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12. Leases
9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
12. Leases

The Company adopted ASU No. 2016-02, “Leases” (Topic 842) on January 1, 2019 and applied the modified retrospective approach to adoption whereby the standard is applied only to the current and future periods. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

 

As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

 

The Company leases approximately 54,000 square feet (not in thousands) of industrial space in West Melbourne, Florida, under a non-cancellable operating lease. The lease has the expiration date of September 30, 2027. Annual rental, maintenance and tax expenses for the facility are approximately $491.

 

The Company also leases 8,100 square feet (not in thousands) of office space in Lawrence, Kansas, to accommodate a portion of the Company’s engineering team. In November 2019, this lease was amended to extend the lease term until December 31, 2021. Annual rental, maintenance and tax expenses for the facility are approximately $121.

 

In February 2020, the Company entered into a lease for 6,857 square feet (not in thousands) of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months commencing July 1, 2020. Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent twelve-month period

 

Lease costs consist of the following:

 

    Three Months Ended     Nine Months Ended  
    September 30, 2020     September 30, 2019     September 30, 2020     September 30, 2019  
Operating lease cost   $ 158     $ 134     $ 445     $ 402  
Short-term lease cost           6       2       16  
Variable lease cost     33       31       96       94  
Total lease cost   $ 191     $ 171     $ 543     $ 512  

 

Supplemental cash flow information related to leases was as follows:

 

    Three Months Ended     Nine Months Ended  
    September 30, 2020     September 30, 2019     September 30, 2020     September 30, 2019  
Cash paid for amounts included in the measurement of lease liabilities:                        
 Operating cash flows (fixed payments)   $ 141     $ 118     $ 384     $ 354  
 Operating cash flows (liability reduction)     102       78       267       234  
                                 
ROU assets obtained in exchange for lease obligations:                                
Operating leases     419             454       2,840  

 

Other information related to operating leases was as follows:

 

    September 30, 2020  
Weighted average remaining lease term (in years)     6.20  
Weighted average discount rate     5.50 %

 

Maturity of lease liabilities as of September 30, 2020 were as follows:

 

    September 30, 2020  
Remaining three months of 2020   $ 141  
2021     687  
2022     579  
2023     592  
2024     604  
Thereafter     1,336  
Total payments     3,939  
Less: imputed interest     614  
Total liability   $ 3,325