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Leases

9 Months Ended

Sep. 30, 2019

Notes To Financial Statements [Abstract]

4. LEASES

Lessor Information - Refer to Note 3 to these condensed consolidated financial statements for further information about the Company’s revenue generating activities as a lessor. All of the Company’s customer agreements are considered operating leases, and the Company currently does not have any sales-type or direct financing leases.

Lessee Information - As a lessee, the Company leases retail, call center and corporate space under operating leases expiring at various times through 2028. At January 1, 2019, the Company recognized $191,001 of operating lease assets and $191,001 of operating lease liabilities as a result of adopting ASU 2016-02.

The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are included in the Company’s consolidated balance sheet beginning January 1, 2019. The breakout of operating lease assets, and current and non-current operating lease liabilities at September 30, 2019, is shown in the table below.

Supplemental balance sheet information related to leases is as follows:

	Balance Sheet Classification	September 30, 2019
Assets
Operating Lease Asset	Property and Equipment, net	$	1,884,822
Finance Lease Asset	Property and Equipment, net		33,036
Total Lease Assets		$	1,917,858

Liabilities
Operating Lease Liability – current portion	Current Lease Liabilities	$	116,403
Finance Lease Liability – current portion	Current Lease Liabilities		5,455
Operating Lease Liability- net of current portion	Long Term Lease Liabilities		1,885,096
Finance Lease Liability – net of current portion	Long Term Lease Liabilities		28,075
Total Lease Liabilities		$	2,035,029

Operating lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company uses its incremental borrowing rate as the discount rate for its leases, as the implicit rate in the lease is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Operating lease assets also include any prepaid lease payments and lease incentives. The lease terms include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company generally uses the base, non-cancelable, lease term when determining the lease assets and liabilities. Under the short-term lease exception provided within ASC 842, the Company does not record a lease liability or right-of-use asset for any leases that have a lease term of 12 months or less at commencement.

Below is a summary of the weighted-average discount rate and weighted-average remaining lease term for the Company’s operating leases:

	Weighted Average Discount Rate			Weighted Average Remaining Lease Term (in years)
Operating Leases		13.50	%		9
Finance Leases		13.40	%		5

Upon adoption of ASU 2016-02, discount rates for existing operating leases were established as of January 1, 2019. The discount rate for the new operating lease related to 901 Yamato Road, Boca Raton, FL was established as of June 1, 2019.

Operating lease expense is recognized on a straight-line basis over the lease term within operating expenses in the Company’s consolidated statements of operations. Finance lease expense is recognized on a straight-line basis over the lease term within interest expense in the Company’s consolidated statements of operations. The Company’s total operating and finance lease expense all relate to lease costs and amounted to $121,314 and $287,170 for the three and nine months ended September 30, 2019, respectively.

Supplemental cash flow information related to operating leases is as follows:

	Nine months ended September 30, 2019
Cash payments for operating leases	$	157,719
Cash payments for finance leases		2,391
New operating lease asset obtained in exchange for lease liabilities		1,869,287
New finance lease asset obtained in exchange for lease liabilities		34,772

The new operating lease asset obtained in exchange for operating lease liabilities, as shown above, does not include the $14,900 of direct costs associated with the new operating lease capitalized as part of the right-of-use asset.

Below is a summary of undiscounted operating lease liabilities as of September 30, 2019. The table also includes a reconciliation of the future undiscounted cash flows to the present value of the operating lease liabilities included in the consolidated balance sheet.

	Operating Leases
2019	$	6,864
2020		303,681
2021		416,998
2022		407,450
2023		419,674
2024 and thereafter		2,048,091
Total undiscounted cash flows		3,602,758
Less: interest		(1,601,259	)
Present value of lease liabilities	$	2,001,499

The Company entered into an office lease in January 2019. The lease commenced in June 2019, at which time the Company recognized the operating lease asset and liability. The Company pays a base monthly rent of $31,532 with payments increasing by 3% on each yearly anniversary of the commencement date. The initial lease term is for 9 years with the Company having a one-time option to extend for 5 years.

Below is a summary of undiscounted finance lease liabilities as of September 30, 2019. The table also includes a reconciliation of the future undiscounted cash flows to the present value of the finance lease liabilities included in the consolidated balance sheet.

	Finance Leases
2019	$	2,391
2020		9,564
2021		9,564
2022		9,564
2023		9,564
2024 and thereafter		4,831
Total undiscounted cash flows		45,478
Less: interest		(11,948	)
Present value of lease liabilities	$	33,530