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Leases

6 Months Ended

Jun. 30, 2019

Note 11 – Leases

We adopted ASU 2016-02: Leases (Topic 842) as of January 1, 2019. We determine if an arrangement is a lease at inception. Operating leases are included in the right-of-use (ROU) assets, current operating lease liabilities and noncurrent operating lease liabilities in our consolidated balance sheet. Finance leases are included in property and equipment, current finance lease obligations and long-term finance lease obligations in our consolidated balance sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

As the discount rates in the Company’s lease are not implicit, the Company estimated the incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term.

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees.

We have operating and finance leases for corporate offices, other regional offices, and certain equipment. Our leases have remaining lease terms of 1 year to 15 years, some of which include multiple options to extend the leases for up to 5 years each.

The components of lease expense were as follows:

	Three months ended		Six months ended
	June 30, 2019		June 30, 2019
Operating lease cost	$	117,842	$	237,539
Finance lease cost
Amortization of assets		2,266		4,533
Interest on finance lease obligations		1,954		3,960
Total net lease cost	$	122,062	$	246,032

Included in the table above, is $106,600 and $198,800 for the three and six months ended June 30, 2019, respectively, of operating lease cost for our corporate headquarters. This space is being leased from The Move, LLC. Our CEO and President, each a related party to WFCF, have a 24.3% jointly-held ownership interest in The Move, LLC.

Rent expense for the three and six months ended June 30, 2018 was $154,900 and $281,100, respectively.

Supplemental balance sheet information related to leases was as follows:

	June 30, 2019
Operating leases:		Related Party		Other		Total
Right of use asset	$	3,017,704	$	274,607	$	3,292,311

Current operating lease liabilities		148,698		59,614		208,312
Noncurrent operating lease liabilities		3,341,434		253,135		3,594,569
Total operating lease liabilities	$	3,490,132	$	312,749	$	3,802,881


Finance leases:	June 30, 2019
Right of use asset, at cost	$	47,367
Accumulated amortization		(18,061	)
Right of use asset, net	$	29,306

Current obligations of finance leases	$	8,044
Finance leases, net of current obligations		29,671
Total finance lease liabilities	$	37,715

Weighted average remaining lease term (in years):
Operating leases		11.5
Finance leases		3.4

Weighted average discount rate:
Operating leases		5.8	%
Finance leases		21.0	%

Supplemental cash flow and other information related to leases was as follows:

	Six months ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	210,645
Operating cash flows from finance leases	$	3,960
Financing cash flows from finance leases	$	2,968

Maturities of lease liabilities were as follows:

Years Ending December 31st,	Operating Leases			Finance Leases
2019 (remaining six months)	$	211,351		$	7,350
2020		422,164			15,705
2021		434,829			14,143
2022		447,874			10,984
2023		461,310			5,610
Thereafter		3,308,155			—
Total lease payments		5,285,683			53,792
Less amount representing interest		(1,482,802	)		(16,077	)
Total lease obligations		3,802,881			37,715
Less current portion		(208,312	)		(8,044	)
Long-term lease obligations	$	3,594,569		$	29,671

As previously reported in the 2018 Form 10-K under ASC Topic 840, future minimum lease payments under the Company’s operating lease agreements that had initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018 were as follows:

Years ended December 31st:	Total
2019	$	420,370
2020		421,590
2021		432,079
2022		447,264
2023		460,682
Thereafter		3,327,705
Total lease commitments	$	5,509,690