Note 8 – Leases

The Company has various lease agreements with original terms of up to 10 years, including leases of office space, a laboratory and manufacturing facility, and various equipment. Some leases include purchase, termination or extension options for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

The assets and liabilities from operating and finance leases are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate, which is determined using the average of borrowing rates explicitly stated in the Company’s finance leases.

The Company incurred lease expense for its operating leases of approximately $203.4 thousand and approximately $610.3 thousand for the three and nine months ended September 30, 2020 and 2019, respectively.

The Company incurred interest expense on its finance leases of approximately $1.4 thousand and approximately $5.4 thousand for the three and nine months ended September 30, 2020, respectively, and approximately $2.8 thousand and approximately $9.3 thousand for the three and nine months ended September 30, 2019, respectively. The Company incurred amortization expense on its finance lease right-of-use assets of approximately $8.6 thousand and approximately $50.3 thousand for the three and nine months ended September 30, 2020, respectively, and approximately $25.0 thousand and approximately $97.8 thousand for the three and nine months ended September 30, 2019, respectively.

The following table presents information about the amount and timing of liabilities arising from the Company’s operating and finance leases as of September 30, 2020:

Schedule of Maturity of Operating and Finance Leases Liabilities 

The following table presents information about the amount and timing of liabilities arising from the Company’s operating and finance leases as of December 31, 2019:

Amendment to the Administrative Office Lease in Bedminster New Jersey

On September 23, 2020, the Company entered into an amendment to the lease on its administrative office location in Bedminster New Jersey. Pursuant to the amendment, the Company will lease an additional 3,034 rentable square feet (“Expansion Premises”). The amendment becomes effective upon the date on which the landlord delivers to the Company the Expansion Premises, which is expected to occur on or about January 15, 2021, and extends the term of the lease for seven years from such date. There is no renewal option, no security deposit, no residual value or significant restrictions or covenants other than those customary in such arrangements. Except as expressly provided, all other terms, covenants, conditions and agreements as set forth in the lease will remain unchanged and in full force and effect. The total lease commitment over the seven-year extension period is approximately $1.8 million.