Leases

9 Months Ended

Sep. 30, 2019

As discussed in Note 2, on January 1, 2019, MiMedx adopted new guidance for the accounting and reporting of leases. The Company has operating leases primarily for corporate offices, vehicles, and certain equipment. Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. The Company determines if an arrangement is or contains a lease at inception.

Under ASC 842 transition guidance, the Company has not elected the hindsight practical expedient to determine the lease term for existing leases, which permits companies to consider available information prior to the effective date of the new guidance as to the actual or likely exercise of options to extend or terminate the lease. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options.

Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. As a practical expedient, the Company has made an accounting policy election not to separate lease components from non-lease components in the event that the agreement contains both. The Company includes both the lease and non-lease components for purposes of calculating the right-of-use asset and related lease liability.

The Company does not act as a lessor or have any leases classified as financing leases.

Operating lease cost for the three and nine months ended September 30, 2019 was $0.4 million and $1.1 million, respectively, and was recorded in Selling, general, and administrative expenses. Interest on lease obligations was for the three and nine months ended September 30, 2019 $0.1 million and $0.4 million, respectively, and was recorded in Selling, general, and administrative expenses. Cash paid for amounts included in the measurement of operating lease liabilities for the three and nine months ended September 30, 2019 was $0.4 million and $1.3 million, respectively. The amortization of leased assets for the three and nine months ended September 30, 2019 was $0.2 million and $0.7 million, respectively.

Supplemental balance sheet information related to operating leases is as follows (amounts in thousands, except lease term and discount rate):



		September 30, 2019
Assets
	Right of use asset	$	3,630

Liabilities
	Short term lease liability	$	1,140
	Long term lease liability	$	3,213

Weighted-average remaining lease term (years)		3.3
Weighted-average discount rate		11.5		%

Maturities of operating leases liabilities are as follows (amounts in thousands):



Year ending December 31,	Maturities
2019 (excluding the nine months ended September 30, 2019)	$	386
2020	1,561
2021	1,528
2022	1,552
2023	196
Thereafter	—
Total lease payments	5,223
Less: imputed interest	(870		)
	$	4,353

Future minimum lease payments under operating leases at December 31, 2018 and thereafter were as follows (amounts in thousands):



Year ending December 31,
2019	$	1,640
2020	1,579
2021	1,625
2022	1,673
2023	205
Thereafter	—
Total lease payments	$	6,722