Note 3 – Leases

In February 2016, the FASB issued ASU 2016-02, “Leases,” which, together with its related clarifying ASUs, provided revised guidance for lease accounting and related disclosure requirements and established a right-to-use (ROU) model that requires lessees to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. This guidance was effective for us on January 1, 2019. We adopted the standard using the modified retrospective method which applied to leases that exist or were entered into on or after January 1, 2019. The Company elected to utilize the package of practical expedients that allows to 1) not reassess whether any expired or existing contracts are or contain leases, 2) retain the existing classification of lease contracts as of the date of adoption and 3) not reassess initial direct costs for any existing leases. The ASU also requires disclosures to allow financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.

On January 1, 2019, upon adoption of ASU 2016-02, the Company recorded an Operating Lease ROU of $599,308, a short-term operating lease liability of $100,844 and a long-term operating lease liability of $498,464. The Company used an estimated incremental borrowing rate of 6%, which approximates our fixed CoBank, ACB (CoBank) borrowing rate to determine the inception present value at January 1, 2019. The terms of our leases range from two to seventeen years.

The following table includes the ROU and operating lease liabilities as of March 31, 2020.

Right of Use Asset	Balance March 31, 2020		Balance December 31, 2019
Operating Lease right-of-use assets	$	1,443,514	$	1,558,164

Operating Lease Liability	Balance March 31, 2020		Balance December 31, 2019
Short-Term Operating Lease Liability	$	373,218	$	415,949
Long-Term Operating Lease Liability		1,080,030		1,146,132
Total	$	1,453,248	$	1,562,081

Maturity analysis under these lease agreements are as follows:

Maturity Analysis	Balance March 31, 2020
2020 (remaining)	$	368,305
2021		290,162
2022		276,299
2023		276,299
2024		164,648
Thereafter		410,595
Total		1,786,308
Less Imputed interest		(333,060)
Present Value of Operating Leases	$	1,453,248

We amortize our leases over the shorter of the term of the lease or the useful life of the asset. Lease expense for the three months ended March 31, 2020 and 2019 was $138,084 and $132,267.