Note 10 - Leases

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note 10: Leases

The Company’s leases are recorded under ASC Topic 842, “Leases”. The Company examines its contracts to determine whether they are or contain a lease. A contract with a lease is further examined to determine whether the lease is a short-term, operating or finance lease. Right-of-use assets and lease liabilities are recognized for operating and finance leases. As permitted by ASC Topic 842, the Company elected not to recognize right-of-use assets and lease liabilities for short-term leases, defined by the standard as leases with terms of 12 months or less. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor. Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease.

Lease payments

Lease payments for short-term leases are recognized as lease expense on a straight-line basis over the lease term, or for variable lease payments, in the period in which the obligation was incurred. Payments for leases with terms longer than 12 months are included in the determination of the lease liability. Payments may be fixed for the term of the lease or variable. If the lease agreement provides a known escalator, such as a specified percentage increase per year or a stated increase at a specified time, the variable payment is included in the cash flows used to determine the lease liability. If the variable payment is based upon an unknown escalator, such as the consumer price index at a future date, the increase is not included in the cash flows used to determine the lease liability. The Company elected the practical expedient provided by Topic 842 not to allocate consideration in a contract between lease and non-lease components

Two of the Company’s leases provide known escalators that are included in the determination of the lease liability. One lease has an annual escalator based on the consumer price index-urban (“CPI-U”). The remaining leases do not have variable payments during the term of the lease.

Options to Extend, Residual Value Guarantees, and Restrictions and Covenants

Of the Company’s six operating leases, three leases offer the option to extend the lease term. Each of the three leases provides two options of five years each. For one of the leases, the Company is reasonably certain it will exercise one option of five years and has included the additional time and lease payments in the calculation of the lease liability. The lease agreement provides that the lease payment will increase at the exercise date based on the CPI-U. Because the CPI-U at the exercise date is unknown, the increase is not included in the cash flows determining the lease liability. None of the Company’s leases provide for residual value guarantees and none provide restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about leases:

	September 30, 2020			December 31, 2019
Lease liability	$	2,090		$	2,286
Right-of-use asset	$	2,074		$	2,277
Weighted average remaining lease term (in years)	7.03			6.90
Weighted average discount rate		3.04	%		3.02	%

	For the Three Months Ended September 30,
	2020		2019
Lease Expense
Operating lease expense	$	92	$	82
Short-term lease expense		1		29
Total lease expense	$	93	$	111
Cash paid for amounts included in lease liabilities	$	90	$	79
Right-of-use assets obtained in exchange for operating lease liabilities commencing during the period	$	23	$	284

	For the Nine Months Ended September 30,
	2020		2019
Lease Expense
Operating lease expense	$	277	$	218
Short-term lease expense		2		101
Total lease expense	$	279	$	319
Cash paid for amounts included in lease liabilities	$	272	$	211
Right-of-use assets obtained in exchange for operating lease liabilities commencing during the period	$	23	$	1,837

The following table presents a maturity schedule of undiscounted cash flows that contribute to the lease liability:

Undiscounted Cash Flow for the Period	As of September 30, 2020
Three months ending December 31, 2020	$	90
Twelve months ending December 31, 2021		363
Twelve months ending December 31, 2022		352
Twelve months ending December 31, 2023		352
Twelve months ending December 31, 2024		334
Twelve months ending December 31, 2025		244
Thereafter		608
Total undiscounted cash flows	$	2,343
Less: discount		(253	)
Lease liability	$	2,090

The contracts in which the Company is lessee are with parties external to the company and not related parties. The Company has a small lease relationship with a director in which the Company is lessor.