Leases

3 Months Ended

Mar. 31, 2021

Leases

Leases

6. Leases

The Company leases property and equipment under operating leases, primarily office and warehouse locations. For leases with terms greater than twelve months, the related asset and obligation are recorded at the present value of the lease payments over the term. Many of these leases contain rental escalation clauses which are factored into the determination of the lease payments when appropriate. When available, the lease payments are discounted using the rate implicit in the lease; however, the Company’s current leases do not provide a readily determinable implicit rate. Therefore, the Company’s incremental borrowing rate is estimated to discount the lease payments based on information available at the lease commencement.

These leases contain both lease and non-lease components, which the Company has elected to treat as a single lease component. The Company elected not to recognize leases that have an original lease term, including reasonably certain renewal or purchase obligations, of twelve months or less in its condensed consolidated balance sheets for all classes of underlying assets. Lease costs for such short-term leases are expensed on a straight-line basis over the lease term.

The land used by the Company to operate its seawater desalination plants in the Cayman Islands and The Bahamas is owned by the Company or leased to the Company for immaterial annual amounts and are not included in the lease amounts presented on the condensed consolidated balance sheets.

AdR entered into a lease for land to be used in the Project with an initial effective term of 20-years from the date of full operation of its proposed seawater desalination plant. The lease is cancellable by AdR should it ultimately not proceed with the Project. On June 29, 2020, AdR was notified that the APP Contract was terminated. As a result, the Company, AdR and NSC expect to terminate the various agreements ancillary to the Project or to transfer them to the State, including this land lease for the Project. As such, the lease right-of-use asset and lease liability amounts as of March 31, 2021 and December 31, 2020 do not include this lease.

All lease assets denominated in a foreign currency are measured using the exchange rate at the commencement of the lease. All lease liabilities denominated in a foreign currency are remeasured using the exchange rate as of the condensed consolidated balance sheet date.

Effective March 9, 2021, the Company entered into a new office lease for the existing office located in Coral Springs, Florida under similar terms compared to the prior lease. This new lease expires, including all renewal options, on March 8, 2031.

Lease assets and liabilities

The following table presents the lease-related assets and liabilities and their respective classification on the condensed consolidated balance sheets:

		March 31,		December 31,
		2021		2020
ASSETS
Current
Prepaid expenses and other current assets	$	93,323	$	108,303
Current assets of discontinued operations		26,197		—
Noncurrent
Operating lease right-of-use assets		2,889,508		1,329,561
Long-term assets of discontinued operations		—		33,909
Total lease right-of-use assets	$	3,009,028	$	1,471,773
LIABILITIES
Current
Current maturities of operating leases	$	462,464	$	455,788
Current liabilities of discontinued operations		24,669		29,432
Noncurrent
Noncurrent operating leases		2,520,367		982,076
Noncurrent liabilities of discontinued operations		—		2,499
Total lease liabilities	$	3,007,500	$	1,469,795
Weighted average remaining lease term:
Operating leases		7.5 years		3.4 years
Operating leases - discontinued operations		0.9 years		1.1 years
Weighted average discount rate:
Operating leases		4.92%		4.15%
Operating leases - discontinued operations		3.48%		3.48%

The components of lease costs were as follows:

	Three Months Ended March 31,
	2021		2020
Operating lease costs	$	175,984	$	190,605
Short-term lease costs		4,429		4,116
Lease costs - discontinued operations		7,414		53,287
Total lease costs	$	187,827	$	248,008

Supplemental cash flow information related to leases is as follows:

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in measurement of liabilities:
Operating cash outflows for operating leases	$	191,526	$	231,879
Operating cash outflows for operating leases - discontinued operations		7,820		45,779

Future lease payments relating to the Company’s operating lease liabilities as of March 31, 2021 were as follows:

Years ending December 31,	Total
2021	$	443,802
2022		622,610
2023		627,033
2024		410,464
2025		268,897
Thereafter		1,150,273
Total future lease payments		3,523,079
Less: imputed interest		(540,248)
Total lease obligations		2,982,831
Less: current obligations		(462,464)
Noncurrent lease obligations	$	2,520,367