Leases

9 Months Ended

Sep. 30, 2020

The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluates whether the lease is an operating lease or a finance lease at the commencement date. The Company recognizes ROU assets and lease liabilities for operating and finance leases with initial terms greater than 12 months. ROU assets represent our right to use an asset for the lease term, while lease liabilities represent our obligation to make lease payments. The ROU assets for operating and finance leases and liabilities are recognized based on the present value of lease payments over the lease term at the lease commencement date. Since the interest rate implicit in the Company's leases is not readily determinable, we use our incremental borrowing rate, which is estimated as the interest rate paid to borrow on a collateralized basis over a similar term, to determine the present value of our lease payments.

Operating lease ROU assets are recognized net of any lease prepayments and incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

Open Lending executed a noncancellable operating lease agreement with G&I VII Barton Skyway, LP, a Delaware limited partnership (“Landlord”) to lease its current office space located at 1501 South MoPac Expressway, Suite 450, Austin, Texas 78746 for a period of 100 months starting on October 1, 2020. The Company moved into the new office space on September 1, 2020, which is considered as the lease commencement date under ASC 842. The Company does not have a lease payment due until four months after the stated commencement date per the agreement. The lease provides us with an extension option for a period of 60 months beyond the end of the initial term, subject to specific conditions outlined in the agreement. Prior to its move-in to the new office, the Company had an operating lease agreement for its office space at 901 S. MoPac Expressway, Bldg. 1, Suite 510, Austin, Texas 78746, which ended on September 30, 2020.

The Company recorded $0.2 million and $0.6 million of operating lease expense for the three and nine months ended September 30, 2020 and $0.2 million and $0.5 million of operating lease expense during the three and nine months ended September 30, 2019.

Additional information related to the operating leases follows:


	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
	(in thousands)
Cash paid for operating leases included in operating cash flows	$	628		$	803
Operating lease ROU assets obtained in exchange for new lease liabilities	5,375			5,375
Total	$	6,003		$	6,178

Weighted-average remaining lease term – operating lease (in years)	8.42			8.42
Weighted-average discount rate – operating lease	7.72		%	7.72		%

The balance of our operating lease ROU assets and liabilities as of September 30, 2020 is summarized below. The current and non-current lease liabilities are reflected in other current liabilities and operating lease liabilities, net of current portion, respectively, on our consolidated balance sheets:


	At September 30, 2020
	(in thousands)
Operating lease right-of-use asset	$	5,898
Accumulated amortization	$	(45)
Net operating lease right-of-use assets	$	5,853

Lease liability, current	$	144
Lease liability, non-current	$	5,265
Total operating lease liability	$	5,409

The maturities of lease liabilities are as follows:


	At September 30, 2020
	(in thousands)
2020 (Remainder)	$	—
2021	774
2022	869
2023	894
2024	920
Thereafter	4,018

Total undiscounted liabilities	7,475
Less: Interest	2,066
Present value of lease liabilities	$	5,409