NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited
)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements include the accounts of Inrad Optics, Inc. and its subsidiaries (collectively, the “Company”).
All significant intercompany balances and transactions have been eliminated.
The condensed consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial
information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management,
all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The results
of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal
year. For further information, refer to the consolidated financial statements and accompanying footnotes included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
In preparing these unaudited condensed
consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through
the date the unaudited condensed consolidated financial statements were issued.
Management Estimates
These unaudited condensed consolidated
financial statements and related disclosures have been prepared in conformity with U.S. GAAP, which requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements.
Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including
the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their
effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions.
Significant changes, if any, in those estimates resulting from continuing changes in the economic environment will be reflected
in the consolidated financial statements in future periods.
Accounts Receivable
Accounts receivable are carried at net
realizable value, net of write-offs and allowances. The Company establishes an allowance for doubtful accounts based on estimates
as to the collectability of accounts receivable. Management specifically analyzes past-due accounts receivable balances and, additionally,
considers bad debt history, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating
the adequacy of the allowance for doubtful accounts. Uncollectible accounts receivable are written-off when it is determined that
the balance will not be collected. Reserves for uncollectible accounts receivable are recorded as part of selling, general and
administrative expenses in the Consolidated Statements of Operations, and were $15,000 at June 30, 2019.
Inventories
Inventories are stated at the lower of
cost (first-in-first-out basis) and net realizable value. The Company records a reserve for slow moving inventory as a charge against
earnings for all products identified as surplus, slow-moving or discontinued. Excess work-in-process costs are charged against
earnings whenever estimated costs-of-completion exceed unbilled revenues.
Inventories are comprised of the following and are shown net of inventory reserves of $2,547,119 and $2,486,209
at June 30, 2019 and December 31, 2018, respectively:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Raw materials
|
|
$
|
1,253,654
|
|
|
$
|
1,143,132
|
|
Work in process, including manufactured parts and components
|
|
|
1,075,235
|
|
|
|
1,388,624
|
|
Finished goods
|
|
|
516,107
|
|
|
|
484,127
|
|
|
|
$
|
2,844,996
|
|
|
$
|
3,015,883
|
|
Income Taxes
The Company recognizes deferred tax assets
and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements
or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statements carrying
amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the year in which the differences are
expected to reverse.
In evaluating the Company’s ability
to recover deferred tax assets in future periods, management considers the available positive and negative factors, including the
Company’s recent operating results, the existence of cumulative losses and near term forecasts of future taxable income consistent
with the plans and estimates that management uses to manage the underlying business. A significant piece of objective negative
evidence evaluated was the cumulative loss incurred by the Company over the three year period ended December 31, 2018. Such objective
evidence limits the ability to consider other subjective evidence such as our projections for future growth.
On the basis of this evaluation as of
June 30, 2019, the Company’s management concluded that it is more likely than not that the Company will not be able to realize
any portion of the benefit on the net deferred tax balance of $3,356,000 and therefore the Company continues to maintain a valuation
allowance for the full amount of the net deferred tax balance. When sufficient positive evidence exists, the Company’s income
tax expense will be charged with the increase or decrease in its valuation allowance. An increase or reversal of the Company’s
valuation allowance could have a significant negative or positive impact on the Company’s future earnings.
For the three and six months ended June
30, 2019, the Company did not record a current provision for either state tax or federal tax due to the losses incurred for both
income tax and financial reporting purposes.
For the three and six months ended June
30, 2018, the Company did not record a current provision for income taxes due to the availability of net operating loss carryforwards
to offset taxable income for both federal and state tax purposes.
Net Income (Loss) per Common Share
Basic net income (loss) per common share
is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted
net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares and
common stock equivalents outstanding, calculated on the treasury stock method for options, stock grants and warrants using the
average market prices during the period, including potential common shares issuable upon conversion of outstanding convertible
notes, except if the effect on the per share amounts is anti-dilutive.
For the three and six months ended June
30, 2019, all common stock equivalents were excluded from the computation of diluted net loss per share because their effect is
anti-dilutive. This included 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding
related party convertible notes. In addition 1,218,367 and 1,228,267 common stock options in each respective period, were excluded
from the computation of basic and diluted net income per common share because their effect is anti-dilutive.
For the three and six months ended June
30, 2018, all common stock equivalents were excluded from the computation of diluted net loss per share because their effect is
anti-dilutive. This included 2,500,000 common shares and 1,875,000 common shares from warrants issuable upon conversion of outstanding
related party convertible notes. In addition 183,141 and 100,641 common stock options in each respective period, were excluded
from the computation of basic and diluted net income per common share because their effect is anti-dilutive.
A reconciliation of the shares used in
the calculation of basic and diluted earnings (loss) per common share is as follows:
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
Income(Loss)
|
|
|
Shares
|
|
|
Per Share
|
|
|
Income(Loss)
|
|
|
Shares
|
|
|
Per Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
Basic Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(341,210
|
)
|
|
|
13,653,353
|
|
|
$
|
(0.02
|
)
|
|
$
|
14,104
|
|
|
|
13,535,148
|
|
|
$
|
0.00
|
|
Effect of dilutive securities:
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Convertible Notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accrued Interest on Convertible Notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock Options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
379,376
|
|
|
|
-
|
|
Diluted Income (Loss) Per Share:
|
|
$
|
(341,210
|
)
|
|
|
13,653,353
|
|
|
$
|
(0.02
|
)
|
|
$
|
14,104
|
|
|
|
13,914,524
|
|
|
$
|
0.00
|
|
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2019
|
|
|
June 30, 2018
|
|
|
|
Income(Loss)
|
|
|
Shares
|
|
|
Per Share
|
|
|
Income(Loss)
|
|
|
Shares
|
|
|
Per Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
Basic Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(377,346
|
)
|
|
|
13,641,664
|
|
|
$
|
(0.03
|
)
|
|
$
|
278,267
|
|
|
|
13,521,899
|
|
|
$
|
0.02
|
|
Effect of dilutive securities:
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Convertible Notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accrued Interest on Convertible Notes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock Options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
390,310
|
|
|
|
-
|
|
Diluted Income (Loss) Per Share:
|
|
$
|
(377,346
|
)
|
|
|
13,641,664
|
|
|
$
|
(0.03
|
)
|
|
$
|
278,267
|
|
|
|
13,912,209
|
|
|
$
|
0.02
|
|
Stock-Based Compensation
Stock-based compensation expense is estimated
at the grant date based on the fair value of the award. The Company estimates the fair value of stock options granted using the
Black-Scholes option pricing model. The fair value of restricted stock units granted is based on the closing market price of the
Company’s common stock on the date of the grant. The fair value of these awards, adjusted for estimated forfeitures, is amortized
over the requisite service period of the award, which is generally the vesting period.
Recently Adopted Accounting Standards
In February 2016, the FASB created Topic
842 and issued ASU 2016-02,
Leases (Topic 842)
, which created new accounting and reporting guidelines for leasing arrangements.
The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the
rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent
with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily
will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial
statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.
The Company adopted the requirements of
the new standard effective January 1, 2019, using the modified retrospective transition method, which applies the provisions of
the standard at the effective date without adjustment to the comparative periods presented. The Company adopted the following
practical expedients and elected the following accounting policies related to this standard:
|
·
|
Carry forward of historical
lease classifications and accounting treatment;
|
|
·
|
Short-term lease accounting
policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less;
and
|
|
·
|
The option to not separate
lease and non-lease components for certain equipment lease categories such as office printers and copiers.
|
Adoption of this standard had no effect
on the consolidated balance sheet as of January 1, 2019, and therefore, did not materially impact operating results or liquidity.
The Company signed an amended lease on its facility effective June 1, 2019, and recognized a lease right-of-use asset and corresponding
lease liability of $0.8 million at June 1, 2019. Disclosures related to the amount, timing and uncertainty of cash flows arising
from this lease are included in Note 7.
NOTE 2 – REVENUE
The Company’s revenues are comprised
of product sales as well as products and services provided under long-term government contracts with its customers. All revenue
is recognized when the Company satisfies its performance obligation(s) under the contract (either implicit or explicit) by transferring
the promised product or service to its customer either when (or as) its customer obtains control of the product or service. A performance
obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price
is allocated to each distinct performance obligation. The majority of the Company’s contracts have a single performance obligation,
as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore,
not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price
to each performance obligation using the Company’s best estimate of a standalone selling price for each distinct product
or service in the contract, which is generally based on an observable price.
Revenue is measured as the amount of consideration
the Company expects to receive in exchange for transferring products or providing services. As such, revenue is recorded net of
returns, allowances, customer discounts, and incentives. Sales, value add, and other taxes collected from customers and remitted
to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included
in cost of goods sold.
The Company’s
performance obligations under long-term government contracts are generally satisfied over time. Revenue from products or
services transferred to customers under these performance obligations accounted for approximately 4.0% and 5.1% of revenue
for the six months ended June 30, 2019 and 2018, respectively. This revenue is generally recognized using an input
measure based upon the proportion of actual costs incurred to estimated total project costs, which is a method used to best
depict the Company’s performance to date under the terms of the contract.
Accounting for these long-term government
contracts involves the use of various techniques to estimate total revenue and costs. The Company estimates profit on these long-term
government contracts as the difference between total estimated revenue and expected costs to complete a contract and recognizes
that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future
events that may span several years. These assumptions include, among other things, labor productivity, costs and availability of
materials, and timing of funding by the U.S. government. The nature of these long-term agreements may give rise to several types
of variable consideration, such as claims, awards and incentive fees. Historically, these amounts of variable consideration are
not considered significant. Additionally, contract estimates may include additional revenue for submitted contract modifications
if there exists an enforceable right to the modification, the amount can be reasonably estimated and its realization is probable.
These estimates are based on historical collection experience, anticipated performance, and the Company’s best judgement
at the time. These amounts are generally included in the contract’s transaction price and are allocated over the remaining
performance obligations. Changes in judgments on these above estimates could impact the timing and amount of revenue recognized
with a resulting impact on the timing and amount of associated income. Under these long-term government contracts, the Company
may receive payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to
consideration becomes unconditional. In the event a contract loss becomes known, the entire amount of the estimated loss is recognized
in the Consolidated Statements of Operations.
The majority of the Company’s revenue
is from products and services transferred to customers at a point in time and was approximately 96.0% and 94.9% of revenue for
the six months ended June 30, 2019 and 2018, respectively. The Company recognizes revenue at the point in time in which the customer
obtains control of the product or service, which is generally when product title passes to the customer upon shipment. In limited
cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location.
As part of the adoption of Accounting Standards
Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” the Company reviewed its sales
by market area and reassigned certain customers within the existing markets.
The following table summarizes the Company’s
sales by market area:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Aerospace & Defense
|
|
$
|
979,004
|
|
|
$
|
395,749
|
|
|
$
|
2,019,561
|
|
|
$
|
1,425,288
|
|
Process Control & Metrology
|
|
|
993,355
|
|
|
|
1,555,662
|
|
|
|
2,114,342
|
|
|
|
3,114,101
|
|
Laser Systems
|
|
|
324,282
|
|
|
|
511,689
|
|
|
|
609,272
|
|
|
|
877,919
|
|
Scientific / R&D
|
|
|
322,982
|
|
|
|
260,374
|
|
|
|
477,508
|
|
|
|
608,595
|
|
Total
|
|
$
|
2,619,623
|
|
|
$
|
2,723,474
|
|
|
$
|
5,220,683
|
|
|
$
|
6,025,903
|
|
Net sales by timing of transfers of goods
and services is as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Transfer at point in time
|
|
$
|
2,506,028
|
|
|
$
|
2,520,975
|
|
|
$
|
5,013,534
|
|
|
$
|
5,719,755
|
|
Transfer over time
|
|
|
113,595
|
|
|
|
202,499
|
|
|
|
207,149
|
|
|
|
306,148
|
|
Total net sales
|
|
$
|
2,619,623
|
|
|
$
|
2,723,474
|
|
|
$
|
5,220,683
|
|
|
$
|
6,025,903
|
|
The timing of revenue recognition, billings and cash collections results in billed receivables, costs
in excess of billings (contract assets), and billings in excess of costs (contract liabilities, previously deferred revenue) on
the Consolidated Balance Sheet. Contract liabilities also include customer advances or prepayments. Costs in excess of billings
and billings in excess of costs associated with long-term government contracts were not significant at June 30, 2019 or 2018. At
June 30, 2019 and 2018, the remaining revenue to be recognized from the long-term government contracts was $105,000 and $420,000,
respectively.
On June 30, 2019, the Company had approximately
$4.8 million of remaining performance obligations, which is also referred to as backlog. Approximately 15% of the June 30, 2019
backlog is related to projects that will extend beyond June 30, 2020.
NOTE 3 – EQUITY COMPENSATION PROGRAM AND STOCK
BASED COMPENSATION
The Company's results of operations for
the three months ended June 30, 2019 and 2018, include stock-based compensation expense for stock option grants totaling $33,591
and $12,966, respectively. Such amounts have been included in the accompanying Condensed Consolidated Statements of Operations
within cost of goods sold in the amount of $9,493 ($3,514 for 2018), and selling, general and administrative expenses in the amount
of $24,098 ($9,452 for 2018).
The Company's results of operations for
the six months ended June 30, 2019 and 2018, include stock-based compensation expense for stock option grants totaling $62,719
and $26,001, respectively. Such amounts have been included in the accompanying Condensed Consolidated Statements of Operations
within cost of goods sold in the amount of $17,719 ($7,097 for 2018), and selling, general and administrative expenses in the amount
of $45,000 ($18,904 for 2018).
As of June 30, 2019 and 2018, there were
$99,627 and $63,485 of unrecognized compensation cost, net of estimated forfeitures, related to non-vested stock options, which
are expected to be recognized over a weighted average period of approximately 1.95 years and 1.11 years, respectively.
There were 200,000 stock options granted
during the six months ended June 30, 2019, and no stock options granted in the six months ended June 30, 2018. The following range
of weighted-average assumptions were used to determine the fair value of stock option grants during the six months ended June
30, 2019 and 2018:
|
|
Six months Ended
|
|
|
|
June
30,
|
|
|
|
2019
|
|
|
2018
|
|
Expected Dividend yield
|
|
|
-
|
%
|
|
|
-
|
%
|
Expected Volatility
|
|
|
125.13
|
%
|
|
|
-
|
%
|
Risk-free interest rate
|
|
|
2.83
|
%
|
|
|
-
|
%
|
Expected term
|
|
|
10
years
|
|
|
|
10
years
|
|
The following table represents stock options
granted, exercised and forfeited during the six months ended June 30, 2019:
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Price per
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Stock Options
|
|
Options
|
|
|
Option
|
|
|
Term (years)
|
|
|
Value
|
|
Outstanding January 1, 2019
|
|
|
1,058,208
|
|
|
$
|
0.64
|
|
|
|
5.58
|
|
|
$
|
337,997
|
|
Granted
|
|
|
200,000
|
|
|
|
0.79
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired/Forfeited
|
|
|
(39,841
|
)
|
|
|
1.27
|
|
|
|
|
|
|
|
|
|
Outstanding June 30, 2019
|
|
|
1,218,367
|
|
|
$
|
0.65
|
|
|
|
6.75
|
|
|
$
|
1,451,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2019
|
|
|
841,698
|
|
|
$
|
0.58
|
|
|
|
4.87
|
|
|
$
|
913,580
|
|
The following table represents non-vested
stock options granted, vested and forfeited for the six months ended June 30, 2019:
|
|
Weighted-average
|
|
|
|
Grant-date Fair Value
|
|
|
|
Options
|
|
|
($)
|
|
Non-Vested - January 1, 2019
|
|
|
349,491
|
|
|
|
0.74
|
|
Granted
|
|
|
200,000
|
|
|
|
0.76
|
|
Vested
|
|
|
(172,822
|
)
|
|
|
0.65
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
Non-Vested - June 30, 2019
|
|
|
376,669
|
|
|
|
0.80
|
|
NOTE 4 – STOCKHOLDERS’ EQUITY
The Company approved a matching contribution
to participants in the Inrad Optics 401k Plan (the “Plan”) for the year ended December 31, 2018, in February 2019.
Cash in the amount of $31,196 and 98,189 common shares of Inrad Optics, Inc. were contributed to the Plan in the second quarter
of 2019.
NOTE 5 – RELATED PARTY TRANSACTIONS
On April 12, 2018, the maturity dates
of a $1,500,000 Subordinated Convertible Promissory Note to Clarex Limited (“Clarex”) and a $1,000,000
Subordinated Convertible Promissory Note to an affiliate of Clarex were each extended to April 1, 2021 from April 1, 2018.
The notes bear interest at an annual rate of 6%. Interest accrues yearly and is payable on maturity. Unpaid interest, along
with principal, may be converted into securities of the Company as follows: the notes are convertible in the aggregate
into 1,500,000 units and 1,000,000 units, respectively, with each unit consisting of one share of common stock and one
warrant. Each warrant allows the holder to acquire 0.75 shares of common stock at a price of $1.35 per share. As part of the
agreement, the expiration dates of the warrants were extended from April 1, 2022 to April 1, 2024. As of June 30, 2019, the
Company had accrued interest in the amount of $112,500 associated with these notes.
NOTE 6 – OTHER LONG TERM NOTES
Other Long Term Notes consist of the following:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(in thousands)
|
|
U.S. Small Business Administration term note payable in equal monthly installments of $1,922 and bearing an interest rate of 4.0% and expiring in April 2032.
|
|
$
|
251,297
|
|
|
$
|
257,741
|
|
Less current portion
|
|
|
(12,960
|
)
|
|
|
(12,960
|
)
|
Long-term debt, excluding current portion
|
|
$
|
238,337
|
|
|
$
|
244,781
|
|
NOTE 7 – LEASE AMENDMENT
The Company entered into an amendment and extension of its building lease on July 8, 2019, retroactive
to June 1, 2019. Under the guidance of ASU 2016-02, Leases (Topic 842), the Company determines if such an arrangement contains
a lease and whether that lease meets the classification criteria of a finance or operating lease at inception of the arrangement. The
Company determined that this lease is an operating lease and presented as a right-of-use lease asset, short term lease liability
and long term lease liability on the consolidated balance sheet as of June 30, 2019. These assets and liabilities are recognized
at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental
borrowing rate.
Lease expense is recognized on a straight-line basis over the lease term and is included in cost of sales
and general and administrative expenses on the consolidated statement of operations.
An initial right-of-use asset of $0.8 million
was recognized as a non-cash asset addition with the signing of the July 8, 2019, lease amendment. Cash paid for amounts included
in the present value of operating lease liability was $26,000 during the six months ended June 30, 2019, and is included in operating
cash flows.
Operating lease costs were $0.2 million
and $0.4 million during the three and six months ended June 2019.
The following table presents information
about the amount and timing of cash flows arising from the Company’s operating lease as of June 30, 2019:
Maturity of Lease Liability
|
|
in thousands
|
|
2019 (Remaining)
|
|
$
|
153
|
|
2020
|
|
|
306
|
|
2021
|
|
|
306
|
|
2022
|
|
|
128
|
|
Total undiscounted operating lease payments
|
|
|
893
|
|
|
|
|
|
|
Less: imputed interest
|
|
|
(73
|
)
|
Present value of operating lease liability
|
|
$
|
820
|
|
|
|
|
|
|
Other Information
|
|
|
|
|
Remaining lease term (in months)
|
|
|
35
|
|
Discount rate for operating leases
|
|
|
5.80
|
%
|