NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS

We determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

Finance Leases

The Company has finance leases to purchase computer equipment. The amortization expense of the leased equipment is included in depreciation expense. As of March 31, 2021 and December 31, 2020, the Company’s outstanding finance lease obligations totaled $50,000 and $61,000, respectively. The effective interest rate of the finance leases is estimated at 6.0% based on the implicit rate in the lease agreements.

The following summarizes the assets acquired under finance leases, included in property and equipment:


	March 31,		December 31,
(in thousands)	2021		2020
Computer equipment	$	159	$	177
Less: accumulated depreciation		(118)		(116)
Assets acquired under finance leases, net	$	41	$	61

Operating Leases

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company has operating leases for office space in Tucson, Arizona and Marietta, Georgia. The company also leases office space in Scottsdale, Arizona from a company controlled by our Executive Chairman.

In addition, the Company entered into membership agreements to occupy shared office space in New York and Portland, Oregon. The membership agreements do not qualify as a lease under ASC 842 as the owner has substantive substitution rights, therefore the Company expenses membership fees as they are incurred. See Note 8 - Commitments and Contingencies for further details on our shared office arrangements.

The Company made operating lease payments in the amount of $65,000 during the three months ended March 31, 2021.

The following summarizes the total lease liabilities and remaining future minimum lease payments at March 31, 2021 (in thousands):


Year ending, December 31,	Finance Leases		Operating Leases		Total
2021 (9 months remaining)	$	35	$	197	$	232
2022		16		257		273
2023		1		118		119
2024		—		81		81
Total minimum lease payments		52		653		705
Less: present value discount		(2)		(53)		(55)
Total lease liabilities		50	$	600	$	650
Current portion of lease liabilities		40	$	234	$	274
Long term portion of lease liabilities	$	10	$	366	$	376

The following summarizes expenses associated with our finance and operating leases for the three months ended March 31, 2021 (in thousands):


Finance lease expenses:
Depreciation expense	$	13
Interest on lease liabilities		1
Total Finance lease expense		14
Operating lease expense		64
Short-term lease and related expenses		53
Total lease expenses	$	131

The following table provides information about the remaining lease terms and discount rates applied as of March 31, 2021:


Weighted average remaining lease term (years)
Operating Leases		2.73
Finance Leases		1.28
Weighted average discount rate (%)
Operating Leases		6.00
Finance Leases		6.00