Quarterly report pursuant to Section 13 or 15(d)

Finance and Operating Lease Obligations

v3.20.2
Finance and Operating Lease Obligations
9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Finance and Operating Lease Obligations

Note 10 – Finance and Operating Lease Obligations

 

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. We elected the package of transition provisions available, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. We do not separate lease and non-lease components of contracts.

 

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, 2020 (unaudited) and December 31, 2019:

 

    Balance Sheet Classification   September 30, 2020     December 31, 2019  
          (unaudited)          
Assets:                    
Operating leases   Right-of-use operating lease assets   $ 1,030,021     $ 88,905  
Finance leases   Property and equipment, net     249,985       1,119,418  
                     
Total lease assets       $ 1,280,006     $ 1,208,323  
                     
Liabilities:                    
Current:                    
Operating leases   Right-of-use operating lease obligations   $ 152,609     $ 30,311  
Finance leases   Current liabilities     249,985       1,119,418  
Noncurrent:                    
Operating leases   Right-of-use operating lease obligations     877,412       58,594  
                     
Total lease liabilities       $ 1,280,006     $ 1,208,323  
                     
Weighted-average remaining term:                    
Operating leases         4.39 years        2.96 years  
Finance leases         0 years       0.08 years  
Weighted-average discount rate:                    
Operating leases         13.0 %     13.0 %
Finance leases         4.9 %     5.1 %

 

The following table presents certain information related to lease expense for finance and operating leases for the three and nine months ended September 30, 2020 and 2019:

 

    Three Months Ended September 30, 2020     Three Months Ended September 30, 2019     Nine Months Ended September 30, 2020     Nine Months Ended September 30, 2019  
Finance lease expense:                                
Depreciation/amortization of leased assets (1)   $ -     $ 15,004     $ 26,349     $ (30,055 )
Interest on lease liabilities     -       704       9,455       5,804  
Operating leases:                                
Short-term lease expense (2)     49,196       42,221       219,138       178,795  
Total lease expense   $ 49,196     $ 57,929     $ 254,942     $ 154,544  

 

(1) Adjusts depreciation recorded in the nine months ended September 30, 2019.
(2) Expenses are included in general and administrative expenses in our unaudited condensed consolidated statements of operations.

 

Other Information

 

The following table presents supplemental cash flow information for the nine months ended September 30, 2020 and 2019:

 

    Nine Months Ended September 30, 2020     Nine Months Ended September 30, 2019  
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flows for operating leases   $ -     $ 118,512  
Financing cash flows for operating leases   $ 98,374     $ 41,953  
Operating cash flows for finance leases   $ 9,455     $ 5,800  
Financing cash flows for finance leases payments   $ 200,709     $ 143,930  

 

Aggregate future minimum lease payments under right-of-use operating and finance leases are as follows:

 

    Right-of-Use Operating Leases     Finance Leases  
October 1, 2020 to September 30, 2021   $ 277,940     $ 253,776  
October 1, 2021 to September 30, 2022     337,357       -  
October 1, 2022 to September 30, 2023     307,082       -  
October 1, 2023 to September 30, 2024     217,839       -  
October 1, 2024 to September 30, 2025     223,795       -  
Thereafter     18,650          
Total     1,382,663       253,776  
                 
Less interest     (352,642 )     (3,791 )
Present value of minimum lease payments   $ 1,030,021     $ 249,985  
                 
Less current portion of lease obligations     (152,609 )     (249,985 )
Lease obligations, net of current portion   $ 877,412     $ -  

 

As of September 30, 2020, the Company was in default under its finance lease obligations, therefore, the aggregate future minimum lease payments and accrued interest under this finance lease in the amount of $0.2 million are deemed to be immediately due. In July 2020, the Company entered into a settlement with the holder of one of the finance leases and paid $0.1 million as full and final settlement of the obligation as more fully discussed in Note 15.