On the “Effective Date”), the Company adopted ASU - Leases (Topic ); ASU - Codification Improvements to Topic Leases; and ASU - Targeted Improvements (collectively, “Topic ) using a modified retrospective transition approach, which requires Topic to be applied to all leases existing at the date of initial application. Under Topic lessees are required to recognize a lease liability and right-of-use asset (“ROU asset”) for all leases and to disclose key information about leasing arrangements. Additionally, leases will be classified as either financing or operating; the classification will determine the pattern of expense recognition and classification within the statement of operations. The Company has elected to apply its lease accounting policy only to leases with a term greater than months.

 

The Effective Date is the Company’s date of initial application. Consequently, our financial information was updated and the disclosures required under the new standard are provided for dates and periods prior to

 

Topic provides several optional practical expedients that can be adopted at transition. We have elected the “package of practical expedients”, which does require us to reassess our prior conclusions regarding lease identification, lease classification and initial direct costs. We did elect the practical expedient of hindsight to the evaluation of lease options (e.g. renewal).

 

The most significant effects related to this adoption relate to (i) the recognition of new ROU assets and lease liabilities on our balance sheet for our real estate and equipment operating leases; and (ii) significant new disclosures about our leasing activities. Upon adoption, we recognized approximately million in additional operating lease liabilities with corresponding ROU assets of approximately the same amount.

 

Topic also provides practical expedients for an entity’s ongoing accounting. We have elected the “combining lease and non-lease components” practical expedient and also elected to apply the short-term lease recognition exemption to certain leases; therefore, we did recognize ROU assets and lease liabilities for these leases.

 

In adopting Topic we have determined and will continue to determine whether an arrangement is a lease at inception. Our operating leases are primarily for office space, service facility centers and equipment under operating lease arrangements that expire at various dates over the next years. Our leases do contain any restrictive covenants. Our office leases generally contain renewal options for periods ranging from to years. Because we are reasonably certain to exercise these renewal options, the options are considered in determining the lease term, and payments associated with the option years are excluded from lease payments. Our office leases do contain any material residual value guarantees. Our equipment leases generally do contain renewal options. We are reasonably certain to exercise the renewal options for those equipment leases that do contain renewal options, thus, the options are considered in determining the lease term and payments associated with the option years are excluded from lease payments.

 

For our equipment leases, we have used and will use the implicit rate in the lease as the discount rate, when available, otherwise, we use our incremental borrowing rate as the discount rate. For our office leases, the implicit rate is typically available, so we have used and will use our incremental borrowing rate as the discount rate. Our lease agreements include both lease and non-lease components. We have elected the practical expedient that allows us to combine lease and non-lease components for all of our leases.

 

Payments due under our operating leases include fixed payments as well as variable payments. For our office leases, variable payments include amounts for the Company’s proportionate share of operating expenses, utilities, property taxes, insurance, common area maintenance and other facility-related expenses. For our equipment leases, variable payments consist of sales taxes, property taxes and other fees.

 

The components of lease costs for the and months ended are as follows (in thousands):

 

		Three Months Ended				Six Months Ended
		June 30, 2019				June 30, 2019
Operating lease cost		$	290			$	677
Variable lease cost			53				126
Total lease cost		$	343			$	803

 

 

Operating lease expense for the and months ended was million and million, respectively.

 

Amounts reported in the condensed consolidated balance sheet as of for our operating leases are as follows (in thousands):

 

		June 30, 2019
Operating lease ROU assets		$	5,182
Current operating lease liabilities (included in other current liabilities)		$	1,374
Operating lease liabilities, net of current portion			4,021
Total operating lease liabilities		$	5,395

 

 

Supplemental cash flow information and non-cash activity related to our leases are as follows (in thousands):

 

		Six Months Ended
		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities and ROU assets:
Operating cash flow from operating leases		$	771
ROU assets obtained in exchange for lease obligations:
Operating leases		$	3,015

 

Weighted average remaining lease terms and discount rates for our leases as of are as follows:

 

		Years
Weighted average remaining lease term:
Operating leases			7.3

 

		Rate
Weighted average discount rate:
Operating leases			7.5	%

 

Future maturities of lease liabilities as of are as follows (in thousands):

 

		Operating Leases (a)
2019		$	779
2020			1,262
2021			716
2022			655
2023			666
Thereafter			3,430
Total undiscounted lease payments			7,508
Less: Imputed interest			(2,113	)
Total lease liabilities		$	5,395

 

 

The Company disclosed in our Annual Report on Form -K maturities of lease liabilities as of in accordance with ASC During the quarter ended the Company determined that it improperly included certain lease commitments in the maturities table as of in Note of the Annual Report on Form -K. The table overstated our lease maturities as follows (in thousands): in in in in in and in the thereafter period.

 

The Company assessed the materiality of this error, considering both the qualitative and quantitative factors and determined that for the year ended the error was immaterial. The Company has decided to correct this immaterial error as a revision to our previously issued financial statements by adjusting the maturities of the lease liabilities as of for the overstated amounts as reflected in the table below (in thousands):

 

						Operating
		Capital Leases				Leases (As Revised)				Total (As Revised)
2019		$	33			$	1,745			$	1,778
2020			-				1,347				1,347
2021			-				726				726
2022			-				624				624
2023			-				636				636
Thereafter			-				3,071				3,071
Total require payments		$	33			$	8,149			$	8,182
Less amounts representing interest (3.5%)			-
Present value of minimum lease payments			33
Less current maturities			(33	)
Long-term capital lease liability		$	-