LEASES

3 Months Ended

Mar. 31, 2019

Leases of Lessee Disclosure [Text Block]

(8)

LEASES

The Company’s primary leases are as follows:



The Company entered into a sublease agreement on October 20, 2017 with CSG Systems Inc. for approximately

41,715

square feet at 9555 Maroon Circle, Englewood CO 80112.

The term of the sublease runs through June 30, 2023, with an option to extend for an additional two years through June 30, 2025

. During the first year of the sublease,

the rent per square foot is $7.50, increasing to $19.75 during the second year of the sublease and each year thereafter for the initial term increasing by an additional $1 per square foot

. The Company has not yet determined whether it is reasonably certain to exercise its renewal option and has therefore only considered the initial term when determining the lease liability and lease asset.



The Company entered into an amendment to its sublease agreement on March 11, 2019 with CSG Systems, Inc. for an additional

21,420

square feet of office space at its current headquarters location at Two Maroon

Circle, located at 9555 Maroon Circle, Englewood, CO 80112.

The term of sublease for the additional space begins on the later of the completion of the Expansion Work (as defined in the Sublease) or June 1, 2019 and runs through June 30, 2023, with an option to extend the term for an additional two years through June 30, 2025

During the first seven months of the Amendment to the Sublease, the rent per square foot is $10.00, increasing to $20.75 from January 1, 2020 through October 31, 2020

. Annual periods beginning November 1, 2020, the price per square foot increases by an additional $1 per square foot. As of March 31, 2019, the Company did not have control over the use of this additional space and therefore determined that the lease had not yet commenced.

The Company is also obligated to pay its proportionate share of building operating expenses. The sub-landlord agreed to contribute approximately $

0.2

million toward tenant improvements which is accounted for as a reduction of the operating lease asset and subsequently treated as a reduction of expense over the term of the lease.

The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s incremental borrowing rate was determined to be

4.8

% for its operating lease liabilities and 7.0% for its financing leases. The remaining lease term was

4.3

years for the Company’s sublease agreements and 1.6 years for the

Company’s

financing lease.

The table below reconciles the undiscounted future minimum lease payments under the Company’s operating leases to the total operating lease liabilities recognized on the consolidated balance sheets as of March 31, 2019 (in thousands):

April 1, 2019 through December 31, 2019	$	641
2020		896
2021		939
2022		982
2023		509
Total undiscounted future minimum lease payments		3,967
Less: Difference between undiscounted lease payments and discounted operating lease liabilities		(491	)
Total operating lease liabilities	$	3,476

Operating lease costs were $0.2 million for the three months ended March 31, 2019, which were included in general and administrative expenses on the consolidated statement of operations.