Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

The Company entered into operating leases for corporate and operational facilities (“real estate leases”), computer hardware for datacenters and automobiles (collectively “all other leases”).

Real estate leases. Substantially all real estate leases have remaining terms of seven (7) to ten (10) years, with additional five (5) year extensions available. All of these leases require a fixed lease payment that contains an annual lease payment escalation provision ranging from 3% to 4% per year. Certain leases contain early termination provisions that would require payment of unamortized tenant improvements, real estate broker commissions paid, and up to six (6) months of rent to compensate the landlord for early termination. The cost to exit a lease would be significant and potentially range $0.2 million to $0.8 million. The earliest any lease termination provisions could be exercised would be in 2023.

All other leases. Non-real estate operating leases have remaining terms of two (2) to three (3) years. All of these leases require a fixed lease payment over the entire lease term with no escalation provision. There are no early termination provisions under such arrangements.

The components of lease expense were as follows:

	THREE MONTHS ENDED		NINE MONTHS ENDED
	SEPTEMBER 30,		SEPTEMBER 30,
	2019		2019
	(Unaudited)
Operating lease expense	$	52,043	$	171,684
Finance lease expense:
Amortization of right of use assets	$	137,957	$	415,226
Interest on finance lease liabilities		72,567		211,905
Total finance lease expense	$	210,524	$	627,131

Operating lease expense is included in general and administrative expenses in the condensed consolidated statement of operations. Amortization of right of use assets is include in depreciation and amortization in the condensed consolidated statement of operations.

Supplemental cash flow information related to leases was as follows:

	NINE MONTHS ENDED
	SEPTEMBER 30,
	2019
	(Unaudited)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	171,684
Operating cash flows from finance leases		211,905
Financing cash flows from finance leases		356,926
Right of use assets obtained in exchange for lease obligations:
Operating leases	$	-
Finance leases		-

Supplemental balance sheet information related to leases was as follows:

	SEPTEMBER 30,
	2019
	(Unaudited)
Operating lease right of use assets, net	$	5,690,692
Current portion of operating lease liabilities		499,739
Operating lease liabilities, net of current portion		5,339,380
Weighted average remaining lease term
Operating leases		11.8
Finance leases		1.3
Weighted average discount rate
Operating leases		5	%
Finance leases		5	%

Maturities of lease liabilities as of September 30, 2019, were as follows:

	Operating Leases		Finance Leases
2019	$	657,853	$	114,496
2020		676,169		35,437
2021		695,041		-
2022		648,577		-
2023		665,862		-
Thereafter		4,254,715		-
Total undiscounted operating lease payments		7,598,216		149,933
Less: Imputed interest		1,907,394		1,636
Total finance lease liability	$	5,690,822	$	148,297

During the nine month period ended September 30, 2019, there were no new material operating leases or modifications to existing operating leases.