Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2020

5.	Leases

The Company’s operating lease right-of-use (“ROU”) assets and operating lease liabilities represent primarily leases for office spaces used to conduct our business. These leases have remaining terms of approximately 3 to 10 years which include one or more options to renew (which 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. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Finance leases primarily consist of processing and transport equipment used by our facilities’ operations. Our finance leases also include a building with land for our waste treatment operations. The Company’s finance leases generally have initial terms between one to six years and some of the leases include options to purchase the underlying assets at fair market value at the conclusion of the lease term. The lease for the building and land has a term of two years with an option to buy at the end of the lease term, which the Company is reasonably certain to exercise.

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 for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

Operating Leases:
Lease cost	$	114	$	114	$	342	$	342

Finance Leases:
Amortization of ROU assets		109		20		161		39
Interest on lease liability		47		15		97		40
		156		35		258		79

Short-term lease rent expense		3		41		7		113

Total lease cost	$	273	$	190	$	607	$	534

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at September 30, 2020 were:

	Operating Leases			Finance Leases
Weighted average remaining lease terms (years)		8.2			3.4

Weighted average discount rate		8.0	%		7.9	%

The following table reconciles the undiscounted cash flows for the operating and finance leases at September 30, 2020 to the operating and finance lease liabilities recorded on the balance sheet (in thousands):

	Operating Leases			Finance Leases
2020 Remainder	$	112		$	263
2021		450			554
2022		458			272
2023		466			149
2024		342			146
2025 and thereafter		1,457			164
Total undiscounted lease payments		3,285			1,548
Less: Imputed interest		(879	)		(158	)
Present value of lease payments	$	2,406		$	1,390

Current portion of operating lease obligations	$	265		$	—
Long-term operating lease obligations, less current portion	$	2,141		$	—
Current portion of finance lease obligations	$	—		$	675
Long-term finance lease obligations, less current portion	$	—		$	715

Supplemental cash flow and other information related to our leases were as follows for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow used in operating leases	$	111	$	109	$	331	$	326
Operating cash flow used in finance leases	$	47	$	15	$	97	$	40
Financing cash flow used in finance leases	$	182	$	73	$	411	$	174

ROU assets obtained in exchange for lease obligations for:
Finance liabilities	$	751	$	390	$	874	$	528
Operating liabilities	$	—		—		—		182