v3.22.2.2
Leases
 9 Months Ended
Sep. 30, 2022
Leases [Abstract]  
Leases Leases
The Company has entered into leases for commercial office spaces and vehicles. These leases are not unilaterally cancellable by the Company, are legally enforceable, and specify fixed or minimum amounts. The leases expire at various dates through 2026 and provide for renewal options. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.
The leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Also, the agreements generally require the Company to pay real estate taxes, insurance, and repairs.
On November 3, 2021, the Company entered into an amendment of its Main Office Lease to include an additional 4,811 rentable square feet in the suite adjoining its main office facilities in San Diego, California. The lease term will run concurrently with the main office lease which commenced in December 2021. The lease terms include 3% annual fixed increases in the base rental payment. The lease also requires the Company to pay operating expenses such as utilities, real estate taxes, insurance, and repairs. The lease term commenced on April 15, 2022, and the Company will receive two months of rental abatement to the base rent.
In July 2022, the Company entered into a lease agreement in Westland, Michigan for 10,000 square feet of warehouse space for the purpose of having its own controlled warehouse facility for its finished inventories. The term of the lease is 36 months with a fixed rent of $5,625 per month. There is an option to renew the lease for an additional 36 months, however it is not reasonably certain the Company will exercise the renewal. There is no option to purchase the premises at lease termination.

Supplemental unaudited consolidated balance sheet information related to leases is as follows:
ClassificationSeptember 30, 2022
Operating lease assetsRight-of-use operating lease assets$5,418,912 
Finance lease assetsProperty, plant and equipment, net18,187 
Total lease assets$5,437,099 
Operating lease liabilities - currentOperating lease liabilities - current$708,441 
Operating lease liabilities - noncurrentOperating lease liabilities - noncurrent5,225,555 
Finance lease liabilities - currentOther liabilities 6,569 
Finance lease liabilities - noncurrentOther long-term liabilities 13,013 
Total lease liabilities$5,953,578 

The components of lease expense are as follows:
Three Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,Nine Months Ended September 30,
Classification2022202120222021
Operating lease expenseSelling, general and administrative $241,852 $44,952 $582,449 $136,779 
Finance lease expense: 
Amortization of finance lease assetsSelling, general and administrative1,413 1,536 8,804 3,073 
Interest on finance lease liabilitiesInterest expense553 729 1,791 1,487 
Total lease expense$243,818 $47,217 $593,044 $141,339 
Operating LeaseFinance Lease
Maturities of lease liabilities are as follows:September 30, 2022September 30, 2022
2022$135,103 $1,642 
2023860,418 6,569 
2024892,212 6,569 
2025893,046 6,569 
2026921,273 — 
Thereafter4,745,237 1,642 
Total lease payments8,447,289 22,991 
Less: interest(2,513,293)(3,409)
Total lease obligations$5,933,996 $19,582 

Lease term and discount rate:
September 30, 2022September 30, 2021
Weighted-average remaining lease terms (in years):
Operating lease9.30
Finance lease3.54.5
Weighted-average discount rate:
Operating lease7.8%10.0%
Finance lease7.8%10.0%
Other Information:
Nine Months Ended September 30,Nine Months Ended September 30,
20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases$111,391 $100,292 
Operating cash flows - finance leases$1,791 $1,487 
Financing cash flows - finance leases$7,396 $4,613 
Leased assets obtained in exchange for new finance lease liabilities$18,187 $27,656 
Leased assets obtained in exchange for new operating lease liabilities$— $— 
Sublease
In April 2022, the Company entered into a sublease agreement with certain local San Diego companies to sublease a portion of the Company's 4,811 square foot expansion. The term of the sublease is six months to twelve months with fixed base rental income ranging from $2,250 to $14,500 per month. The sublease has no option for renewal or extension at the end of the sublease term.
Sublease income are as follows:
Three Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,Nine Months Ended September 30,
Classification2022202120222021
Sublease lease incomeOther, net$64,750 $— $84,875 $— 
Leases Leases
The Company has entered into leases for commercial office spaces and vehicles. These leases are not unilaterally cancellable by the Company, are legally enforceable, and specify fixed or minimum amounts. The leases expire at various dates through 2026 and provide for renewal options. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.
The leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Also, the agreements generally require the Company to pay real estate taxes, insurance, and repairs.
On November 3, 2021, the Company entered into an amendment of its Main Office Lease to include an additional 4,811 rentable square feet in the suite adjoining its main office facilities in San Diego, California. The lease term will run concurrently with the main office lease which commenced in December 2021. The lease terms include 3% annual fixed increases in the base rental payment. The lease also requires the Company to pay operating expenses such as utilities, real estate taxes, insurance, and repairs. The lease term commenced on April 15, 2022, and the Company will receive two months of rental abatement to the base rent.
In July 2022, the Company entered into a lease agreement in Westland, Michigan for 10,000 square feet of warehouse space for the purpose of having its own controlled warehouse facility for its finished inventories. The term of the lease is 36 months with a fixed rent of $5,625 per month. There is an option to renew the lease for an additional 36 months, however it is not reasonably certain the Company will exercise the renewal. There is no option to purchase the premises at lease termination.

Supplemental unaudited consolidated balance sheet information related to leases is as follows:
ClassificationSeptember 30, 2022
Operating lease assetsRight-of-use operating lease assets$5,418,912 
Finance lease assetsProperty, plant and equipment, net18,187 
Total lease assets$5,437,099 
Operating lease liabilities - currentOperating lease liabilities - current$708,441 
Operating lease liabilities - noncurrentOperating lease liabilities - noncurrent5,225,555 
Finance lease liabilities - currentOther liabilities 6,569 
Finance lease liabilities - noncurrentOther long-term liabilities 13,013 
Total lease liabilities$5,953,578 

The components of lease expense are as follows:
Three Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,Nine Months Ended September 30,
Classification2022202120222021
Operating lease expenseSelling, general and administrative $241,852 $44,952 $582,449 $136,779 
Finance lease expense: 
Amortization of finance lease assetsSelling, general and administrative1,413 1,536 8,804 3,073 
Interest on finance lease liabilitiesInterest expense553 729 1,791 1,487 
Total lease expense$243,818 $47,217 $593,044 $141,339 
Operating LeaseFinance Lease
Maturities of lease liabilities are as follows:September 30, 2022September 30, 2022
2022$135,103 $1,642 
2023860,418 6,569 
2024892,212 6,569 
2025893,046 6,569 
2026921,273 — 
Thereafter4,745,237 1,642 
Total lease payments8,447,289 22,991 
Less: interest(2,513,293)(3,409)
Total lease obligations$5,933,996 $19,582 

Lease term and discount rate:
September 30, 2022September 30, 2021
Weighted-average remaining lease terms (in years):
Operating lease9.30
Finance lease3.54.5
Weighted-average discount rate:
Operating lease7.8%10.0%
Finance lease7.8%10.0%
Other Information:
Nine Months Ended September 30,Nine Months Ended September 30,
20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases$111,391 $100,292 
Operating cash flows - finance leases$1,791 $1,487 
Financing cash flows - finance leases$7,396 $4,613 
Leased assets obtained in exchange for new finance lease liabilities$18,187 $27,656 
Leased assets obtained in exchange for new operating lease liabilities$— $— 
Sublease
In April 2022, the Company entered into a sublease agreement with certain local San Diego companies to sublease a portion of the Company's 4,811 square foot expansion. The term of the sublease is six months to twelve months with fixed base rental income ranging from $2,250 to $14,500 per month. The sublease has no option for renewal or extension at the end of the sublease term.
Sublease income are as follows:
Three Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,Nine Months Ended September 30,
Classification2022202120222021
Sublease lease incomeOther, net$64,750 $— $84,875 $—