Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2019
Leases [Abstract]  

4. Leases


At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on facts and circumstances present in that arrangement. Lease classifications, recognition, and measurement are then determined at the lease commencement date.


The Company’s operating lease ROU assets and operating lease liabilities represent primarily leases for office/warehouse spaces used to conduct our business. These leases have remaining terms of approximately 4 to 11 years which include one or more options to renew, with renewal terms from 3 years to 8 years. Based on the Company’s reasonable certainty to exercise these renewal options, the renewal to extend the lease terms are included in valuing our ROU assets and liabilities. As most of our operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate as the discount rate when determining the present value of the lease payments. The incremental borrowing rate is determined based on the Company’s secured borrowing rate, lease terms and current economic environment. Some of our operating leases include both lease (rent payments) and non-lease components (maintenance costs such as cleaning and landscaping services). The Company has elected the practical expedient to account for lease component and non-lease component as a single component for all leases. Lease expense for operating leases is recognized on a straight-line basis over the lease term.


Finance leases primarily consist of processing and lab equipment for our facilities. The Company’s finance leases generally have terms between two to three years and some of the leases include options to purchase the underlying assets at fair market value at the conclusion of the lease term. At September 30, 2019, assets recorded under finance leases were $1,046,000 less accumulated depreciation of $48,000, resulting in net fixed assets under finance leases of $998,000, which is recorded within net property and equipment on the Consolidated Balance Sheets.


The Company adopted the policy to not recognize ROU assets and liabilities for short term leases.


The components of lease cost for the Company’s leases were as follows (in thousands):


    Three Months Ended     Nine Months Ended  
    September 30, 2019     September 30, 2019  
Operating Leases:                
Lease cost   $      114     $     342  
Finance Leases:                
Amortization of ROU assets     20       39  
Interest on lease liability     15       40  
      35       79  
Short-term lease rent expense     41       113  
Total lease cost   $ 190     $ 534  


The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at September 30, 2019 was:


    Operating Leases     Finance Leases  
Weighted average remaining lease terms (years)     9.0       2.1  
Weighted average discount rate     8.0 %     11.6 %


The following table reconciles the undiscounted cash flows for the operating and finance leases at September 30, 2019 to the operating and finance lease liabilities recorded on the balance sheet (in thousands):


    Operating Leases     Finance Leases  
2019 Remainder   $ 108     $ 103  
2020     443       433  
2021     450       124  
2022     459       105  
2023     466        ―  
2024 and thereafter     1,799        ―  
Total undiscounted lease payments     3,725       765  
Less: Imputed interest     (1,082 )     (95 )
Present value of lease payments   $ 2,643     $ 670  
Current portion of operating lease obligations   $ 237     $  ―  
Long-term operating lease obligations, less current portion   $ 2,406     $  ―  
Current portion of finance lease obligations   $  ―     $ 319  
Long-term finance lease obligations, less current portion   $  ―     $ 351  


Supplemental cash flow and other information related to our leases were as follows (in thousands):


    Three Months Ended     Nine Months Ended  
    September 30, 2019     September 30, 2019  
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flow used in operating leases   $ 109     $ 326  
Operating cash flow used in finance leases   $ 15     $ 40  
Financing cash flow used in finance leases   $ 73     $      174  
ROU assets obtained in exchange for lease obligations for:                
Finance liabilities   $      390     $ 528  
Operating liabilities   $  ―     $ 182