Operating Leases

9 Months Ended

Sep. 30, 2021

Operating Leases

Operating Leases

Note 9 – Operating Leases

On January 1, 2019, the Company adopted ASC 842 using the modified retrospective method applied to leases that were in place at January 1, 2019. Results for operating periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 840. The Company’s leases consist of operating leases that mostly relate to real estate rental agreements. Most of the value of the Company’s lease portfolio relates to real estate lease agreements that were entered into starting March 2017.

Discount Rate Applied to Operating Leases

To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the “incremental borrowing rate” or “IBR”).

The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the ten year mortgage interest rate.

Right of Use Assets

Right of use assets included in the Company’s condensed consolidated balance sheet were as follows:

	September 30, 2021		December 31, 2020
Non-current assets
Right of use assets, net of amortization	$	4,857,388	$	3,816,035

Total operating lease cost

Individual components of the total lease cost incurred by the Company were as follows:

	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Operating lease expense	$	917,819	$	942,351

Minimum rental payments under operating leases are recognized on a straight light basis over the term of the lease.

Maturity of operating leases

The Company’s amount of future minimum lease payments under operating leases are as follows:

	Operating Leases
Undiscounted future minimum lease payments:
2021 (three months)	$	425,344
2022		1,598,488
2023		1,442,234
2024		1,073,318
2025		699,279
Thereafter		539,442
Total		5,778,105
Amount representing imputed interest		(332,881	)
Total operating lease liability		5,445,224
Current portion of operating lease liability		(1,517,485	)
Operating lease liability, non-current	$	3,927,739