9. Leases

A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On April 1, 2019, the Company adopted ASC 842 and it primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of corporate office space and tower space. The Company is obligated under certain lease agreements for office space with lease terms expiring on various dates from October 14, 2025 through June 30, 2027, which includes a ten-year lease extension for its corporate headquarters. The Company entered into multiple lease agreements for tower space related to its TeamConnect business. The lease expiration dates range from April 16, 2020 to June 30, 2026.

Substantially all of the Company’s leases are classified as operating leases, and as such, were previously not recognized on the Company’s Consolidated Balance Sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the Consolidated Balance Sheet as ROU assets and corresponding lease liabilities.

On April 1, 2019, the Company recognized ROU assets of $7.1 million and lease liabilities of approximately $9.4 million, and derecognized deferred rent liabilities of approximately $2.3 million. As of March 31, 2019, deferred rent liabilities were reported under accounts payable and accrued expenses – other amounting to $0.2 million and non-current other liabilities amounting to $2.1 million. The Company elected not to recognize ROU assets and lease liabilities arising from short-term office leases, leases with initial terms of twelve months or less (deemed immaterial) on the Consolidated Balance Sheets.

ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

During the three and nine months ended December 31, 2019, the Company recorded a $11,000 non-cash charge impairment for an ROU asset to reduce the carrying value to zero. The lease relating to the ROU asset impaired will expire on June 2020.

When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at April 1, 2019. The weighted average incremental borrowing rate applied was 13%. As of December 31, 2019, the Company’s leases had a remaining weighted average term of 5.19 years.

Rent expense amounted to approximately $0.7 million and $2.0 million for the three and nine months ended December 31, 2019, respectively. Total rent expense amounted to approximately $0.6 million and $2.0 million for the three and nine months ended December 31, 2018 respectively.

The following table presents net lease cost (in thousands):


	Three Months Ended		Nine Months Ended
	December 31, 2019		December 31, 2019
Lease cost
Operating lease cost (cost resulting from lease payments)	$	662	$	1,952
Short term lease cost		10		42
Sublease income		(4)		(13)
Net lease cost	$	668	$	1,981

The following table presents other supplemental lease information (in thousands):


	Nine Months Ended
	December 31, 2019
Operating lease - operating cash flows (fixed payments)	$	2,012
Operating lease - operating cash flows (liability reduction)	$	1,044
Right of use assets obtained in exchange for new operating lease liabilities	$	7,904
Non-current assets - right of use assets, net	$	6,841
Current liabilities - operating lease liabilities	$	1,706
Non-current liabilities - operating lease liabilities	$	7,442

Future minimum payments under non-cancelable leases for office and tower spaces (exclusive of real estate tax, utilities, maintenance and other costs borne by the Company), for the remaining terms of the leases following the nine months ended December 31, 2019 are as follows (in thousands):


		Operating
Fiscal Year		Leases
2020 (excluding the nine months ended December 31, 2019)	$	710
2021		2,670
2022		2,265
2023		2,098
2024		1,893
After 2024		3,061
Total future minimum lease payments		12,697
Amount representing interest		(3,549)
Present value of net future minimum lease payments	$	9,148