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Leases

6 Months Ended

Jun. 30, 2019

3. LEASES

On January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach. Results for the reporting periods beginning January 1, 2019 are presented in accordance with ASC 842, while prior period amounts are reported in accordance with FASB ASC Topic 840-Leases. On January 1, 2019, the Company recorded a $228 thousand right-of-use asset and a $252 thousand lease liability representing the present value of minimum payment obligations associated with our Denver office operating lease, which has non-cancellable terms in excess of one year. We do not have any financing leases. The Company has elected the following practical expedients available under ASC 842 (i) excluding from the condensed consolidated balance sheet leases with terms that are less than one year, (ii) for agreements that contain both lease and non-lease components, combining these components together and accounting for them as a single lease, (iii) the package of practical expedients, which allows the Company to avoid reassessing contracts that commenced prior to adoption that were properly evaluated under legacy GAAP, and (iv) the policy election that eliminates the need for adjusting prior period comparable financial statements prepared under legacy lease accounting guidance. As such, there was no required cumulative effect adjustment to accumulated deficit at January 1, 2019.

During the six months ended June 30, 2019, the Company did not acquire any right-of-use assets or incur any lease liabilities. The Company’s right-of-use assets and lease liabilities are recognized at their discounted present value on the unaudited condensed consolidated balance sheet at June 30, 2019, of $203 thousand and $228 thousand, respectively.

	June 30, 2019
	(in thousands)
Other assets:
Right-of-use asset		203

Other current liabilities		55
Other noncurrent liabilities	$	173

	Right-of Use Asset		Lease Liability
	(in thousands)
Corporate office lease	$	203	$	228

The Company recognizes lease expense on a straight line basis excluding short-term and variable lease payments which are recognized as incurred. Short-term lease costs represent payments for our Houston office lease, which has a lease term of one year.

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
	(in thousands)
Operating lease cost	$	17	$	34
Short-term lease cost		4		8
Total lease cost	$	21	$	42

The Company’s Denver office operating lease does not contain an implicit interest rate that can be readily determined. Therefore, the Company used the incremental borrowing rate of 8.75% as established under the Company’s prior credit facility as the discount rate.

	June 30, 2019
Weighted average lease term (years)		3.6
Weighted average discount rate		8.75	%

The future minimum lease commitments as of June 30, 2019 are presented in the table below. Such commitments are reflected at undiscounted values and are reconciled to the discounted present value on the unaudited condensed consolidated balance sheet as follows:

	Amount
Remainder of 2019	$	36
2020		73
2021		75
2022		76
2023		6
Total lease payments	$	266
Less: imputed interest		(38	)
Total lease liability	$	228

The Company owns a 14-acre tract in Riverton, Wyoming with a two-story, 30,400 square foot office building, which served as the Company’s corporate headquarters until it relocated to Denver, Colorado in 2015. Currently, the building’s eight office suites are rented to non-affiliates and government agencies under operating leases with varying terms from month-to-month to twelve years. The building is included in property and equipment, net on our condensed consolidated balance sheet. The net capitalized cost of the building subject to operating leases at June 30, 2019 is as follows:

	June 30, 2019
	(in thousands)
Building subject to operating leases	$	4,012
Less: accumulated depreciation		3,186
Building subject to operating leases, net	$	826

The future lease maturities of the Company’s operating leases as of June 30, 2019 are presented in the table below. Such maturities are reflected at undiscounted values to be received on an annual basis.

	Amount
	(in thousands)
Remainder of 2019	$	81
2020		127
2021		130
2022		134
2023		138
2024		142
Remaining through June 2029		695
Total lease maturities	$	1,446

The Company recognized the following operating lease income related to its Riverton, Wyoming office building for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(in thousands)
Operating lease income	$	48	$	44	$	96	$	89