|9 Months Ended|
Sep. 30, 2020
|12. LEASE OBLIGATIONS||
12. LEASE OBLIGATIONS
The Company leases certain properties and equipment for its ADMA BioCenters subsidiary and certain equipment for its ADMA BioManufacturing subsidiary, which leases provide the right to use the underlying assets and require lease payments through the respective lease terms which expire at various dates through 2030. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. Right-to-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of the lease payments is determined using the Company’s incremental borrowing rate of 13%. The Company’s lease expense is recognized on a straight-line basis over the lease term and is reflected in Plasma center operating expenses and Selling, general and administrative expenses. Aggregate lease expense for the Company’s leases for the three months ended September 30, 2020 and 2019 was approximately $0.2 million and $0.1 million, respectively, and aggregate lease expense for the nine months ended September 30, 2020 and 2019 was approximately $0.4 million and $0.3 million, respectively. Cash paid for the Company’s leases for the three months ended September 30, 2020 and 2019 was approximately $0.1 million, and cash paid for the Company’s leases for the nine months ended September 30, 2020 and 2019 was $0.3 million.
In connection with the adoption of ASU 2016-02 on January 1, 2019 (see Note 2), the Company recognized right to use assets of $1.4 million and lease liabilities of approximately $1.6 million. During the nine months ended September 30, 2020, the Company entered into two new property leases where the Company has opened or intends to open two new plasma collection facilities. In connection with these leases, the Company recognized aggregate lease liabilities and corresponding right-to-use assets in the approximate amount of $1.7 million. Including a finance lease the Company entered into in June 2018, the Company has aggregate lease liabilities of $3.1 million and $1.5 million as of September 30, 2020 and December 31, 2019, respectively, which are comprised primarily of the leases for the Company’s plasma collection centers and an administrative office lease in Roswell, GA related to the Company’s ADMA BioCenters subsidiary. The Company’s operating leases have a weighted average remaining term of 8.3 years. Scheduled payments under the Company’s lease obligations are as follows:
As of October 31, 2020, the Company had entered into two additional property leases where the Company intends to construct additional new plasma collection facilities. The Company has not taken possession of these two leased properties and their lease commencement dates have not been determined. With the exception of advance deposits and initial months’ rent totaling approximately $75,000, no payments have been made under these leases. The initial terms of each lease are from 11 to 13 years with monthly rental payments varying between approximately $17,000 and $21,000, including common area maintenance charges.
The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing.
Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef