Leases, Right-to-Use Assets and Related Liabilities

The Company enters into various arrangements which constitute a lease as defined by ASC

842,

Leases,

as part of its ongoing business activities and operations. Leases represent a contract or part of a contract that conveys the right to control the use of identified property, plant or equipment (an identified asset) for a period of time in exchange for consideration. Such contracts result in both (a) right-to-use assets, which represent the Company’s right to use an underlying asset for the term of the contract; and (b) a corresponding lease liability which represents the Company’s obligation to make the lease payments arising from the contract, measured on a discounted basis.

The contracts for the Company are comprised of facility, equipment and transportation leases necessary to conduct the Company’s day-to-day operations for which the Company maintains control of right-to-use assets and incurs the related liabilities.

The Company elected to adopt both the (a) short-term lease exemption for those leases with initial terms of

twelve

months or less; and (b) the practical expedient to

not

separate lease components from non-lease components, if applicable. Leases which qualify for the short-term scope exception consist of certain residential rents for executive apartments, certain of the Company’s railcar leases and other equipment leases. There were

leases containing variable lease payments and

none

of the Company’s leases contained extension or termination options which were necessary in determining the value of the right-to-use asset and related liabilities. The Company assumed a

12.0%

discount rate, which is consistent with the stated rate on the Company’s

2020

Notes and represents the best approximation of the rate implicit in the Company’s leases.

The Company identified

three

lease agreements that qualify as “operating” based on the terms and conditions at the commencement date for each lease. These include the lease for the Company’s office and research facility in Englewood, Colorado, with a term expiring in

July 2021,

a lease of plant equipment with a term expiring in

January 2021

used by Agri-Energy at the Luverne Facility and a lease of transportation equipment with a term expiring in

June 2020

used by Agri-Energy at the Luverne Facility. All other leases qualified for the short-term scope exemption. This consists of a corporate apartment in Colorado and leases of transportation equipment located at both the Luverne Facility and the South Hampton Facility with original lease terms of less than

twelve

months.

Upon adoption of ASC

842,

Leases,

which was effective

January 1, 2019,

the Company recognized a total of

$1.2

million of right-to-use assets and related lease liabilities. Within the Consolidated Balance Sheet at

December 31, 2019,

$0.6

million of right-to-use assets with a remaining term exceeding

twelve

months are included in

"Deposits and other assets".

For the related lease liabilities,

$0.4

million are included in

"Accounts payable and accrued liabilities"

for the current portion and

$0.3

million are included in

"Other long-term liabilities"

for the non-current portion.

The Company recognizes rent expense on its operating leases on a straight-line basis.

There are

two

contractual agreements related to equipment improvements at the Luverne Facility that were

not

recognized as of

December 31, 2019

as a result of operating contingencies which must be satisfied before the Company is obligated under the terms of the contract. The total estimated fair value of unrecognized right-to-use assets and related lease liabilities relating to these contracts was approximately

$3.0

million as of

December 31, 2019.

The following table presents the (a) costs by lease category and (b) other quantitative information relating to the Company’s leases for the year ended

December 31, 2019:

Lease Cost
Operating lease cost	$	1,554
Short-term lease cost		66
Variable lease expense (1)		119

Total lease cost	$	1,739
(1) Represents amounts incurred in excess of minimum payments for common area maintenance and present value discounts.

Other Information
Cash paid for the measurement of lease liabilities
Operating cash flows from operating leases	$	1,554
Right-to-use assets obtained in exchange for new operating lease liabilities	$	280
Weighted-average remaining lease term, operating leases (months)		21.0
Weighted-average discount rate - operating leases		12	%

The table below shows the future minimum payments under non-cancelable operating leases at

December 31, 2019 (

in thousands):

Year Ending December 31,
2020	$	684
2021		336
2022 and thereafter		—
Total		1,020
Less: Amounts representing present value discounts		(80	)

Total lease liabilities	$	940