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Leases

3 Months Ended

Mar. 31, 2020

7. Leases

We have operating leases for our corporate offices and our manufacturing facility, and finance leases for equipment. Our leases have remaining lease terms of three months to 2.5 years, and our two primary operating leases include options to extend the leases for one to three years; those operating leases also include options to terminate the leases within one year. Future renewal options that are not likely to be executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities.

Our operating leases represent building leases for our Stockholm corporate offices and our Kungsbacka manufacturing facility. Our corporate office lease is automatically renewed at a cost increase of 2% on a yearly basis unless we provide written notice three months prior to expiration date.

We report operating leased assets, as well as operating lease current and noncurrent obligations on our balance sheets for the right to use those buildings in our business. Our finance leases represent manufacturing equipment; we report the manufacturing equipment, as well as finance lease current and noncurrent obligations on our balance sheets.

Generally, interest rates are stated in our leases for equipment. When no interest rate is stated in a lease, however, we review the interest rates implicit in our recent finance leases to estimate our incremental borrowing rate. We determine the rate implicit in a lease by using the most recent finance lease rate, or other method we think most closely represents our incremental borrowing rate.

The components of lease expense were as follows (in thousands):

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating lease cost ⁽¹⁾	$	119	$	157

Finance lease cost:
Amortization of leased assets	$	151	$	161
Interest on lease liabilities		7		10
Total finance lease cost	$	158	$	171

⁽¹⁾

Includes short term lease costs of $24,000 and $34,000 for the three months ended March 31, 2020 and 2019, respectively.

Supplemental cash flow information related to leases was as follows (in thousands):

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Cash paid for amounts included in leases:
Operating cash flows from operating leases	$	(91	)	$	(111	)
Operating cash flows from finance leases		(7	)		(10	)
Financing cash flows from finance leases		(132	)		(137	)

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		-			-

Supplemental balance sheet information related to leases was as follows (in thousands):

	March 31, 2020			December 31, 2019
Operating leases
Operating lease right-of-use assets	$	301		$	416

Current portion of operating lease obligations	$	240		$	332
Operating lease liabilities, net of current portion		36			58
Total operating lease liabilities	$	276		$	390

Finance leases
Property and equipment, at cost	$	3,136		$	3,348
Accumulated depreciation		(1,980	)		(1,956	)
Property and equipment, net	$	1,156		$	1,392

Current portion of finance lease obligations	$	520		$	568
Finance lease liabilities, net of current portion		360			508
Total finance lease liabilities	$	880		$	1,076

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Weighted Average Remaining Lease Term
Operating leases		1.0 years		2.0 years
Finance leases		1.4 years		2.2 years


Weighted Average Discount Rate:
Operating leases ⁽²⁾		5%		5%
Finance leases		2%		3%

⁽²⁾

Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019

A summary of future minimum payments under non-cancellable operating lease commitments as of March 31, 2020 is as follows (in thousands):

Years ending December 31,	Total
2020 (remaining months)	$	228
2021		56
		284
Less imputed interest		(8	)
Total lease liabilities	$	276

The following is a schedule of minimum future rentals on the non-cancellable finance leases as of March 31, 2020 (in thousands):

Year ending December 31,	Total
2020 (remaining months)	$	415
2021		447
2022		34
Total minimum payments required:		896
Less amount representing interest:		(16	)
Present value of net minimum lease payments:		880
Less current portion		(520	)
	$	360