NOTE 7 – LEASES

Management determines if a contract is or contains a lease at inception or modification of the contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.

The Company has made the election, as permitted by the new standard, not to apply the new accounting to those leases with terms of twelve (12) months or less and that do not include options to purchase the underlying assets that the Company is reasonably certain to exercise. In addition, the Company has chosen not to separate non-lease components from their related lease components. Finally, the Company elected to utilize the package of permitted practical expedients that, upon adoption of ASC Topic 842, allows entities to not reassess whether any existing contracts are or contain leases.

The Company has operating leases primarily for office space that expire on various dates through May 2024; it has no finance leases. Certain leases contain renewal options. Renewal periods are included in the expected lease term if they are reasonably certain of being exercised by the Company. None of the Company’s operating leases include significant amounts for incentives, rent holidays, penalties, or price escalations. Under certain lease agreements, the Company is obligated to pay property taxes, insurance, and maintenance costs.

Operating lease right-of-use assets and associated lease liabilities are recognized in the balance sheet at the lease commencement date based on the present value of future minimum lease payments over the expected lease term. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The expected lease term includes options to extend or terminate the lease when it is reasonably certain the Company will exercise such option. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. Operating lease expense for the three months ended April 30, 2019 was $0.2 million. For operating leases as of April 30, 2019, the weighted average lease term was 42 months and the weighted average discount rate was 4.5%.

The following is a schedule of future minimum lease payments for the operating leases that were recognized in the condensed consolidated balance sheet as of April 30, 2019:


Year ending January 31,
Remainder of 2020	$	467
2021		283
2022		210
2023		185
2024		121
Thereafter		22
Total lease payments		1,288
Less interest portion		94
Present value of lease payments		1,194
Less current portion (included in accrued expenses)		549
Non-current portion	$	645

The Company also uses equipment and occupies other facilities under cancelable or short-term rental agreements. Rent expense related to all lease and rental arrangements incurred on construction projects and included in the costs of revenues for the three months ended April 30, 2018 was approximately $4.8 million. Rent expense for such arrangements included in selling, general and administrative expenses for the three-month period ended April 30, 2018 was $0.2 million. Rent expense amounts incurred under operating leases and short-term rental agreements (including the lease expense amount disclosed above) and included in costs of revenues and in selling, general and administrative expenses for the three months ended April 30, 2019 were $1.0 million and $0.2 million, respectively.