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Leases

9 Months Ended

Sep. 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 September 30, 2022 and 2021:

	Three Months Ended				Nine Months Ended
Components of total lease cost:	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Operating lease expense	$	626,188	$	508,128	$	1,517,541	$	1,446,067
Short-term lease expense		334,619	$	62,653		863,316		256,448
Total lease cost	$	960,807	$	570,781	$	2,380,857	$	1,702,515

Lease Position as of September 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:

	September 30, 2022		December 31, 2021
Assets
Lease right-of-use assets	$	8,185,547	$	4,195,682
Total lease assets	$	8,185,547	$	4,195,682

Liabilities
Current liabilities:
Lease liability - current portion	$	2,059,278	$	1,461,335
Noncurrent liabilities:
Lease liability, net of current portion		6,406,246		2,980,946
Total lease liability	$	8,465,524	$	4,442,281

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 September 30, 2022:

Weighted average remaining lease term (in years) - operating leases			5.22
Weighted average discount rate - operating leases			6.00	%

Undiscounted Cash Flows

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


	Operating Leases
2022, remaining	$	676,878
2023		2,375,470
2024		1,880,974
2025		1,897,247
2026		1,499,654
2027 and thereafter		1,418,692
Total future minimum lease payments		9,748,915
Less effects of discounting		(1,283,391	)
Present value of future minimum lease payments	$	8,465,524

Operating lease expense was approximately $960,807 and $570,781 for the three months ended September 30, 2022 and 2021, respectively.

Operating lease expense was approximately $2,380,857 and $1,702,515 for the nine months ended September 30, 2022 and 2021, respectively.

For the three months ended September 30, 2022, the Company made $626,188 of fixed cash payments related to operating leases and $672,975 related to finance leases.

For the three months ended September 30, 2021, the Company made $519,716 of fixed cash payments related to operating leases and $725,233 related to finance leases.

For the nine months ended September 30, 2022, the Company made $1,517,541 of fixed cash payments related to operating leases and $2,146,857 related to finance leases.

For the nine months ended September 30, 2021, the Company made $1,446,067 of fixed cash payments related to operating leases and $1,972,283 related to finance leases.

Finance Leases

The Company leases vehicles under a non-cancelable finance lease agreements with a liability of $8,945,489 and $10,139,410 as of September 30, 2022 and December 31, 2021, respectively. This includes accumulated depreciation expense of $9,662,686 and $7,095,242 as of September 30, 2022 and December 31, 2021, respectively.

Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $873,713 and $752,313 for the three months ended September 30, 2022 and 2021, respectively.

Depreciation expense for the vehicles under non-cancelable lease agreements amounted to $2,391,989 and $2,109,770 for the nine months ended September 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.

Lease Payments

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

	Three Months Ended				Nine Months Ended
Components of total lease payment:	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Finance lease payment	$	672,975	$	717,891	$	2,146,857	$	1,972,283
Short-term lease payment		-		-				-
Total lease payments	$	672,975	$	717,891	$	2,146,857	$	1,972,283

Lease Position as of September 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:

	September 30, 2022		December 31, 2021
Assets
Lease right-of-use assets	$	9,421,196	$	9,307,113
Total lease assets	$	9,421,196	$	9,307,113

Liabilities
Current liabilities:
Lease liability - current portion	$	2,858,968	$	3,271,990
Noncurrent liabilities:
Lease liability, net of current portion		6,086,521		6,867,420
Total lease liability	$	8,945,489	$	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 September 30, 2022:

Weighted average remaining lease term (in years) - finance leases			3.92
Weighted average discount rate - finance leases			6.01	%

Undiscounted Cash Flows

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

	Finance Leases
2022, remaining		878,626
2023		3,127,590
2024		2,398,030
2025		2,095,826
2026		1,185,433
2027 and thereafter		274,974
Total future minimum lease payments		9,960,479
Less effects of discounting		(1,014,990	)
Present value of future minimum lease payments	$	8,945,489

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

	Operating Leases
2022, remaining	$	676,878
2023		2,375,470
2024		1,880,974
2025		1,897,247
2026		1,499,654
2027 and thereafter		1,418,692
Total future minimum lease payments		9,748,915
Less effects of discounting		(1,283,391	)
Present value of future minimum lease payments	$	8,465,524