Finance and Operating Lease Obligations |
Note 9 – 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 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 most recent agreed upon borrowing
interest rate 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 March 31, 2021 and December 31, 2020:
|
|
Balance Sheet Classification |
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
Right-of-use operating lease assets |
|
|
$ |
958,745 |
|
|
$ |
1,000,272 |
|
Finance leases |
|
Property and equipment, net |
|
|
|
249,985 |
|
|
|
249,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease assets |
|
|
|
|
|
$ |
1,208,730 |
|
|
$ |
1,250,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
Right-of-use operating lease obligations |
|
|
$ |
195,454 |
|
|
$ |
172,952 |
|
Finance leases |
|
Current liabilities |
|
|
|
249,985 |
|
|
|
249,985 |
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
Right-of-use operating lease obligations |
|
|
|
763,291 |
|
|
|
827,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease liabilities |
|
|
|
|
|
$ |
1,208,730 |
|
|
$ |
1,250,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining term: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
3.96 years |
|
|
|
4.17 years |
|
Finance leases |
|
|
|
|
|
|
0 years |
|
|
|
0 years |
|
Weighted-average discount rate: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
13.0 |
% |
|
|
13.0 |
% |
Finance leases |
|
|
|
|
|
|
4.9 |
% |
|
|
4.9 |
% |
The following table presents certain information related
to lease expense for finance and operating leases for the three months ended March 31, 2021 and 2020:
|
|
Three Months Ended
March 31, 2021
|
|
|
Three Months Ended
March 31, 2020
|
|
Finance lease expense: |
|
|
|
|
|
|
|
|
Depreciation/amortization of leased assets |
|
$ |
- |
|
|
$ |
15,810 |
|
Interest on lease liabilities |
|
|
- |
|
|
|
46,509 |
|
Operating leases: |
|
|
|
|
|
|
|
|
Short-term lease expense (1) |
|
|
72,650 |
|
|
|
100,706 |
|
Total lease expense |
|
$ |
72,650 |
|
|
$ |
163,025 |
|
(1) |
Expenses are included in general and administrative expenses in the consolidated statements of operations. |
Other Information
The following table presents supplemental cash flow
information for the three months ended March 31, 2021 and 2020:
|
|
Three Months Ended
March 31, 2021
|
|
|
Three Months Ended
March 31, 2020
|
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
Operating cash flows for operating leases obligations |
|
$ |
34,861 |
|
|
$ |
18,000 |
|
Operating cash flows for finance leases |
|
$ |
- |
|
|
$ |
9,455 |
|
Financing cash flows for finance lease payments |
|
$ |
- |
|
|
$ |
100,707 |
|
Aggregate future minimum lease payments under right-of-use
operating and finance leases are as follows:
|
|
Right-of-Use
Operating
Leases
|
|
|
Finance
Leases
|
|
April 1, 2021 to March 31, 2022 |
|
$ |
309,718 |
|
|
$ |
253,776 |
|
April 1, 2022 to March 31, 2023 |
|
|
341,718 |
|
|
|
- |
|
April 1, 2023 to March 31, 2024 |
|
|
243,270 |
|
|
|
- |
|
April 1, 2024 to March 31, 2025 |
|
|
221,088 |
|
|
|
- |
|
April 1, 2025 to March 31, 2026 |
|
|
130,547 |
|
|
|
- |
|
Thereafter |
|
|
|
|
|
|
|
|
Total |
|
|
1,246,341 |
|
|
|
253,776 |
|
|
|
|
|
|
|
|
|
|
Less interest |
|
|
(287,595 |
) |
|
|
(3,791 |
) |
Present value of minimum lease payments |
|
|
958,746 |
|
|
|
249,985 |
|
|
|
|
|
|
|
|
|
|
Less current portion of lease obligations |
|
|
(195,454 |
) |
|
|
(249,985 |
) |
Lease obligations, net of current portion |
|
$ |
763,292 |
|
|
$ |
- |
|
As of March 31, 2021, the Company was in default under
its finance lease obligation, 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.
|