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Leases

3 Months Ended

Mar. 31, 2020

4. LEASES

On January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach and recorded a $228 thousand right-of-use asset and a $252 thousand lease liability representing the present value of minimum payment obligations associated with the Company’s Denver office operating lease, which has non-cancellable terms in excess of one year. The Company does 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 three months ended March 31, 2020 and 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 under the following captions in the unaudited condensed consolidated balance sheet at March 31, 2020 and December 31, 2019:

	March 31, 2020		December 31, 2019
	(in thousands)
Right of use asset balance
Operating lease	$	167	$	179
Lease liability balance
Short-term operating lease	$	59	$	58
Long-term operating lease		127		142
	$	186	$	200

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. Beginning in March 2020, the Company subleased its Denver office and recognized sublease income.

	Three Months Ended March 31,
	2020			2019
	(in thousands)

Operating lease cost	$	17		$	17
Short-term lease cost		4			4
Sublease income		(5	)		-
Total lease cost		16		$	21

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.

	Three Months Ended March 31,
	2020			2019
	(in thousands)
Weighted average lease term (years)		2.8			3.8
Weighted average discount rate	$	8.75	%		8.75	%

The future minimum lease commitments as of March 31, 2020 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
		(in thousands)
Remainder of 2020	$	55
2021		75
2022		76
2023		6
Total lease payments	$	212
Less: imputed interest		(26	)
Total lease liability	$	186

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 March 31, 2020 and December 31, 2019 is as follows:

	March 31, 2020			December 31, 2019
	(in thousands)
Building subject to operating leases	$	4,012		$	4,012
Less: accumulated depreciation		(3,269	)		(3,244	)
Building subject to operating leases, net	$	743		$	768

The future lease maturities of the Company’s operating leases as of March 31, 2020 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 2020	$	119
2021		161
2022		165
2023		169
2024		163
Remaining through June 2029		695
Total lease maturities	$	1,472

The Company recognized the following operating lease income related to its Riverton, Wyoming office building for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		2019
	(in thousands)
Operating lease income	$	56	$	48