Leases

9 Months Ended

Sep. 30, 2021

Leases

Note 5. Leases

Note 5: Leases

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 September 30, 2021. 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 a three-year office lease in Florida, which was signed on January 4, 2019, at which time 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. We also have facilities in Salt Lake City, Utah, and New York, which are on short-term leases that are less than twelve months. As a result, we have elected the short-term lease recognition exemption for these leases, which means, for those leases we do not expect to extend beyond twelve months, we will not recognize ROU assets or lease liabilities.

Lease liabilities totaled $2,105,000 as of September 30, 2021. The current portion of this liability of $367,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $1,738,000 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):

	For the Three Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Lease expense
Operating lease expense	$	87	$	87	$	261	$	261
Variable lease expense		29		33		86		99
Total lease expense	$	116	$	120	$	347	$	360

The weighted-average remaining non-cancelable lease term for our operating leases was 6.2 years as of September 30, 2021. As of September 30, 2021, 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 September 30, 2021, are as follows (in 000’s):

Year Ended December 31:
2021	$	100
2022		359
2023		369
2024		379
2025		389
Thereafter		813
Total lease payments		2,409
Present value adjustment		(304	)
Lease liability	$	2,105

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.