Note

Leases

We adopted ASC Topic

842

(Leases) on

January 1, 2019.

This standard requires us to record certain operating lease liabilities and corresponding right-of-use assets on our balance sheet. Results for periods beginning after

January 1, 2019

are presented under Topic

842,

while prior period amounts are

not

adjusted and continue to be reported in accordance with our historic accounting under Topic

840.

We elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of whether contracts are (or contain) leases, as well as lease classification tests and treatment of initial direct costs. We also elected to

not

separate lease components from non-lease components for all fixed payments, and we exclude variable lease payments in the measurement of right-of-use assets and lease obligations.

Upon adoption of ASC

842

we recorded a

$2.8

million increase in other assets, a

$1.1

million increase in current liabilities, and a

$1.7

million increase in non-current liabilities. We did

not

record any cumulative effect adjustments in opening retained earnings, and adoption of ASC

842

had

impact on cash flows from operating, investing, or financing activities.

We determine if an arrangement is a lease at inception. Most of our operating leases do

not

provide an implicit rate of interest so we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. We lease various assets in the course of ordinary business including warehouses and manufacturing facilities, as well as vehicles and equipment used in our operations. Leases with an initial term of

months or less are

not

recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable life of assets and related improvements are limited by the expected lease term unless there is a reasonably certain expected transfer or title or purchase option. Some lease agreements include renewal options at our sole discretion. Any guaranteed residual value is included in our lease liability.

The table below describes our lease position as of

June 30, 2020

Assets	As of June 30, 2020
Operating lease right-of-use assets	$	1,417,000
Accumulated amortization		(962,000)
Net lease assets		455,000

Liabilities
Current
Operating		343,000
Noncurrent
Operating		112,000
Total lease liabilities		455,000

Weighted average remaining term (years) – operating leases (in years)		2

Weighted average discount rate – operating leases		11.25%

During the

six

months ended

June 30, 2020,

we recorded expenses related to

Operating right-of-use lease asset amortization	$	416,000

Total expense during six months ended June 30, 2020		416,000

Operating lease expenses were approximately

$416,000

for the

six

months ended

June 30, 2020.

Operating lease costs are included within selling, general and administrative expenses on the condensed consolidated statements of operations. The Company does

not

have any finance leases. Cash paid for amounts included in the measurement of operating lease liabilities were approximately

$416,000

for the

six

months ended

June 30, 2020.

The following table summarizes the maturities of our lease liabilities for all operating leases as of June 30, 2020:

(in thousands)
2020	$	234
2021		364
2022 and thereafter		49
Total lease payments		647
less: Imputed interest		(192	)
Present value of lease liabilities	$	455