12.	Operating Leases

The Company adopted ASU

2016

as of

January 1, 2019

using the modified retrospective adoption method, which did

not

require it to restate prior periods, and there was

impact on retained earnings. The transition guidance associated with ASU

2016

also permitted certain practical expedients. The Company has elected the “package of

3”

practical expedients permitted under the transition guidance which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs. The Company also adopted the practical expedient to use hindsight to determine the lease term. The Company adopted an accounting policy which provides that leases with an initial term of

months or less and

purchase option the Company is reasonably certain of exercising will

not

be included within the lease right-of-use assets and lease liabilities on its consolidated balance sheet. The Company elected an accounting policy to combine the non-lease components (which include common area maintenance, taxes and insurance) with the related lease component. The Company elected this practical expedient to all asset classes upon the adoption of ASU

2016

02.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the circumstances present. Leases with a term greater than

one

year are recognized on the consolidated balance sheet as right-of-use assets, lease liabilities, and, if applicable, long-term lease liabilities. The Company includes renewal options to extend the lease in the lease term where it is reasonably certain that it will exercise these options. Lease liabilities and the corresponding right-of-use assets are recorded based on the present values of lease payments over the lease terms. The interest rate implicit in lease contracts is typically

not

readily determinable. As such, the Company utilizes the appropriate incremental borrowing rates, which are the rates that would be incurred to borrow on a collateralized basis, over similar terms, amounts equal to the lease payments in a similar economic environment. Variable payments that do

not

depend on a rate or index are

not

included in the lease liability and are recognized as incurred. Lease contracts do

not

include residual value guarantees nor do they include restrictions or other covenants. Certain adjustments to the right-of-use assets

may

be required for items such as initial direct costs paid, incentives received or lease prepayments. If significant events, changes in circumstances, or other events indicate that the lease term or other inputs have changed, the Company would reassess lease classification, remeasure the lease liability by using revised inputs as of the reassessment date, and adjust the right-of-use asset.

The Company has

two

primary leases, which are its real estate leases in Bedford, Massachusetts and Padova, Italy. The Company leases approximately

134,000

square feet of administrative, research and development, and manufacturing space in Bedford, Massachusetts (the “Bedford lease”), and approximately

33,000

square feet of office, research and development, training, and warehousing space in Padova, Italy (the “Padova lease”). The current term of the Bedford lease extends to

2022

with several lease renewal options into

2038,

and the current term of the Padova lease extends to

2032,

with a right to terminate at the Company’s option in

2026

without penalty.

The Company identified and assessed significant assumptions in recognizing the right-of-use asset and lease liability on

January 1, 2019

as follows:

Incremental borrowing rate

. The Company derives its incremental borrowing rate from information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rate represents a collateralized rate of interest the Company would have to pay to borrow over a similar term an amount equal to the lease payments in a similar economic environment. The Company’s lease agreements do

not

provide implicit rates. As the Company did

not

have any external borrowings at the transition date with comparable terms to its lease agreements, the Company estimated its incremental borrowing rate based on its credit quality, line of credit agreement and by comparing interest rates available in the market for similar borrowings, and adjusting this amount based on the impact of collateral over the term of the lease. The weighted average discount rate at

September 30, 2019

4.1%.

Lease term.

The Company applied the hindsight practical expedient and as a result the lease term for the Bedford lease was determined to include all lease renewal options. There were

changes to the lease terms for its other leases. For the Padova lease, the Company considered the termination option when determining the lease term. The weighted average lease term at

September 30, 2019

17.1

years.

The components of lease expense and other information are as follows:

	For the three months ended September 30, 2019		For the nine months ended September 30, 2019
Lease cost
Operating lease cost	$	525	$	1,568
Short-term lease cost		-		6
Variable lease cost		43		155
Total lease cost	$	568	$	1,729

Other information
Operating cash flows from operating leases	$	488	$	1,482

Future commitments due under these lease agreements as of

September 30, 2019

are as follows:

	Operating Lease Obligation As Of
Years ended December 31,	September 30, 2019
2019 (remaining 3 months)	$	497
2020		2,025
2021		2,024
2022		1,981
2023		1,965
Thereafter		23,530
Present value adjustment		(9,310	)
Present value of lease payments		22,712
Less current portion included in Accrued expenses and other current liabilities		(1,109	)
Operating lease liabilities	$	21,603

The following table summarizes the future minimum payments due for the Company’s operating leases under the prior lease guidance without the hindsight practical expedient for each of the next

five

years and the total thereafter as of

December 31, 2018:

Years ended December 31,
2019	$	1,879
2020		1,917
2021		1,924
2022		1,672
2023		414
2024 and thereafter		897
Total	$	8,703