The Company’s leases pertain primarily to engineering, manufacturing, sales and administrative facilities, with an initial term of one year or more. The Company has three leased facilities in Minnesota, two that expire in 2022 and one that expires in 2023, one leased facility in Illinois that expires in 2022, one leased facility in California that expires in 2022, two leased facilities in Singapore that both expire in 2020, one leased facility in Indonesia that expires in 2024, and one leased facility in Germany that expires in 2022.

As discussed in Note 4, the Company incurred $326 for lease modification costs at Hearing Help Express to reduce square footage by approximately 65% in an effort to reduce future operating costs. The modification had no impact on the lease term.

Certain foreign leases allow for variable lease payments that depend on an index or a market rate adjustment for the respective country and are adjusted on an annual basis. The adjustment is recognized as incurred in profit and loss. The facility leases include options to extend for terms ranging from one year to five years. Lease options that the Company is reasonably certain to execute, are included in the determination of the ROU asset and lease liability. Our Indonesia lease includes embedded forward starting leases that will begin in 2022 and 2024 for additional square footage, which will result in the recognition of an additional ROU asset and lease liability in those periods of approximately $103 and $72, respectively. The Company also leases equipment that include bargain purchase options at termination. These leases have been classified as finance leases.

As of June 30, 2020, the Company has a weighted-average lease term of 1.0 years for its finance leases, and 2.7 years for its operating leases. As of June 30, 2020, the Company has a weighted-average discount rate of 5.56% for its finance leases, and 5.17% for its operating leases. Discount rates are determined based on 5 year term incremental borrowing rates at inception of the lease. Operating cash flows for the six months ended June 30, 2020 from operating leases were $924. Financing lease assets are classified as machinery and equipment within the consolidated balance sheet.


	Three Months Ended		Six Months Ended
	June 30, 2020	June 30, 2019	June 30, 2020	June 30, 2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$ 26	$ 24	$ 52	$ 49
Interest on lease liabilities	1	2	3	5

Operating lease cost	393	457	874	917
Variable lease cost*	148	141	299	279
Total lease cost	$ 568	$ 624	$ 1,228	$ 1,250

*Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our domestic and foreign building leases.


		Operating Leases		Financing Leases		Total
2020	$	879	$	39	$	918
2021		1,503		24		1,528
2022		1,013		3		1,016
2023		414		-		414
2024		92		-		92
2025 and thereafter		-		-		-
Total lease payments		3,900		67		3,967
Less: Interest		(269)		(9)		(278)
Present value of lease liabilities	$	3,631	$	58	$	3,689