XML 19 R10.htm IDEA: XBRL DOCUMENT

Leases

9 Months Ended

Sep. 30, 2023

4. LEASES

Refer to Note 3 to these condensed 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 as a lessor.

Lease Commitments

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 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, which was September 18, 2019.

In September 2021, FlexShopper entered into a 12-month lease for an office space for approximately 18 people at the Battery at SunTrust Park at Georgia, Atlanta mainly to expand the sales team. This lease was renewed for another twelve-month period with a monthly rent of approximately $8,800. This lease is accounted for under the practical expedient for leases with initial terms for 12 months or less, and as such no related right of use asset or liability was recorded.

As part of the Revolution Transaction (See Note 14), 22 storefront lease agreements were acquired by FlexShopper. Some of those stores were closed or transferred to franchisees after the Revolution Transaction. As of September 30, 2023, 20 storefront lease agreements belong to FlexShopper. The stores are located in Alabama, Michigan, Nevada, and Oklahoma and are used to offer finance products to customers. The monthly average rent for these stores is approximately $1,700 per month. These leases are accounted for under the practical expedient for leases with initial terms for 12 months or less, and as such no related right of use asset or liability was recorded.

The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are included in the Company’s condensed consolidated balance sheets within the Right of use asset, net, Lease liability- current portion and Lease liabilities net of current portion.

Supplemental balance sheet information related to leases is as follows:

	Balance Sheet Classification	September 30, 2023		December 31, 2022
Assets
Operating Lease Asset	Right of use asset, net	$	1,276,709	$	1,395,741
Finance Lease Asset	Right of use asset, net		5,209		10,529
Total Lease Assets		$	1,281,918	$	1,406,270

Liabilities
Operating Lease Liability – current portion	Current Lease Liabilities	$	229,824	$	199,535
Finance Lease Liability – current portion	Current Lease Liabilities		6,804		8,466
Operating Lease Liability – net of current portion	Long Term Lease Liabilities		1,386,769		1,562,022
Finance Lease Liability – net of current portion	Long Term Lease Liabilities		-		4,600
Total Lease Liabilities		$	1,623,397	$	1,774,623

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 leases:

	Weighted Average Discount Rate			Weighted Average Remaining Lease Term (in years)
Operating Leases		13.03	%		5
Finance Leases		13.39	%		1

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 and amortization in the Company’s consolidated statements of operations. The Company’s total operating and finance lease expense all relate to lease costs amounted to $96,453 and $290,056 for the three and nine months ended September 30, 2023, respectively, and $97,023 and $292,056 for the three and nine months ended September 30, 2022, respectively.

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

	Nine Months ended
	September 30,
	2023		2022
Cash payments for operating leases	$	311,137	$	302,075
Cash payments for finance leases		7,308		8,388

Below is a summary of undiscounted operating lease liabilities as of September 30, 2023. 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
2023	$	106,469
2024		430,134
2025		443,038
2026		456,330
2027		470,019
2028 and thereafter		303,573
Total undiscounted cash flows		2,209,563
Less: interest		(592,970	)
Present value of lease liabilities	$	1,616,593

Below is a summary of undiscounted finance lease liabilities as of September 30, 2023. 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
2023	$	2,391
2024		4,782
Total undiscounted cash flows		7,173
Less: interest		(369	)
Present value of lease liabilities	$	6,804