Annual report pursuant to Section 13 and 15(d)

Leases

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Leases
 12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases

7. Leases

 

The Company leases office space in Irvine, California that houses its headquarters and manufacturing facility under a non-cancellable operating lease. The lease term commenced on October 1, 2018 and expires in September 2023. The Company has the option to renew the lease for two additional periods of five years each. The Company also leases office space in Mississauga, Ontario, Canada for its software development personnel. The lease term commenced on August 1, 2018, is set to expire in July 2020, and provides for automatic one-year renewals at the Company’s option. Both office leases are classified as operating leases in conformity with the provisions of Topic 842.

 

The lease cost, included in general and administrative expense, was $113,393 and $106,911 for the years ended December 31, 2019 and 2018, respectively.

 

At December 31, 2019, the weighted average discount rate was 6.69% and the weighted average remaining lease term was 47.36 months with respect to the leases described above.

 

 

The assumptions used in determining the foregoing information are as follows:

 

• Lease term – Topic 842 provides that the lease term consists of: (a) the non-cancelable period of the Irvine and Mississauga office leases; and (b) the period covered by the Company option to extend each office lease for which the Company is reasonably certain to do so. Based on the foregoing, management determined the lease term to extend to September 2023 for the Irvine office lease, and to July 2020 for the Mississauga office lease.

 

• Discount rate – Topic 842 provides that the discount rate is the rate implicit in the lease unless that rate cannot be determined, in which case the lessee’s incremental borrowing rate shall be used. Because neither the rate implicit in the lease nor the Company’s incremental borrowing rate were determinable, discount rates were obtained with reference to published U.S. High Yield CCC corporate bond rates at the inception dates of each of the leases, which, with respect to the Irvine office lease was 6.7%, and with respect to the Mississauga office lease was 6.9%.