LEASES - Note 9

6 Months Ended

Jun. 30, 2020

Notes To Financial Statements Abstract

LEASES - Note 9

9. 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 right-of-use (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 capital 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:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(in thousands)		2020		2019		2020		2019
Operating lease expense	$	116	$	116	$	232	$	232
Finance lease expense:
Amortization of leased assets		6		4		12		8
Interest on lease liabilities		1		2		2		3
Total finance lease expense		7		6		14		11
Total lease expense	$	123	$	122	$	246	$	243

Supplemental cash flow information related to leases was as follows:

		Six Months Ended
		June 30,
		2020		2019
(in thousands)
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	325	$	321
Operating cash flows from finance leases		2		3
Financing cash flows from finance leases		13		9
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:

		June 30, 2020		December 31, 2019
(in thousands)
Operating leases
Operating lease right-of-use assets	$	1,132	$	1,308
Current portion of operating lease liability		666		656
Operating lease liability, net of current portion		1,069		1,348
Total operating lease liabilities	$	1,735	$	2,004
Finance leases
Property and equipment, at cost	$	66	$	66
Accumulated depreciation		(32)		(25)
Property and equipment, net	$	34	$	41
Current portion of finance lease obligations	$	20	$	25
Finance lease obligations, net of current portion		1		9
Total finance lease liabilities	$	21	$	34
Weighted Average Remaining Lease Term
Operating leases		3 years		3 years
Finance leases		1 year		1 year
Weighted Average Discount Rate
Operating leases		6.0%		6.0%
Finance leases		13.8%		13.8%

As of June 30, 2020, maturities of lease liabilities were as follows:

		Operating		Finance
(in thousands)		leases		leases
Years Ended December 31,
2020	$	330	$	13
2021		676		9
2022		696		-
2023		175		-
Thereafter		-		-
Total minimum lease payments		1,877		22
Less: amount representing interest		(142)		(1)
Present value of capital lease liabilities	$	1,735	$	21