LEASES

9 Months Ended

Sep. 30, 2021

Finance Leases

Finance leases are included in finance lease right-of-use lease assets and finance lease liability current and long-term liabilities on the unaudited consolidated balance sheets. The associated amortization expenses for the three months ended September 30, 2021 and 2020 were $3,258 and $3,258, respectively, and are included in depreciation and amortization on the unaudited consolidated statements of operations. The associated interest expense for the three months ended September 30, 2021 and 2020 were $0 and $74, respectively, and are included in interest expense on the unaudited consolidated statements of operations. The associated amortization expenses for the nine months ended September 30, 2021 and 2020 were $9,774 and $9,774, respectively, and are included in depreciation and amortization on the unaudited consolidated statements of operations. The associated interest expense for the nine months ended September 30, 2021 and 2020 were $16 and $359, respectively, and are included in interest expense on the unaudited consolidated statements of operations. Please see “Note 6. Line of Credit and Long-Term Debt” for more details.

Operating Leases

Operating leases are included in operating lease right-of-use lease assets, and operating current and long-term lease liabilities on the consolidated balance sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense for equipment is included in cost of revenues and other rents are included in selling, general and administrative expense on the unaudited consolidated statements of operations and are reported net of lease income. Lease income is not material to the results of operations for the three and nine months ended September 30, 2021 and 2020. Total operating lease costs for both the three months ended September 30, 2021 and 2020 were $218,176 and $203,969, respectively. Total operating lease costs for both the nine months ended September 30, 2021 and 2020 were $646,310 and $596,449, respectively.

Cash Flows

Cash paid for amounts included in operating lease liabilities, including some small leases with initial terms less than twelve months was $0.4 million and $1.6 million during the nine months ended September 30, 2021 and 2020, and is included in operating cash flows. Cash paid for amounts included in finance lease was $91,893 and $93,438 during the nine months ended September 30, 2021 and 2020, respectively, and is included in financing cash flows.

Maturities of our lease liabilities for all operating leases are as follows as of September 30, 2021:


September 30, 2021
	Facilities		Equipment		Plant		Total
Year 1	$	214,937	$	7,500	$	650,257	$	872,694
Year 2	195,017		7,500		650,257		852,774
Year 3	38,400		7,500		650,257		696,157
Year 4	38,400		4,375		650,257		693,032
Year 5	12,800		—		650,257		663,057
Thereafter	—		—		3,684,844		3,684,844
Total lease payments	$	499,554	$	26,875	$	6,936,129	$	7,462,558
Less: interest	(58,160)		(2,626)		(2,551,660)		(2,612,446)
Present value of operating lease liabilities	$	441,394	$	24,249	$	4,384,469	$	4,850,112

The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of September 30, 2021:


Remaining lease term and discount rate:	September 30, 2021
Weighted average remaining lease terms (years)
Lease facilities	5.20
Lease equipment	0.60
Lease plant	11.50

Weighted average discount rate
Lease facilities	9.05	%
Lease equipment	8.00	%
Lease plant	9.37	%

Significant Judgments

Significant judgments include the discount rates applied, the expected lease terms, lease renewal options and residual value guarantees. There are several leases with renewal options or purchase options.

The purchase options are not expected to have a material impact on the lease obligation. There are several facility and plant leases which have lease renewal options from one to twenty years.

The largest facility lease has an initial term through 2032. That lease does not have an extension option. The two plant leases both have multiple 5-year extension options for a total of 20 years. Two extension options have been included in the lease right-of-use asset and lease obligation.

The Company will reassess the lease terms and purchase options when there is a significant change in circumstances or when the Company elects to exercise an option that had previously been determined that it was not reasonably certain to do so.

LEASES