Quarterly report pursuant to Section 13 or 15(d)

Lease Obligations

Lease Obligations
9 Months Ended
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  



The Company has operating lease agreements for two office spaces both with remaining lease terms of 4 years. 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. 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.


Operating lease right-of-use ("ROU") assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our 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 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,

Lease Cost      
Operating lease cost (of which $446,674 is included in general and administration and $77,927 is included in cost of sales in the Company's unaudited condensed statement of operations)   $ 524,601  
Other Information        
Cash paid for amounts included in the measurement of lease liabilities for the first quarter 2019   $ —    
Weighted average remaining lease term – operating leases (in years)     3.7  
Average discount rate – operating leases     3.75 %


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


    At September 30,
Operating leases      
Long-term right-of-use assets   $ 2,339,353  
Short-term operating lease liabilities   $ 589,696  
Long-term operating lease liabilities     1,818,927  
Total operating lease liabilities   $ 2,408,623  


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


Year Ending   Operating Leases  
2019 (remaining 3 months)   $ 153,765  
2020     692,977  
2021     720,922  
2022     746,752  
2023     272,057  
Total lease payments     2,586,473  
Less: Imputed interest/present value discount     (177,849 )
Present value of lease liabilities   $ 2,408,624  


Rent expense for the three months ended September 30, 2019 and 2018 was $203,395 and $158,734, respectively (including short-term and other rentals). Rent expense for the nine months ended September 30, 2019 and 2018 was $601,772 and 414,317, respectively (including short-term and other rentals).