LEASES

6 Months Ended

Jun. 30, 2021

LEASES

NOTE 13 - Leases

NOTE 13 — LEASES

In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the interest rate that a lessee 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. If we cannot readily determine the discount rate implicit in lease agreements, we utilize our incremental borrowing rate.

The Company has seven operating leases as of June 30, 2021—six in the Dallas/Fort Worth Metroplex and one in Charleston, South Carolina. The lease for DGSE’s flagship-store at 13022 Preston Road, Dallas, Texas will expire October 31, 2021, with no current renewal options. This location is under review as to whether to pursue a lease renewal. The lease for DGSE’s Grand Prairie, Texas location expires June 30, 2022, and has no current renewal options. The lease for DGSE’s Mt Pleasant, South Carolina location expires April 30, 2025, with no additional renewal options. The lease for DGSE’s Euless, Texas location expires June 30, 2025, with an option for an additional five years. ECHG’s Echo, located on W. Belt Line Road, in Carrollton, Texas, renewed their lease starting January 1, 2021 for 61 months, expiring January 31, 2026. ECHG’s lease for ITAD USA’s location on McKenzie Drive in Carrollton, Texas was in effect on June 30, 2021 but expired July 31, 2021. ITAD USA has recently moved its operations to the new CEX location on Realty Road in Carrollton Texas, the lease of which was assigned to CEX effective June 8, 2021 as part of the CExchange Transaction and under which ITAD USA is permitted to utilize the space. The lease expires December 31, 2021, and this location is under review as to whether to pursue a lease renewal. Pursuant to the assignment of the CExchange lease to CEX, the lease is considered short-term and therefore does not fall under the rules to be reported as a Right of Use asset. As such, it will be reported as an operating lease. All of the Company’s seven leases as of June 30, 2021 are triple net, for which it pays its proportionate share of common area maintenance, property taxes and property insurance. Leasing costs for the three months ended June 30, 2021 and 2020 were $588,896 and $342,740, respectively. Leasing costs for the six months ended June 30, 2021 and 2020 were $895,433 and $649,276, respectively, comprised of a combination of minimum lease payments and variable lease costs.  

As of June 30, 2021, the weighted average remaining lease term and weighted average discount rate for operating leases was 2.1 years and 5.5%, respectively. For the three months ended June 30, 2021 and 2020, the Company’s cash paid for operating lease liabilities was $588,026 and $327,608 respectively. For the six months ended June 30, 2021 and 2020, the Company’s cash paid for operating lease liabilities was $923,253 and $672,039, respectively.

Future annual minimum lease payments as of June 30, 2021:

	Operating
	Leases
DGSE
2021 (excluding the six months ending June 30, 2021)	$	217,670
2022		235,677
2023		212,855
2024		213,855
2025		64,087
2026 and thereafter		-
Total minimum lease payments		944,144
Less imputed interest		(82,953	)
DGSE Subtotal		861,191
ECHG
2021 (excluding the six months ending June 30, 2021)		398,386
2022		784,599
2023		806,175
2024		828,345
2025		851,125
2026 and thereafter		72,878
Total minimum lease payments		3,741,508
Less imputed interest		(371,963	)
ECHG Subtotal		3,369,545
Total		4,230,736
Less current portion		(961,873	)
Long-term operating lease liability	$	3,268,863