SIGNIFICANT ACCOUNTING POLICIES UPDATE

The Company’s significant accounting policies are detailed in “Note 2: Significant Accounting Policies” of its Form 10-K for the year ended December 31, 2018. Significant changes to the Company’s accounting policies as a result of adopting Accounting Standards Codification (“ASC”) 842 are discussed below:

Leases:

The Company determines if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in the Condensed Consolidated Balance Sheets and the Company recognizes lease expense for these leases on a straight line basis over the lease term. Operating leases are included in operating lease ROU asset, current portion of lease obligations and long term portion of lease obligations on its Condensed Consolidated Balance Sheet. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on its Condensed Consolidated Balance Sheet. As of March 31, 2019, the Company does not have any non-cancelable operating lease commitments that have not yet commenced.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. If a lease does not implicitly state a rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made in advance, any initial direct costs incurred and excludes any lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably assured that the Company will exercise that option. Lease expense for minimum lease payments are recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately.

The Company has operating leases for its production and office facilities and certain office equipment. These leases have remaining lease terms of 2 years to 15 years, some of which include options to extend for up to 5 years. These options have been included in the Company’s calculation of the ROU asset and lease liability based upon the Company’s assessment of whether the option will be exercised.

The Company’s lease agreements do not contain any residual value guarantees or material restrictive covenants.

The Company rents or subleases certain real estate to third parties. The Company’s sublease portfolio consists of an operating lease within one of its facilities, resulting in approximately $27,000 of sublease income for the three months ended March 31, 2019.

The components of lease expense were as follows:



Three months ended March 31,	2019
Operating lease cost	$	280,246

Finance lease cost:
Amortization of right-of-use assets	$	3,166
Interest on lease liabilities	728
Total finance lease costs	$	3,894

Three months ended March 31,	2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	103,004
Operating cash flows from finance leases	728
Financing cash flows from finance leases	2,939

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	2,785,444
Finance leases	31,386

Weighted Average Remaining Lease Term
Operating leases	11 years
Finance leases	4 years

Weighted Average Discount Rate
Operating leases	7.47		%
Finance leases	6.86		%

The undiscounted annual future minimum lease payments are summarized by year in the table below:



Year Ending December 31,	Operating Leases			Finance Leases
2019 (excluding the three months ended March 31, 2019)	$	826,215		$	10,998
2020	1,106,944			14,664
2021	891,346			14,664
2022	805,432			12,276
2023	697,277			7,500
Thereafter	5,555,117			—
Total future minimum lease payments	9,882,331			60,102
Less imputed interest	(3,546,134		)	(8,128		)
Total:	$	6,336,197		$	51,974

Supplemental balance sheet information related to leases was as follows:



Operating Leases as of March 31,	2019
Right of use asset	$	6,035,660

Current portion of lease obligations	622,065
Long term portion of lease obligations	5,714,132
Total operating lease obligations	6,336,197

Financing Leases as of March 31,	2019
Property and Equipment, at cost	56,933
Accumulated depreciation	(5,295		)
Property and Equipment, net	51,638

Other accounts payable and accrued expenses	11,445
Other long term liabilities	40,529
Total financing lease liabilities	$	51,974