Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.3
Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases

NOTE 3 – LEASES



In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (ASC Topic 842), which is intended to improve financial reporting of leasing transactions by requiring organizations that lease assets to recognize assets and liabilities for the rights and obligations created by leases that extend more than twelve months from the date of the balance sheet. This accounting update also requires additional disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leases. This standard is effective for financial statements issued for annual and interim periods beginning after December 15, 2018 for public business entities.



The Company adopted this standard with a cumulative-effect adjustment as of January 1, 2019, the beginning of the period of adoption. The Company has elected the package of practical expedients permitted in ASC Topic 842. Adoption of the new standard resulted in the recording of right of use (“ROU”) assets and lease liabilities of approximately $280,000 and $259,000, respectively as of January 1, 2019. ROU assets represent our right to use an underlying asset for the lease term, while lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at the commencement date of a lease based on the present value of lease payments over the lease term. Because the rate implicit in each individual lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Adoption of the standard did not materially impact the Company’s condensed consolidated balance sheets, consolidated statement of income (loss) and comprehensive income (loss) or condensed consolidated statements of cash flows.



The Company has entered into operating leases for two office locations, including one in February 2019.  These leases have remaining lease terms of 5 to 8 years.  One of the leases includes two options to extend the lease for 5 years each, and the other lease includes an option to terminate the lease in 2022One of the leases includes a 3% rent adjustment on each anniversary of the lease. As of September 30, 2019, total ROU assets and operating lease liabilities were $396,000 and $375,000, respectively. All operating lease expense is recognized on a straight-line basis over the lease term. In the three and nine months ended September 30, 2019, the Company recognized $31,000 and $92,000 in lease expense, respectively.



Information related to the Company’s ROU assets and related lease liabilities were as follows:





 

 

 

 



 

 

 

 



 

Three Months Ended September 30, 2019

 

Nine Months Ended September 30, 2019



 

 

 

 

Cash paid for operating leases

$

30,000 

$

80,000 

Right-of-use assets obtained in exchange for new operating lease obligations (1)

 

 -

 

450,000 



 

 

 

 



 

 

 

 



 

 

 

As of September 30, 2019

Weighted-average remaining lease term

 

 

 

3.5 years

Weighted-average discount rate

 

 

 

4.5% 



 

 

 

 

(1)

Includes $262,000 for operating leases existing on January 1, 2019 and $188,000 for operating leases that commenced in the first quarter of 2019.



Maturities of lease liabilities as of September 30, 2019 were as follows:







 

 



 

 

Q4 2019

$

31,000 

2020

 

121,000 

2021

 

126,000 

2022

 

87,000 

2023

 

47,000 

Thereafter

 

4,000 

Total lease payments

 

416,000 

Less imputed interest

 

(41,000)

Total operating lease liabilities

$

375,000 



 

 

Future minimum lease commitments under operating leases based on accounting standards applicable as of December 31, 2018 were as follows:





 

 

 



 

 

 

Year Ending December 31:

 

 

 

2019

 

$  

106,000 

2020

 

 

86,000 

2021

 

 

86,000 

2022

 

 

50,000 



 

328,000 



 

 

 



As of September 30, 2019, the Company does not have any additional future operating lease obligations that have not yet commenced.