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Leases
3 Months Ended
Mar. 31, 2020
Lessee Disclosure [Abstract]  
Leases

7. Leases

ASU 2016-02 Adoption

On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), and the related amendments.  We used the optional transition method of adoption, in which the cumulative effect of initially applying the new standard, as of January 1, 2019, to our existing leases was approximately $2.0 million and $2.2 million to record the operating lease right-of-use asset and the related liabilities, respectively, all of which relate to our corporate office lease.  Leases with terms of 12 months or less are not recorded on the balance sheet.

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and if it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement of the lease.

We lease certain equipment to a customer under a lease arrangement that expires in 2020.  The capital lease receivable amounts were approximately $2,400 and $5,000 at March 31, 2020 and December 31, 2019, respectively, the majority of which was included in Prepaid expenses and other current assets.  

Balance Sheet Classification

The table below presents the lease related assets and liabilities recorded on the balance sheet. Right-of-use assets and related liabilities related to finance leases at March 31, 2020 are de minimis and mature in less than 12 months.

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

Operating Leases:

 

(Unaudited)

 

 

 

 

 

 

Right-of-use operating lease asset:

 

 

 

 

 

 

 

   Property and equipment, net and other assets

$

1,454,914

 

 

$

1,595,044

 

 

 

 

 

 

 

 

 

Lease Liabilities:

 

 

 

 

 

 

 

   Accounts payable and accrued liabilities

$

631,760

 

 

$

627,896

 

   Other long-term liabilities

 

977,186

 

 

 

1,136,583

 

       Total operating lease liabilities

$

1,608,946

 

 

$

1,764,479

 

Lease Costs

For the three months ended March 31, 2020, we recorded approximately $150,000 of fixed cost operating lease expense.  Our operating lease expense is offset by a minimum annual incentive received from a local Economic Development Council, which is accrued monthly and will continue over the term of the lease through August 2022.  This minimum annual incentive is $63,000, which will increase to $93,600 for the annual incentive period starting September 2020 through the remainder of the lease term.

Effective December 1, 2019, we subleased a portion of our corporate office space to a single tenant.  The sublease agreement is accounted for as an operating lease and we recognize sublease income as an offset to operating lease expense on a straight-line basis over the term of the sublease agreement through August 2022.  Sublease income, net of amortized leasing costs, for the three months ended March 31, 2020 was approximately $11,000.    

Cash paid for operating leases approximated operating lease expense and non-cash right of use asset amortization for the three months ended March 31, 2020.  We did not obtain any new operating lease right-of-use assets in the three months ended March 31, 2020.

Other Information

Our office lease had a remaining term of 2.5 years as of March 31, 2020, and we used an effective interest rate of 2.456%, which was our incremental borrowing rate in effect at the inception of the lease as our lease does not provide a readily determinable implicit rate.

The future minimum lease payments required under our office lease as of March 31, 2020 were as follows:    

 

 

Amount

 

2020

 

$

498,150

 

2021

 

 

664,200

 

2022

 

 

498,150

 

   Total lease payments

 

 

1,660,500

 

Less:  Interest

 

 

51,554

 

    Present value of lease liabilities

 

$

1,608,946