Operating Lease Obligations

9 Months Ended

Sep. 30, 2022

Operating Lease Obligations

Operating Lease Obligations

(9) Operating Lease Obligations

The Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), Accounting Standards Codification 842 prospectively using the modified-retrospective method and elected the package of transition practical expedients that does not require reassessment of: (1) whether any existing or expired contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical expedients to not separate lease and nonlease components, which consist principally of common area maintenance charges, and to exclude leases with an initial term of 12 months or less.

The Company leases its headquarters where it occupies 10,877 square feet of office space. On March 1, 2021, the Company extended its lease for three additional years until May 31, 2024. The Company’s lease contains variable lease costs that do not depend on a rate or index and consist primarily of common area maintenance, taxes, and insurance charges. As the implicit rate was not readily determinable for the Company’s lease, the Company used an estimated incremental borrowing rate, or discount rate, to determine the initial present value of the lease payments. The discount rate for the lease was calculated using a synthetic credit rating model.

As of March 1, 2021, the effective date of the lease modification, the Company remeasured the lease liability for the remaining portion of the lease and adjusted the lease liability to $755,085 and right-of-use assets to $752,391, which was recorded net of a deferred rent liability of $2,694. As of September 30, 2022, the Company’s right-of-use asset, net of amortization, was $394,205.

Other operating lease information as of September 30, 2022:

Weighted-average remaining lease term - operating leases	1.7	years
Weighted-average discount rate - operating leases	2.76	%

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of September 30, 2022:

	September 30,
Year ending:	2022
December 31, 2022	$	60,105
December 31, 2023		240,421
December 31, 2024		100,175
Total minimum lease payments		400,701
Less: imputed lease interest		(8,601)
Total lease liabilities	$	392,100

Lease expense for the nine months ended September 30, 2022 was comprised of the following:

	Nine months ended September 30,
		2022		2021
Operating lease expense	$	181,262	$	183,788
Variable lease expense		46,951		46,190
Total lease expense	$	228,213	$	229,978

Total cash payments related to leases were $227,266 and $237,835 for the nine months ended September 30, 2022 and 2021, respectively.