Quarterly report pursuant to Section 13 or 15(d)

Finance and Operating Lease Obligations

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Finance and Operating Lease Obligations
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Finance and Operating Lease Obligations

Note 10 – Finance and Operating Lease Obligations

 

As more fully discussed in Note 1, we adopted ASU No. 2016-02, Leases (Topic 842), which requires leases with durations greater than 12 months to be recognized on the balance sheet, effective January 1, 2019, using the modified retrospective approach.

 

Generally, we use our estimated weighted average cost of capital at lease commencement as our interest rate, as most of our operating leases do not provide a readily determinable implicit interest rate.

 

The following table presents our lease-related assets and liabilities at June 30, 2019:

 

    Balance Sheet Classification   June 30, 2019  
Assets:            
Operating leases   Right-of-use operating lease assets   $ 380,769  
Finance leases   Property and equipment, net     618,282  
Total lease assets       $ 999,051  
             
Liabilities:            
Current:            
Operating leases   Right-of-use operating lease assets   $ 166,804  
Finance leases   Current liabilities     589,541  
Noncurrent:            
Operating leases   Right-of-use operating lease obligations     213,965  
Finance leases   Long-term debt     28,741  
             
Total lease liabilities       $ 999,051  
             
Weighted-average remaining term:            
Operating leases          2.23 years  
Finance leases         0.23 years  
Weighted-average discount rate:            
Operating leases (1)         13.0 %
Finance leases         5.122 %

 

(1) Upon adoption of the new lease standard, discount rates used for existing operating leases were established at January 1, 2019.

 

The following table presents certain information related to lease expense for finance and operating leases for the three and six months ended June 30, 2019:

 

    Three Months Ended
June 30, 2019
    Six Months Ended
June 30, 2019
 
Finance lease expense:                
Depreciation/amortization of leased assets (1)   $ 9,290     $ (45,069 )
Interest on lease liabilities     1,155       5,100  
Operating leases:                
Short-term lease expense (2)     99,927       187,401  
Total lease expense   $ 110,372     $ 147,432  

 

(1) The depreciation for the six months ended June 30, 2019 has been adjusted for depreciation recorded in the prior year.
(2) Expenses are included in general and administrative expenses in our condensed consolidated statements of operations.

 

Other Information

 

The following table presents supplemental cash flow information for the six months ended June 30, 2019:

 

    2019  
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows for operating leases   $ 169,109  
Operating cash flows for finance leases   $ 5,100  
Financing cash flows for finance leases payments   $ 143,926  

 

Aggregate future minimum rentals under right-to-use operating and finance leases are as follows:

 

    Right-to-Use Operating Leases     Finance Leases  
July 1, 2019 to June 30, 2020   $ 171,425     $ 604,080  
July 1, 2020 to June 30, 2021     134,776       32,611  
July 1, 2021 to June 30, 2022     110,062       -  
July 1, 2022 to June 30, 2023     29,247       -  
July 1, 2023 to June 30, 2024     2,437       -  
Total     447,947       636,691  
                 
Less interest     (67,178 )     (18,409 )
Present value of minimum lease payments     380,769       618,282  
                 
Less current portion of lease obligations     (166,804 )     (589,541 )
Lease obligations, net of current portion   $ 213,965     $ 28,741  

 

As of June 30, 2019, the Company is in default of substantially all its finance lease obligations, therefore the aggregate future minimum rentals and accrued interest under finance leases in the amount of $0.6 million are deemed to be immediately due.