General form of registration statement for all companies including face-amount certificate companies

Operating leases (Q3)

v3.20.2
Operating leases (Q3)
9 Months Ended 12 Months Ended
Sep. 30, 2020
Dec. 31, 2019
Operating leases [Abstract]    
Operating leases
Note 8 - Operating Leases

The table below presents certain information related to the lease costs for operating leases for the three and nine months ended September 30, 2020 and 2019:

Dollars in thousands
 
For the Nine Months Ended
   
For the Three Months Ended
 
 
September 30,
2020
   
September 30,
2019
   
September 30,
2020
   
September 30,
2019
 
Operating lease costs
 
$
331
   
$
219
   
$
110
   
$
95
 
Variable lease costs
   
27
     
24
     
11
     
8
 
Total operating lease costs
 
$
358
   
$
243
   
$
121
   
$
103
 
As of September 30, 2020, the weighted-average remaining operating lease term was 1.9 years and the incremental borrowing rate was 12.5% for operating leases recognized on the Company’s condensed consolidated balance sheets. Short term lease costs, excluding expenses relating to leases with a lease term of one month or less, were less than $0.1 million for the nine months ended September 30, 2020. During the three and nine months ended September 30, 2019, the Company recorded less than $0.1 million of short term lease costs, respectively.
Rent expense was $0.2 and $0.4 million for the three and nine months ended September 30, 2020, respectively, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2019, respectively.
Undiscounted cash flows
The table below reconciles the undiscounted cash flows for the remaining term of the operating lease liabilities recorded on the condensed consolidated balance sheets:

Dollars in thousands
 
Operating Leases
 
Remainder of 2020
 
$
114
 
2021
   
464
 
2022
   
246
 
2023
   
7
 
Total minimum lease payments
 
$
831
 
Less: amount of lease payments representing interest
   
86
 
Present value of future minimum lease payments
 
$
745
 
Less: current obligations under leases
   
395
 
Long-term lease obligations
 
$
350
 
Note 8 – Operating leases

Effective January 1, 2019, the Company adopted the FASB guidance on leases (“Topic 842”), which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted Topic 842 using the modified retrospective transition approach.  Prior year financial statements were not recast under Topic 842, and therefore those amounts are not disclosed. The Company has elected certain practical expedients, including the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs as well as an accounting policy to account for lease and non-lease components as a single component.  The Company also elected the optional transition method that gives companies the option to use the effective date as the date of initial application on transition, and as a result, the Company did not adjust its comparative period financial information or make the new required lease disclosures for periods before the effective date. The Company has elected to make the accounting policy election for short-term leases. Consequently, short-term leases are recorded as an expense on a straight-line basis over the lease term.  The Company did not elect the hindsight practical expedient.

The Company’s leases relate to our corporate offices and warehouse. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Lease renewal options are not included in the measurement of the right-of-use assets and right-of-use liabilities unless the Company is reasonably certain to exercise the optional renewal periods. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.  Additionally, the Company’s leases contain rent escalations over the lease term and the Company recognizes expense for these leases on a straight-line basis over the lease term. Some of the Company’s leases include rent escalations based on inflation indexes.

The Company identified an error as of January 1, 2019 related to the adoption of ASC 842, Leases, which resulted in an overstatement of less than $0.1 million for right-of-use assets and operating lease liabilities, respectively.   The Company also identified an overstatement of Accumulated Deficit of less than $0.1 million as of January 1, 2019.  The errors related to the impact upon adoption of ASC 842 were corrected during the twelve months ended December 31, 2019.  The Company believes the correction of these errors is not material to the consolidated financial statements as of and for the twelve months ended December 31, 2019.

For leases entered into or reassessed after the adoption of the new standard, the Company has elected the practical expedient allowed by the standard to account for all fixed consideration in a lease as a single lease component. Therefore, the lease payments used to measure the operating lease liability for these leases include fixed minimum rentals along with fixed operating costs such as common area maintenance and utilities.

The Company’s leases do not provide a readily available implicit rate. Therefore, the Company estimates the incremental borrowing discount rate based on information available at lease commencement. The discount rates used are indicative of a synthetic credit rating based on quantitative and qualitative analysis.

The table below presents the lease-related assets and liabilities recorded upon adoption:

     
January 1,
 
Dollars in thousands
Classification on the balance sheet 2019
 
2019
 
Assets
       
Operating lease right-of-use assets
Operating lease right-of-use assets
 
421
 
           
Liabilities
         
Current - operating
Operating lease liability short term
   
87
 
Noncurrent - operating
Operating lease liability long term
   
342
 
Total lease liabilities
   
$
429
 

The table below presents certain information related to the lease costs for operating leases for the years ended December, 31 2019 and 2018.

   
Year ended December 31,
 
Dollars in thousands
 
2019
   
2018
 
Operating lease costs
   
369
     
189
 
Variable lease costs
   
31
     
42
 
Total operating lease costs
 
$
400
     
231
 

As of December 31, 2019, the weighted-average remaining operating lease term was 2.6 years and the incremental borrowing rate was 12.5% for operating leases recognized on our consolidated balance sheet. Short term lease costs, excluding expenses relating to leases with a lease term of one month or less, was $0.1 million for the year ended December 31, 2019.

Rent expense for the year ended December 31, 2019 and 2018 was $0.5 million and $0.2 million, respectively.

Undiscounted cash flows

The table below reconciles the undiscounted cash flows for each of the first four years and total of the remaining years to the operating lease liabilities recorded on the balance sheet.

Operating Leases
 
2020
   
444
 
2021
   
459
 
2022
   
240
 
2023
   
5
 
Total minimum lease payments
   
1,148
 
Less: amount of lease payments representing interest
   
162
 
Present value of future minimum lease payments
 
$
986
 
Less: current obligations under leases
   
345
 
Long-term lease obligations
 
$
641
 

Future minimum lease payments under contractually-obligated leases as of December 31, 2018 were as follows (in thousands):

Year ending December 31,

2019
 
$
257
 
2020
   
296
 
2021
   
296
 
2022
   
123
 
2023
   
-
 
   
$
972