7. LEASES

On January 1, 2019, the Company recorded initial ROU assets and corresponding operating lease liabilities of approximately $750,000 and a reversal of deferred rent and prepaid expenses of approximately $6,000 resulting in no cumulative effect adjustment upon adoption of Topic 842. The Company leases administrative facilities and laboratory equipment through operating lease agreements. In addition we rent various equipment used in our diagnostic lab and in our administrative offices through finance lease arrangements. Our operating leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common area or other maintenance costs). The facility leases include one or more options to renew, from 1 to 5 years or more. The exercise of lease renewal options is typically at our sole discretion, therefore, the renewals to extend the lease terms are not included in our ROU assets and lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and, when they are reasonably certain of exercise, we include the renewal period in our lease term. As our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

Operating leases result in the recognition of ROU assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The primary leases we enter into with initial terms of 12 months or less are for equipment.

Upon the adoption of Topic 842, our accounting for finance leases, previously referred to as capital leases, remains substantially unchanged from prior guidance.

The balance sheet presentation of our operating and finance leases is as follows:


(dollars in thousands)	Classification on the Condensed Consolidated Balance Sheet	September 30, 2019

Assets:
Operating lease assets	Operating lease right-of-use assets	$	574
Finance lease assets	Property and equipment, net		201
Total lease assets		$	775

Liabilities:
Current:
Operating lease obligations	Current maturities of operating lease liabilities	$	210
Finance lease obligations	Current maturities of finance lease liabilities		65
Noncurrent:
Operating lease obligations	Operating lease liabilities, less current maturities		370
Finance lease obligations	Finance lease liabilities, less current maturities		126
Total lease liabilities		$	771

As of September 30, 2019, the estimated future minimum lease payments, excluding non-lease components, are as follows:


(dollars in thousands)	Operating Leases		Finance Leases		Total
Remainder of 2019	$	64	$	24	$	88
2020		242		62		304
2021		241		38		279
2022		48		32		80
2023		35		27		62
Thereafter		17		41		58
Total lease obligations		647		224		871
Less: Amount representing interest		(67)		(33)		(100)
Present value of net minimum lease obligations		580		191		771
Less, current portion		(210)		(65)		(275)
Long term portion	$	370	$	126	$	496

Other information as of September 30, 2019:


Weighted-average remaining lease term (years):
Operating leases	2.8
Finance leases	4.3
Weighted-average discount rate:
Operating leases	8.00%
Finance leases	7.25%

During the nine months ended September 30, 2019, operating cash flows from operating leases was $144,000 and ROU assets obtained in exchange for operating lease liabilities was $750,000.

Operating Lease Costs

Operating lease costs were less than $0.1 million and $0.2 million during the three and nine months ended September 30, 2019, respectively, and $0.1 million and $0.2 million for the three and nine months ended September 30, 2018, respectively. These costs are primarily related to long-term operating leases for the Company’s facilities and laboratory equipment.

Finance Lease Costs

Finance leases are included in property and equipment, net and finance lease liabilities, less current maturities on the condensed consolidated balance sheets. The associated amortization expense and interest included in the condensed consolidated statements of operations for both the three and nine months ended September 30, 2019 is less than $0.1 million, respectively.