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OPERATING LEASES

9 Months Ended

Sep. 30, 2021

NOTE 10 – OPERATING LEASES

The Company has two operating lease agreements for its warehouse and office spaces both with remaining lease terms at September 30, 2021, of 1.7 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its leases as a single lease component. Rent expense is recognized on a straight-line basis over the lease term. The Company also has another storage facility on a twelve-month lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical collateralized borrowing rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

The components of rent expense and supplemental cash flow information related to leases for the period are as follows:

	Nine months Ended September 30, 2021			Nine months Ended September 30, 2020
Lease Cost
Operating lease cost (of which $74 is included in general and administration and $451 is included in cost of sales in the Company’s statement of operations for the nine months ended September 30, 2021, and for the same period in 2020, respectively)	$	525		$	525
Operating lease cost (of which $74 is included in general and administration and $451 is included in cost of sales in the Company’s statement of operations for the nine months ended September 30, 2021, and for the same period in 2020, respectively)	$	525		$	525

Other Information
Weighted average remaining lease term – operating leases (in years)		1.7			2.7
Average discount rate – operating leases		3.75	%		3.75	%

The supplemental balance sheet information related to leases for the period is as follows:

	At September 30, 2021		At December 31, 2020
Operating leases
Long-term right-of-use assets, net of accumulated amortization of $1,749 and $1,265, respectively	$	1,079	$	1,563

Short-term operating lease liabilities	$	708	$	670
Long-term operating lease liabilities		454		990
Total operating lease liabilities	$	1,162	$	1,660

Maturities of the Company’s lease liabilities are as follows (in thousands):

Year Ending	Operating Leases
2021 (remaining 3 months)		182
2022		747
2023		280
Total lease payments		1,209
Less: Imputed interest/present value discount		(47	)
Present value of lease liabilities	$	1,162

Rent expense for the nine months ended September 30, 2021 and 2020 was $678 and $678, respectively.