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9. LEASES

9 Months Ended

Jun. 30, 2021

Effective October 1, 2019, the Company accounts for its leases under ASC 842, which requires lessees to recognize lease assets and liabilities arising from operating leases on the balance sheet. The Company adopted the new lease guidance using the modified retrospective approach and elected the transition option issued under ASU 2018-11, Leases (Topic 842) Targeted Improvements, allowing entities to continue to apply the legacy guidance in ASC 840, Leases, to prior periods, including disclosure requirements. Accordingly, prior period financial results and disclosures have not been adjusted.

The Company has operating leases under which it leases its branch offices, corporate headquarters, and data center, one of which is with a related party. As of June 30, 2021, the Company's operating lease right of use asset and operating lease liability totaled $559,182 and $554,669, respectively. A weighted average discount rate of 10% was used in the measurement of the right of use asset and lease liability. As the rate implicit in the lease is not readily determinable, the Company's incremental collateralized borrowing rate is used to determine the present value of lease payments. This rate gives consideration to the applicable Company collateralized borrowing rates and is based on the information available at the commencement date. The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term of 12 months or less; therefore, these leases are not recorded on the Company’s consolidated balance sheets, but rather, lease expense is recognized over the lease term on a straight-line basis.

As of June 30, 2021, the Company’s operating leases had a weighted-average remaining lease term of 5 years. Some leases include multiple year renewal options. The Company’s decision to exercise these renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. Currently, the Company has no leases for which the option to renew is reasonably certain and therefore, options to renew were not factored into the calculation of its right of use asset and lease liability as of June 30, 2021. These operating leases also have a weighted average discount rate of 10% at June 30, 2021.

The following is a schedule of the Company's operating lease liabilities by contractual maturity as of June 30, 2021:

Fiscal year ending September 30, 2021 (three months remaining) $ 22,613

Fiscal year ending September 30, 2022 136,696

Fiscal year ending September 30, 2023 140,797

Fiscal year ending September 30, 2024 145,021

Fiscal year ending September 30, 2025 149,372

Thereafter 114,531

Total Lease Payments 709,030

Less: imputed interest (154,361)

Total present value of lease liabilities $ 554,669

Total operating lease costs of $327,991 and $38,328 for the nine months ended June 30, 2021 and 2020, respectively, were included as part of General and administrative expenses. The Company terminated its ATL lease agreement upon exercise of its purchase option (see Note 7 for additional details). The lease agreement was entered into on June 6, 2020 for a two year term at $52,958 of base rent per month.

The Company has financing leases in relation to the equipment used at its data center. The following is a schedule of the Company’s financing lease liabilities by contractual maturity as of June 30, 2021:


Fiscal year ending September 30, 2021 (three months remaining)	$	104,698
Fiscal year ending September 30, 2022		414,998
Fiscal year ending September 30, 2023		321,154
Fiscal year ending September 30, 2024		135,180
Fiscal year ending September 30, 2025		12,320
Thereafter		1,851
Total lease payments		990,201
Less: imputed interest		(117,461)
Total present value of lease liabilities	$	872,740

These financing leases have a weighted average lease term of 3.15 years and a weighted average discount rate of 10.0% at June 30, 2021.