

10.

The following table presents supplemental balance sheet information related to SPAR's operating leases as of

March 31, 2019 (

in thousands):

Leases	March 31, 2019
Assets:
Operating lease right-of-use assets	$	5,328
Liabilities:
Current portion of operating lease liabilities	$	1,400
Non-current portion of operating lease liabilities		3,928
Total operating lease liabilities	$	5,328

Weighted average remaining lease term—operating leases (in years)		2.1
Weighted average discount rate—operating leases		8.9	%

March 31, 2019,

SPAR had the following maturities of lease liabilities related to office space and equipment, all of which are under non-cancellable operating leases (in thousands):

Period Ending March 31,	Amount

2019	$	1,336
2020		2,682
2021		878
2022		987
2023		78
Thereafter		-
Total lease payments		5,961
Less: imputed interest		(633	)
Total	$	5,328

As previously disclosed in the Company’s Annual Report on Form

-K/A for the year ended

December 31, 2018

and under the previous lease accounting standard, ASC

840,

Leases, the following table summarizes the future minimum lease payments due under operating leases as of

December 31, 2018 (

in thousands):

Year	Amount
2019	$	1,946
2020		1,428
2021		945
2022		682
2023		340
Total	$	5,341