Profire Energy, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LEASES (Notes)

LEASES (Notes)

6 Months Ended

Jun. 30, 2020

LEASESWe have leases for office equipment and office space. The leases for office equipment are classified as financing leases and the typical term is 36 months. We have the option to extend most office equipment leases, but we do not intend to do so. Accordingly, no extensions have been recognized in the right-of-use asset or lease liability. The office equipment lease payments are not variable and the lease agreements do not include any non-lease components, residual value guarantees, or

restrictions. There are no interest rates implicit in the office equipment lease agreements, so we have used our incremental borrowing rate to determine the discount rate to be applied to our financing leases. The weighted average discount rate applied to our financing leases is 4.50% and the weighted average remaining lease term is 20.5 months.

The following table shows the components of financing lease cost:


Financing Lease Cost	For the Three Months Ended June 30, 2020		For the Six Months Ended June 30, 2020
Amortization of right-of-use assets	$	15,121	$	33,497
Interest on lease liabilities	3,375		4,247
Total financing lease cost	$	18,496	$	37,744

The following table reconciles future minimum lease payments to the discounted finance lease liability:


Years ending December 31,	Amount
2020 - remaining	$	25,013
2021	40,921
2022	12,803
2023	—
2024	—
Thereafter	—
Total future minimum lease payments	$	78,737
Less: Amount representing interest	3,088
Present value of future payments	$	75,649
Current portion	$	45,411
Long-term portion	$	30,238

Because our office space leases are short-term, we have elected not to recognize them on our balance sheet under the short-term recognition exemption. During the three and six months ended June 30, 2020, we recognized $19,059 and $38,531, respectively, in short-term lease costs associated with office space leases.