LEASES

9 Months Ended

Sep. 30, 2020

LEASES

LEASES

7.    LEASES

Effective January 1, 2019, the Company adopted the provisions of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). The provisions of this ASU require the Company to record a right-of-use asset and related lease liability related to their leases.

The Company leases its operating facilities in both the United States and Germany under operating lease agreements. In the United States, in May 2020, the Company entered into a Nineteenth Amendment to Lease with the landlord which became effective May 1, 2020. This amendment expands the Company’s space to 20,821 square feet and extends the term of the lease to May 31, 2021. The Company’s base rent is approximately $34,000 per month. In addition, the Company is obligated to pay monthly operating expenses of approximately $30,000 per month. The amendment also includes a one year renewal option. The base rent for the renewal term will increase by the greater of five percent or the increase in the Consumer Price Index. There were no lease incentives and no initial direct costs were incurred related to this lease amendment.

In Germany, the Company leases its operating facility under two operating lease agreements. These leases require combined base rent payments amounting to approximately $8,800 per month. The initial lease term of both leases ends August 31, 2021. In addition, the Company is obligated to monthly operating expenses of approximately $2,900 per month. Both leases have a five year option to renew that would extend the lease term to August 31, 2026. There are no provisions in the leases to increase the base rent during the renewal period. There were no lease incentives and no initial direct costs were incurred related to these leases.

Initial Measurement of Right-Of-Use Asset and Lease Liability:

The Company's consolidated balance sheets reflect the value of the right-of-use asset and related lease liability. This value was calculated based on the present value of the remaining base rent lease payments. The remaining lease payments include the renewal periods for both facilities as the Company has determined that it is probable that the renewal options will be exercised under each of the lease agreements. The discount rate used was the Company’s incremental borrowing rate, which is 9.16%, as the Company could not determine the rate implicit in the lease. As a result, the value of the right-of- use asset and related lease liability is as follows:

	September 30,		December 31,
	2020		2019
Right-of-use asset	$	1,131,915	$	1,070,762
Total lease liability	$	1,131,915	$	1,070,762
Less current portion		(432,423)		(428,083)
Lease liability, net of current portion	$	699,492	$	642,679

The maturities of the lease liabilities due in the twelve months ending September 30, 2020:

2021	$	432,423
2022		345,067
2023		78,823
2024		86,354
2025		94,605
Thereafter		94,643
Total	$	1,131,915

For the three months ended September 30, 2020 and 2019, operating cash flows paid in connection with operating leases amounted to approximately $211,000 and $234,000, and $658,000 and $674,000 for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and December 31, 2019, the weighted average remaining lease term was 4.3 years and 4.10 years, respectively.