Sale-leaseback transaction	9 Months Ended
Sep. 30, 2019
Sale-leaseback transaction
Sale-leaseback transaction	Note 6. Sale-leaseback transaction For periods prior to January 1, 2019, the Company accounted for the sale and leaseback transactions as capital leases. With the adoption of the New Lease Standard, these transactions are classified as finance leases. Accordingly, the leased assets are recorded in property and equipment and the capitalized lease obligations are included in long-term liabilities at the present value of the future lease payments in accordance with the terms of the lease (see Note 8). Lease payments are applied using the effective interest rate inherent in the leases. Depreciation of the property and equipment is included within cost of goods sold and operating expenses in the consolidated statements of operations and within depreciation and amortization of property and equipment in the consolidated statements of cash flows. In February 2017, the Company entered into an agreement with Essex Capital Corporation (“Essex”) for the sale-leaseback of newly acquired assets of up to $5.0 million to finance its capital expenditures. Each lease under this master agreement is for an initial term of 36 months and has an option to purchase the equipment at the end of the respective lease that management considers to be a bargain purchase option. Under this agreement, the Company entered into leases and sold assets with a total capitalized cost of $481,000 and $2,742,000 at effective interest rates of 14.3% and 14.9% on February 13, 2017 and June 30, 2017, respectively. The February sale resulted in net gains of $14,000 which has been deferred and is being amortized over the 36-month term of the lease. There was no gain or loss on the June 2017 sale. For each of the three months ended September 30, 2019 and 2018, approximately $2,000 and $1,000, respectively, and for each of the nine months ended September 30, 2019 and 2018, approximately $4,000, of the net gain on sale-leasebacks was recognized in other income on the condensed consolidated statements of operations.

Note 6. Sale-leaseback transaction

For periods prior to January 1, 2019, the Company accounted for the sale and leaseback transactions as capital leases. With the adoption of the New Lease Standard, these transactions are classified as finance leases. Accordingly, the leased assets are recorded in property and equipment and the capitalized lease obligations are included in long-term liabilities at the present value of the future lease payments in accordance with the terms of the lease (see Note 8). Lease payments are applied using the effective interest rate inherent in the leases. Depreciation of the property and equipment is included within cost of goods sold and operating expenses in the consolidated statements of operations and within depreciation and amortization of property and equipment in the consolidated statements of cash flows.

In February 2017, the Company entered into an agreement with Essex Capital Corporation (“Essex”) for the sale-leaseback of newly acquired assets of up to $5.0 million to finance its capital expenditures. Each lease under this master agreement is for an initial term of 36 months and has an option to purchase the equipment at the end of the respective lease that management considers to be a bargain purchase option. Under this agreement, the Company entered into leases and sold assets with a total capitalized cost of $481,000 and $2,742,000 at effective interest rates of 14.3% and 14.9% on February 13, 2017 and June 30, 2017, respectively. The February sale resulted in net gains of $14,000 which has been deferred and is being amortized over the 36-month term of the lease. There was no gain or loss on the June 2017 sale.

For each of the three months ended September 30, 2019 and 2018, approximately $2,000 and $1,000, respectively, and for each of the nine months ended September 30, 2019 and 2018, approximately $4,000, of the net gain on sale-leasebacks was recognized in other income on the condensed consolidated statements of operations.