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Leases | 12 Months Ended
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Dec. 31, 2020
Leases [Abstract] |
LEASES | 3. LEASES Lessor accounting In February 2016, the FASB issued ASU No. 2016-02, Leases as amended ("Topic 842"), which is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Under Topic 842, lessees are required to recognize for all leases at the commencement date a lease liability, which is a lessee's obligation to make lease payments arising from a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee's right to use or control the use of a specified asset for the lease term. The Company has determined that the new standard will not materially impact the timing of revenue recognition. The new standard resulted in the Company classifying bad debt expense incurred as a reduction of lease revenue and fees within the consolidated statement of operations including retrospective presentation of prior year financial information. As a result of the change in presentation, the breakout of lease revenues and fees, net of lessor bad debt expense, that ties the consolidated statements of operations is shown below:
|  | Year ended |
|  | December 31, |
|  | 2020 |  |  | 2019 |
Gross lease billings and fees |  | $ | 128,870,481 |  |  | $ | 120,169,406 |
Provision for doubtful accounts |  |  | (31,930,714 | ) |  |  | 34,838,046 |
Lease revenues and fees, net |  | $ | 96,939,767 |  |  | $ | 85,331,360 |
The new standard also impacted the Company as a lessee by requiring all its operating leases to be recognized on the balance sheet as a right-to-use asset and lease liability. The Company has elected a package of optional practical expedients which includes the option to retain the current classification of leases entered prior to January 1, 2019. The Company adopted this new guidance on January 1, 2019. Lessor Information - Refer to Note 2 to these consolidated financial statements for further information about the Company's revenue generating activities as a lessor. All the Company's customer agreements are considered operating leases, and the Company currently does not have any sales-type or direct financing leases. Lease Commitments In August 2017, FlexShopper entered into a 12-month lease with two additional three-year options for retail store space in West Palm Beach, Florida. In April 2018, FlexShopper exercised its first option to extend the term of the lease to September 30, 2021. The monthly rent for this space is approximately $2,300 per month. In January 2019, FlexShopper entered into a 108-month lease with an option for one additional five-year term for 21,622 square feet of office space in Boca Raton, FL to accommodate FlexShopper's business and its employees (the "January 2019 Lease"). The monthly rent for this space is approximately $31,500 with annual three percent increases throughout the initial 108-month lease term beginning on the anniversary of the commencement date. The rental expense for the years ended December 31, 2020 and 2019 was approximately $688,400 and $520,700, respectively. At December 31, 2020, the future minimum annual lease payments are approximately as follows:
2021 |  | $ | 426,233 |
2022 |  |  | 416,627 |
2023 |  |  | 427,305 |
2024 |  |  | 434,916 |
2025 |  |  | 443,038 |
2026 and thereafter |  |  | 1,229,924 |
|  | $ | 3,378,043 |
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 December 31, 2020, is shown in the table below. Supplemental balance sheet information related to leases is as follows:
|  | Balance Sheet Classification |  | December 30, 2020 |  |  | December 31, 2019 |
Assets |  |  |  |  |  |  |  |
Operating Lease Asset |  | Property and Equipment, net |  | $ | 1,673,432 |  |  | $ | 1,847,932 |
Finance Lease Asset |  | Property and Equipment, net |  |  | 27,106 |  |  |  | 31,299 |
Total Lease Assets |  |  |  | $ | 1,700,538 |  |  | $ | 1,879,231 |
Liabilities |  |  |  |  |  |  |  |  |  |
Operating Lease Liability - current portion |  | Current Lease Liabilities |  | $ | 153,019 |  |  | $ | 22,088 |
Finance Lease Liability - current portion |  | Current Lease Liabilities |  |  | 7,707 |  |  |  | 5,638 |
Operating Lease Liability- net of current portion |  | Long Term Lease Liabilities |  |  | 1,925,498 |  |  |  | 2,040,576 |
Finance Lease Liability - net of current portion |  | Long Term Lease Liabilities |  |  | 21,857 |  |  |  | 26,608 |
Total Lease Liabilities |  |  |  | $ | 2,108,081 |  |  | $ | 2,094,910 |
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 Topic 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 |  |  | 13.06 | % |  |  | 8 |
Finance Leases |  |  | 13.31 | % |  |  | 3 |
Upon adoption of Topic 842, 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 the commencement date of the lease. 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 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 amounted to $433,654 and $395,455 for the years ended December 31, 2020 and December 31, 2019, respectively. Supplemental cash flow information related to operating leases is as follows:
|  | December 31, |  |  | December 31, |
|  | 2020 |  |  | 2019 |
Cash payments for operating leases |  | $ | 221,433 |  |  | $ | 164,664 |
Cash payments for finance leases |  |  | 11,049 |  |  |  | 4,782 |
New operating lease asset obtained in exchange for lease liabilities |  |  | - |  |  |  | 2,060,288 |
New finance lease asset obtained in exchange for lease liabilities |  |  | 4,033 |  |  |  | 34,772 |
Below is a summary of undiscounted operating lease liabilities as of December 31, 2020. 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 |
2021 |  | $ | 415,050 |
2022 |  |  | 405,443 |
2023 |  |  | 417,606 |
2024 |  |  | 430,134 |
2025 |  |  | 443,038 |
2026 and thereafter |  |  | 1,229,924 |
Total undiscounted cash flows |  |  | 3,341,195 |
Less: interest |  |  | (1,262,678 | )
Present value of lease liabilities |  | $ | 2,078,517 |
The January 2019 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 approximately $31,500 with payments increasing by 3% on each yearly anniversary of the commencement date. The initial lease term is for nine years with the Company having a one-time option to extend for five years. Below is a summary of undiscounted finance lease liabilities as of December 31, 2020. 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 |
2021 |  | $ | 11,184 |
2022 |  |  | 11,184 |
2023 |  |  | 9,699 |
2024 |  |  | 4,782 |
Total undiscounted cash flows |  |  | 36,849 |
Less: interest |  |  | (7,284 | )
Present value of lease liabilities |  | $ | 29,565 |

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