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Note 9. Leases

12 Months Ended

Dec. 31, 2020

Generally, our leasing activity consists of office leases. In March 2019, we signed a new lease to move our corporate headquarters to Raleigh, North Carolina. As we continue our transition from a services-based company to a cloud-based platform company, the new lease affords us the ability to separate our warehouse from our corporate office. The new lease, which had a lease commencement date of October 2, 2019, is for 9,766 square feet and expires December 31, 2027. Minimum lease payments are $2,997,000, not including a tenant improvement allowance of $488,000, which is included in fixed assets as of December 31, 2020. We recognized a ROU asset and corresponding lease liability of $2,596,000, which represents the present value of minimum lease payments discounted at 3.77%, the Company’s incremental borrowing rate at lease inception.

Additionally, we have an office in Salt Lake City, Utah, which is on a short-term lease that is less than twelve months. As a result, we have elected the short-term lease recognition exemption for our Utah office lease, which means, for those leases we do not expect to extend beyond twelve months, we will not recognize ROU assets or lease liabilities.

In connection with the Company’s acquisition of VWP (See Note 4), the Company assumed two short-term leases in New York City, NY and entered into a three-year office lease in Florida. We have elected the short-term lease exemption for the two New York leases because we do not expect them to extend beyond twelve months. For the Florida lease, which was signed on January 4, 2019, we recognized a ROU asset and corresponding lease liability of $125,000, which represents the present value of minimum lease payments discounted at 4.25%, the Company’s incremental borrowing rate at lease inception. After year-end, the Company vacated one of the leases in New York.

Lease liabilities totaled $2,361,000 as of December 31, 2020. The current portion of this liability of $390,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $1,971,000 is included in Lease liabilities on the Consolidated Balance Sheets. Rent expense consists of both operating lease expense from amortization of our ROU assets as well as variable lease expense which consists of non-lease components of office leases (i.e. common area maintenance) or rent expense associated with short- term leases. The components of lease expense were as follows (in 000’s):

	Year ended December 31, 2020		Year ended December 31, 2019
Lease expense
Operating lease expense	$	347	$	241
Variable lease expense		132		133
Rent expense	$	479	$	374

The weighted-average remaining non-cancelable lease term for our operating leases was 6.9 years as of December 31, 2020. As of December 31, 2020, the weighted-average discount rate used to determine the lease liability was 3.8%. The future minimum lease payments to be made under non-cancelable operating leases on December 31, 2020, are as follows (in 000’s):

Year Ended December 31:
2021	$	394
2022		359
2023		369
2024		379
2025		389
Thereafter		812
Total lease payments	$	2,702
Present value adjustment		(341	)
Lease liability		2,361

We have performed an evaluation of our other contracts with customers and suppliers in accordance with Topic 842 and have determined that, except for the leases described above, none of our contracts contain a lease.