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Leases

6 Months Ended

Jun. 30, 2022

13. Leases

Operating Leases

The Company is obligated to make rental payments under non-cancellable operating leases for office, dispatch station space, and transportation equipment, expiring at various dates through 2026. Under the terms of the leases, the Company is also obligated for its proportionate share of real estate taxes, insurance and maintenance costs of the property. The Company is required to hold certain funds in restricted cash and cash equivalents accounts under some of these agreements.

Certain leases for property and transportation equipment contain options to purchase, extend or terminate the lease. Determining the lease term and amount of lease payments to include in the calculation of the right-of-use (ROU) asset and lease obligations for leases containing options requires the use of judgment to determine whether the exercise of an option is reasonably certain and whether the optional period and payments should be included in the calculation of the associated ROU asset and lease obligation. In making such judgment, the Company considers all relevant economic factors that would require whether to exercise or not exercise the option.

The Company’s lease agreements generally do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates, which were used to discount its real estate lease liabilities. The Company used estimated borrowing rates of 6% on January 1, 2019, for all leases that commenced prior to that date, for office spaces and transportation equipment.

Lease Costs

The table below comprise lease expenses for the periods ended June 30, 2022 and 2021:

	Three Months Ended				Six Months Ended
Components of total lease cost:	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Operating lease expense	$	428,728	$	446,564	$	891,353	$	937,939
Short-term lease expense		273,601		125,745		528,697		193,795
Total lease cost	$	702,329	$	572,309	$	1,420,050	$	1,131,734

Lease Position as of June 30, 2022

Right-of-use lease assets and lease liabilities for the Company’s operating leases were recorded in the Condensed Consolidated Balance Sheets as follows:

	June 30, 2022		December 31, 2021
Assets
Lease right-of-use assets	$	3,812,085	$	4,195,682
Total lease assets	$	3,812,085	$	4,195,682

Liabilities
Current liabilities:
Lease liability - current portion	$	1,421,036	$	1,461,335
Noncurrent liabilities:
Lease liability, net of current portion		2,651,849		2,980,946
Total lease liability	$	4,072,885	$	4,442,281

Lease Terms and Discount Rate

Weighted average remaining lease term (in years) - operating leases			3.97
Weighted average discount rate - operating leases			6.00	%

Undiscounted Cash Flows

Future minimum lease payments under the operating leases at June 30, 2022 are as follows:

	Operating Leases
2022, remaining	$	891,985
2023		1,338,089
2024		897,548
2025		894,740
2026		483,775
2027 and thereafter		14,625
Total future minimum lease payments		4,520,762
Less effects of discounting		(447,877	)
Present value of future minimum lease payments	$	4,072,885

Operating lease expense was approximately $428,728 and $446,564 for the three months ended June 30, 2022 and 2021, respectively.

Operating lease expense was approximately $891,353 and $937,939 for the six months ended June 30, 2022 and 2021, respectively.

For the three months ended June 30, 2022, the Company made $428,728 of fixed cash payments related to operating leases and $851,307 related to finance leases.

For the three months ended June 30, 2021, the Company made $446,564 of fixed cash payments related to operating leases and $652,891 related to finance leases.

For the six months ended June 30, 2022, the Company made $891,353 of fixed cash payments related to operating leases and $1,473,882 related to finance leases.

For the six months ended June 30, 2021, the Company made $937,939 of fixed cash payments related to operating leases and $1,254,392 related to finance leases.

Finance Leases

The Company leases vehicles under a non-cancelable finance lease agreements with a liability of $7,931,349 and $10,139,410 as of June 30, 2022 and December 31, 2021, respectively. This includes accumulated depreciation expense of $8,837,761 and $7,095,242 as of June 30, 2022 and December 31, 2021, respectively.

Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $662,495 and $710,645 for the three months ended June 30, 2022 and 2021, respectively.

Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $1,518,276 and $1,357,457 for the six months ended June 30, 2022 and 2021, respectively.

Gain on Lease Remeasurement

In June 2022, the Company reassessed its finance lease estimates relating to vehicle milage and residual value. As a result, the Company determined to purchase the vehicles at the end of the leases which resulted in a gain of $1.4 million recorded as gains from lease accounting on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

Lease Payments

The table below presents lease payments for the periods ended June 30, 2022 and 2021:

	Three Months Ended				Six Months Ended
Components of total lease payment:	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Finance lease payment	$	851,307	$	652,891	$	1,473,882	$	1,254,392
Short-term lease payment		-		-				-
Total lease payments	$	851,307	$	652,891	$	1,473,882	$	1,254,392

Lease Position as of June 30, 2022

Right-of-use lease assets and lease liabilities for the Company’s finance leases were recorded in the Condensed Consolidated Balance Sheets as follows:

	June 30, 2022		December 31, 2021
Assets
Lease right-of-use assets	$	8,408,399	$	9,307,113
Total lease assets	$	8,408,399	$	9,307,113

Liabilities
Current liabilities:
Lease liability - current portion	$	2,655,037	$	3,271,990
Noncurrent liabilities:
Lease liability, net of current portion		5,276,312		6,867,420
Total lease liability	$	7,931,349	$	10,139,410

Lease Terms and Discount Rate

The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s finance leases as of June 30, 2022:

Weighted average remaining lease term (in years) - finance leases			4.14
Weighted average discount rate - finance leases			6.01	%

Undiscounted Cash Flows

Future minimum lease payments under the finance leases at June 30, 2022 are as follows:

	Finance Leases
2022, remaining		1,634,535
2023		2,660,174
2024		1,930,614
2025		1,628,715
2026		826,735
2027 and thereafter		133,586
Total future minimum lease payments		8,814,359
Less effects of discounting		(883,010	)
Present value of future minimum lease payments	$	7,931,349