LEASES - Note 11

12 Months Ended

Dec. 31, 2019

Notes To Financial Statements Abstract

LEASES - Note 11

11. LEASES

In February 2016, the FASB issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases (Topic 842). ASU 2016-02 requires lessees to recognize a ROU asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. Recognition, measurement and presentation of expenses and cash flows from a lease by a lessee have not significantly changed from previous guidance. The amendments also require qualitative disclosures along with specific quantitative disclosures. We adopted this guidance using the cumulative-effect adjustment method on January 1, 2019, meaning we did not restate prior periods. Current year financial information is presented under the guidance in Topic 842, while prior year information will continue to be presented under Topic 840. Adoption of the standard resulted in the recognition of an operating ROU asset of approximately $1.6 million, a lease liability of approximately $2.5 million, and a reduction in other short-term and long-term liabilities of $873,000. Adoption of the standard did not have a material impact on our Statement of Operations or Statement of Cash flows. Accounting for our finance leases remains substantially unchanged.

We lease our office space and certain equipment under finance and operating leases. Our leases have remaining lease terms of one to three years. Our office space lease contains an option to extend the lease for one period of five years. This extension period is not included in our ROU asset or lease liability amounts. Our office lease agreement includes both lease and non-lease components, which are accounted for separately. Our finance leases contain options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless we are reasonably certain to exercise the purchase option.

The components of lease expense were as follows:

		Year Ended
(in thousands)		December 31, 2019
Operating lease expense	$	464
Finance lease expense:
Amortization of leased assets		15
Interest on lease liabilities		6
Total finance lease expense		21
Total lease expense	$	485

Supplemental cash flow information related to leases was as follows:

		Year Ended
(in thousands)		December 31, 2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	642
Operating cash flows from finance leases		6
Financing cash flows from finance leases		20
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	1,638
Finance leases		-

Supplemental balance sheet information related to leases was as follows:

(in thousands)		December 31, 2019
Operating leases
Operating lease right-of-use assets	$	1,308
Current portion of operating lease liability		656
Operating lease liability, net of current portion		1,348
Total operating lease liabilities	$	2,004
Finance leases
Property and equipment, at cost	$	66
Accumulated depreciation		(25)
Property and equipment, net	$	41
Current portion of finance lease obligations	$	25
Finance lease obligations, net of current portion		9
Total finance lease liabilities	$	34
Weighted Average Remaining Lease Term
Operating leases		3 years
Finance leases		1 year
Weighted Average Discount Rate
Operating leases		6.0%
Finance leases		13.8%

As of December 31, 2019, maturities of lease liabilities were as follows:

		Operating		Finance
(in thousands)		leases		leases
Years Ended December 31,
2020	$	656	$	27
2021		676		9
2022		696		-
2023		175		-
Thereafter		-		-
Total minimum lease payments		2,203		36
Less: amount representing interest		(199)		(2)
Present value of lease liabilities	$	2,004	$	34

Lease commitments as of December 31, 2018 classified under ASC 840 were as follows:

		Operating		Finance
(in thousands)		leases		leases
Years Ended December 31,
2019	$	654	$	27
2020		656		27
2021		676		9
2022		696		-
2023		175		-
Thereafter		-		-
Total minimum lease payments	$	2,857		63
Less: amount representing interest				(9)
Present value of finance lease obligations				54
Less: current portion				(21)
Long-term portion at December 31, 2018			$	33

Net rent expense was $834,000 in 2018.