Leases

6 Months Ended

Jun. 30, 2022

Leases

Leases

Note 10. Leases

The Company determines if an arrangement is a lease at its inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if the Company obtains the rights to direct the use of, and to obtain substantially all of the economic benefits from the use of, the underlying asset. Lease expense for variable leases and short-term leases is recognized when the obligation is incurred.

The Company has operating leases for certain facilities and equipment with a weighted average remaining lease term of 2.75 years as of June 30, 2022. Operating leases are included in right of use lease assets, other current liabilities and long-term lease liabilities on the condensed consolidated balance sheet. Right of use lease assets and liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its respective lease term. The Company does not have an established incremental borrowing rate as it does not have any debt. The Company uses the stated borrowing rate for a lease when readily determinable. When the interest rates implicit in its lease agreements is not readily determinable, the Company used an interest rate based on the marketplace for public debt. The weighted average discount rate associated with operating leases as of June 30, 2022 is 5.5%.

Operating lease expense for the three and six months ended June 30, 2022 was approximately $54,000 and $106,000. The Company has no material variable lease costs or sublease income for the periods ended June 30, 2022.

Maturities of operating lease liabilities as of June 30, 2022 were as follows:

	June 30, 2022
For the year ending December 31, 2022	$	108,000
For the year ending December 31, 2023		217,000
For the year ending December 31, 2024		222,000
For the year ending December 31, 2025 and beyond		56,000
Total lease payments		603,000
Less: imputed lease interest		(45,797	)
Present value of lease liabilities	$	557,203