Note 6. Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

As described further in "Note 2. Summary of Significant Accounting Policies", we adopted Topic 842 as of January 1, 2019. Prior period amounts have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 840.

Generally, our leasing activity consists of office leases. As of January 1, 2019, we had three existing leases for office space. In October 2015, we signed a three-year lease extension for our 16,059 square-foot corporate headquarters in Morrisville, NC. This lease expires on October 31, 2019 and as of January 1, 2019, we had remaining minimum lease payments of $135,000. An ROU asset and corresponding lease liability was recorded for this amount on January 1, 2019.

Additionally, we have an office in Salt Lake City, Utah and a shared office facility in London, England, both of which are on short-term leases that are less than twelve months. As a result, we have elected the short-term lease recognition exemption for our Utah and London office leases, which means, for those leases that qualify, we will not recognize ROU assets or lease liabilities.

In connection with the Company’s acquisition of VWP (See Note 3), the Company assumed two short term leases in New York City, NY and entered into a three-year office lease in Florida. We have elected the short term lease exemption for the two New York leases. For the Florida lease, which was signed on January 4, 2019, we recognized a ROU asset and corresponding lease liability of $125,000, which represents the present value of minimum lease payments discounted at 4.25%, the Company’s incremental borrowing rate at lease inception.

ROU assets totaled $186,000 as of March 31, 2019 and are included in Other long-term assets on the Consolidated balance sheets. Lease liabilities totaled $209,000 as of March 31, 2019. The current portion of this liability of $135,000 is included in accrued expenses on the Consolidated balance sheets and the long-term portion of $74,000 is included in other long-term liabilities on the Consolidated Balance Sheets.

Rent expense consists of both operating lease expense from amortization of our ROU assets as well as variable lease expense which consists of non-lease components of office leases (i.e. common area maintenance) or rent expense associated with short term leases. The components of lease expense were as follows (in 000’s):

	Three months ended
	March 31,
	2019		2018
Lease expense
Operating lease expense	$	41	$	29
Variable lease expense		24		20
Rent expense	$	65	$	49

The weighted-average remaining non-cancelable lease term for our operating leases was 1.7 years as of March 31, 2019. As of March 31, 2019, the weighted-average discount rate used to determine the lease liability was 4.25%. The future minimum lease payments to be made under noncancelable operating leases at March 31, 2019, are as follows (in 000’s):

Year Ended December 31:
	2019	$	126
	2020		43
	2021		45
	Total lease payments	$	214
	Present value adjustment		(5	)
	Lease liability		209

In March 2019, we signed a new lease to move our corporate headquarters to Raleigh, North Carolina. As we continue our transition from a services based company to a cloud-based platform company, the new lease affords us the ability to separate our warehouse from our corporate office. The new lease, which is scheduled to commence at the later of the date tenant improvements are completed (as defined in the lease) or August 1, 2019, is for 9,766 square feet and has a term of eight years and four months. Minimum lease payments are $2,997,000, not including a tenant improvement allowance up to $488,000, which will be reflected in the balance sheet upon lease commencement date.

We have performed an evaluation of our other contracts with customers and suppliers in accordance with Topic 842 and have determined that, except for the leases described above, none of our contracts contain a lease.