8. LEASES

The Company leases certain real estate for its retail store locations under long-term lease agreements. For leases effective on or after January 1, 2019, the Company determines if an arrangement is a lease at inception and recognizes operating lease assets and lease liabilities at commencement date based on the present value of lease payments over the lease term. The present value of the Company’s lease payments may include: (1) rental payments adjusted for inflation or market rates, and (2) lease terms with options to renew the lease when it is reasonably certain the Company will exercise such an option. The exercise of lease renewal options is generally at the Company’s discretion. Payments based on a change in an index or market rates are not considered in the determination of lease payments for purposes of measuring the related lease liability. The Company discounts lease payments using its incremental borrowing rate based on information available as of the measurement date. Subsequent to the recognition of its operating lease assets and lease liabilities, the Company recognizes lease expense related to its operating leases on a straight-line basis over the lease term.

None of the Company’s lease agreements contain contingent rental payments, material residual value guarantees or material restrictive covenants. The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term. As of September 30, 2020, the Company had no finance leases, no sublease agreements, and no lease agreements in which it is named as a lessor. During the fourth quarter of 2020, the Company entered into a few finance leases.

The Company performs interim reviews of its long-lived assets for impairment when evidence exists that the carrying value of an asset group, including a lease asset, may not be recoverable. Excluding the January 1, 2019 impairment charge to retained earnings upon the adoption of Topic 842, no impairment expense associated with operating lease assets was recognized during the three and nine months ended September 30, 2019.

Additional information regarding the Company’s operating leases is as follows:

Leases	Balance Sheet Classification	September 30, 2019
Assets:
Non-current	Operating lease assets	$	14,769,812

Liabilities:
Current	Operating lease liabilities	$	3,918,757
Non-current	Operating lease liabilities, noncurrent		11,398,664
Total lease liabilities		$	15,317,421

Lease Cost	Income Statement Classification	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	Operating expenses	$	1,031,445	$	3,120,156
Variable lease cost (1)	Operating expenses		216,533		685,527
Total lease cost		$	1,247,978	$	3,805,683

(1)	Variable lease cost includes payments for certain real estate taxes, insurance, common area maintenance, and other charges related to lease agreements, which are not included in the measurement of the operating lease liabilities.

Maturity of Lease Liabilities	September 30, 2019
2019	$	1,022,821
2020		3,884,481
2021		3,275,976
2022		2,405,989
2023		1,718,825
Thereafter		4,995,395
Total lease payments (1)	$	17,303,487
Less: Interest		(1,986,066	)
Present value of lease liabilities	$	15,317,421
(1) Operating lease payments exclude $0.3 million of legally binding minimum lease payments for leases signed, but not yet commenced as of September 30, 2019.

As of September 30, 2019, the weighted average remaining lease term for our operating leases was 6.1 years, and the weighted average discount rate used to measure our operating leases was 4.1%.

Other Information	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases	$	1,023,521	$	3,055,534

ROU assets obtained in exchange for lease obligations	$	-	$	18,076,962