| Finance and Operating Lease Obligations |
Note 11 – Finance and Operating Lease
Obligations
As more fully discussed in Note 2, 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 December 31, 2019:
| |
|
Balance Sheet Classification |
|
December 31, 2019 |
|
| Assets: |
|
|
|
|
|
|
| Operating leases |
|
Right-of-use operating lease assets |
|
$ |
274,747 |
|
| Finance leases |
|
Property and equipment, net |
|
|
1,119,418 |
|
| Total lease assets |
|
|
|
$ |
1,394,165 |
|
| |
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
| Current: |
|
|
|
|
|
|
| Operating leases |
|
Right-of-use operating lease assets |
|
$ |
116,037 |
|
| Finance leases |
|
Current liabilities |
|
|
1,119,418 |
|
| Noncurrent: |
|
|
|
|
|
|
| Operating leases |
|
Right-of-use operating lease obligations |
|
|
158,710 |
|
| Finance leases |
|
Long-term debt |
|
|
— |
|
| |
|
|
|
|
|
|
| Total lease liabilities |
|
|
|
$ |
1,394,165 |
|
| |
|
|
|
|
|
|
| Weighted-average remaining term: |
|
|
|
|
|
|
| Operating leases |
|
|
|
|
2.02 years |
|
| Finance leases |
|
|
|
|
0.08 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. |
Equipment leased under finance leases consisted
of the following:
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2019 |
|
|
2018 |
|
| |
|
|
|
|
|
|
| Medical equipment |
|
$ |
742,745 |
|
|
$ |
742,745 |
|
| Less accumulated depreciation (1) |
|
|
(711,490 |
) |
|
|
(723,318 |
) |
| |
|
|
|
|
|
|
|
|
| Net |
|
$ |
31,255 |
|
|
$ |
19,427 |
|
The following table presents certain information
related to lease expense for finance and operating leases for the year ended December 31, 2019:
| |
|
Year Ended
December 31, 2019 |
|
| Finance lease expense: |
|
|
|
|
| Depreciation/amortization of leased assets (1) |
|
$ |
(11,827 |
) |
| Interest on lease liabilities |
|
|
184,997 |
|
| Operating leases: |
|
|
|
|
| Short-term lease expense (2) |
|
|
356,075 |
|
| Total lease expense |
|
$ |
529,245 |
|
| (1) |
The depreciation for the year ended December 31, 2019 has been adjusted for depreciation recorded in the prior year. |
| (2) |
Expenses are included in general and administrative expenses in our consolidated statements of operations. |
Other Information
The following table presents supplemental cash
flow information for year ended December 31, 2019:
| |
|
2019 |
|
| Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
| Operating cash flows for operating leases |
|
$ |
246,033 |
|
| Operating cash flows for finance leases |
|
$ |
— |
|
| Financing cash flows for finance lease payments |
|
$ |
143,931 |
|
Aggregate future minimum rentals under right-of-use
operating and finance leases are as follows:
| |
|
Right-of-Use |
|
|
|
|
| |
|
Operating Leases |
|
|
Finance Leases |
|
| January 1, 2020 to December 31, 2020 |
|
$ |
144,422 |
|
|
$ |
1,316,564 |
|
| January 1, 2021 to December 31, 2021 |
|
|
136,592 |
|
|
|
— |
|
| January 1, 2022 to December 31, 2022 |
|
|
29,247 |
|
|
|
— |
|
| January 1, 2023 to December 31, 2023 |
|
|
9,749 |
|
|
|
— |
|
| January 1, 2024 to December 31, 2024 |
|
|
— |
|
|
|
— |
|
| Total |
|
|
320,010 |
|
|
|
1,316,564 |
|
| |
|
|
|
|
|
|
|
|
| Less interest |
|
|
(45,264 |
) |
|
|
(197,146 |
) |
| Present value of minimum lease payments |
|
|
274,747 |
|
|
|
1,119,418 |
|
| |
|
|
|
|
|
|
|
|
| Less current portion of lease obligations |
|
|
(116,037 |
) |
|
|
(1,119,418 |
) |
| Lease obligations, net of current portion |
|
$ |
158,710 |
|
|
$ |
0 |
|
Rent expense for the years ended December 31,
2019 and 2018 was $0.4 million and $0.6 million, respectively.
At December 31, 2019, the Company was 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 $0.8 million are deemed to be immediately due.
|