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Leases

9 Months Ended

Sep. 30, 2019

Note 12. Leases

The Company determines if an arrangement is a lease at its inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if the Company obtains the rights to direct the use of, and to obtain substantially all of the economic benefits from the use of, the underlying asset. Lease expense for variable leases and short-term leases is recognized when the obligation is incurred.

The Company has operating leases for certain facilities, vehicles and equipment with a weighted average remaining lease term of 5.4 years as of September 30, 2019. Operating leases are included in right of use lease assets, other current liabilities and long-term lease liabilities on the condensed consolidated balance sheet. Right of use lease assets and liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its respective lease term. The Company does not have an established incremental borrowing rate as it does not have any debt. The Company uses the stated borrowing rate for a lease when readily determinable. When the interest rates implicit in its lease agreements is not readily determinable, the Company used an interest rate based on the marketplace for public debt. The weighted-average discount rate associated with operating leases as of September 30, 2019 is 5.5%.

Operating lease expense for the three months ended September 30, 2019 was approximately $53,000 and approximately $164,000 for the nine months ended September 30, 2019. The Company has no material variable lease costs or sublease income for the nine months ended September 30, 2019. Subsequent to the Company’s adoption of the new lease accounting guidance on January 1, 2019, the Company recorded new right of use lease assets of approximately $900,000 and associated lease liabilities of approximately $1.1 million.

Maturities of operating lease liabilities as of September 30, 2019 were as follows:

	September 30, 2019
For the remainder of 2019	$	52,989
For the year ended December 31, 2020		213,146
For the year ended December 31, 2021		207,229
For the year ended December 31, 2022		213,320
For the year ended December 31, 2023		217,151
For the year ended December 31, 2024 and beyond		277,743
Total lease payments		1,181,578
Less: imputed lease interest		(166,630	)
Present value of lease liabilities	$	1,014,948