| 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 September 30, 2019:
| |
|
Balance Sheet Classification |
|
September 30, 2019 |
|
| Assets: |
|
|
|
|
|
|
| Operating leases |
|
Right-of-use operating lease assets |
|
$ |
328,615 |
|
| Finance leases |
|
Property and equipment, net |
|
|
618,278 |
|
| Total lease assets |
|
|
|
$ |
946,893 |
|
| |
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
| Current: |
|
|
|
|
|
|
| Operating leases |
|
Right-of-use operating lease assets |
|
$ |
141,830 |
|
| Finance leases |
|
Current liabilities |
|
|
589,457 |
|
| Noncurrent: |
|
|
|
|
|
|
| Operating leases |
|
Right-of-use operating lease obligations |
|
|
186,785 |
|
| Finance leases |
|
Long-term debt |
|
|
28,821 |
|
| |
|
|
|
|
|
|
| Total lease liabilities |
|
|
|
$ |
946,893 |
|
| |
|
|
|
|
|
|
| Weighted-average remaining term: |
|
|
|
|
|
|
| Operating leases |
|
|
|
|
1.98 years |
|
| Finance leases |
|
|
|
|
0.19 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 nine months ended September 30, 2019:
| |
|
Three Months Ended
September 30, 2019
|
|
|
Nine Months Ended
September 30, 2019 |
|
| Finance lease expense: |
|
|
|
|
|
|
|
|
| Depreciation/amortization of leased assets (1) |
|
$ |
15,004 |
|
|
$ |
(30,055 |
) |
| Interest on lease liabilities |
|
|
704 |
|
|
|
5,804 |
|
| Operating leases: |
|
|
|
|
|
|
|
|
| Short-term lease expense (2) |
|
|
76,312 |
|
|
|
263,713 |
|
| Total lease expense |
|
$ |
92,020 |
|
|
$ |
239,462 |
|
(1) The depreciation for the nine months ended
September 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 nine months ended September 30, 2019:
| |
|
2019 |
|
| Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
| Operating cash flows for operating leases |
|
$ |
214,357 |
|
| Operating cash flows for finance leases |
|
$ |
5,800 |
|
| Financing cash flows for finance leases payments |
|
$ |
143,930 |
|
Aggregate future minimum rentals under right-to-use
operating and finance leases are as follows:
| |
|
Right-to-Use |
|
|
|
|
| |
|
Operating Leases |
|
|
Finance Leases |
|
| October 1, 2019 to September 30, 2020 |
|
$ |
107,457 |
|
|
$ |
604,080 |
|
| October 1, 2020 to September 30, 2021 |
|
|
134,776 |
|
|
|
32,611 |
|
| October 1, 2021 to September 30, 2022 |
|
|
110,062 |
|
|
|
— |
|
| October 1, 2022 to September 30, 2023 |
|
|
29,247 |
|
|
|
— |
|
| October 1, 2023 to September 30, 2024 |
|
|
2,437 |
|
|
|
— |
|
| Total |
|
|
383,979 |
|
|
|
636,691 |
|
| |
|
|
|
|
|
|
|
|
| Less interest |
|
|
(55,364 |
) |
|
|
(18,413 |
) |
| Present value of minimum lease payments |
|
|
328,615 |
|
|
|
618,278 |
|
| |
|
|
|
|
|
|
|
|
| Less current portion of lease obligations |
|
|
(141,830 |
) |
|
|
(589,457 |
) |
| Lease obligations, net of current portion |
|
$ |
186,785 |
|
|
$ |
28,821 |
|
As of September 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.
|