Finance and Operating Lease Obligations

9 Months Ended

Sep. 30, 2023

Finance And Operating Lease Obligations

Finance and Operating Lease Obligations

Note 8 – Finance and Operating Lease Obligations

We lease property and equipment under finance and operating leases. For operating leases with terms greater than 12 months, we record the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. We do not separate lease and non-lease components of contracts.

Generally, we use our most recent agreed-upon borrowing interest rate at lease commencement as our interest rate, as most of our operating leases do not provide a readily determinable implicit interest rate.

The following table presents our lease-related assets and liabilities at September 30, 2023 (unaudited) and December 31, 2022:

	Balance Sheet Classification	September 30, 2023			December 31, 2022
Assets:
Operating leases	Right-of-use operating lease assets	$	400,937		$	574,256
Finance lease	Property and equipment, net		-			-
Total lease assets		$	400,937		$	574,256
Liabilities:
Current:
Operating leases	Right-of-use operating lease obligations	$	175,923		$	215,063
Finance lease	Finance lease obligation		220,461			220,461
Long-term	Right-of-use operating lease obligations		225,014			359,193
Total lease liabilities		$	621,398		$	794,717
Weighted average remaining term:
Operating leases			2.1 years			2.6 years
Finance lease (1)			N/a			N/a
Weighted average discount rate:
Operating leases			13.0	%		13.0	%
Finance lease			4.9	%		4.9	%

The following table presents certain information related to lease expense for finance and operating leases for the three and nine months ended September 30, 2023 and 2022 (unaudited):

	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Finance lease expense:
Depreciation/amortization of leased assets	$	-	$	-	$	-	$	-
Interest on lease liabilities		-		-		-		-
Operating leases:
Short-term lease expense (2)		82,347		83,211		257,262		248,250
Total lease expense	$	82,347	$	83,211	$	257,262	$	248,250

Other Information

The following table presents supplemental cash flow information for the nine months ended September 30, 2023 and 2022 (unaudited):

	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	220,365	$	218,846
Operating cash flows for finance lease	$	-	$	-
Financing cash flows for finance lease payments	$	-	$	-

(1)	As of September 30, 2023 and December 31, 2022, the Company was in default under its finance lease obligation, therefore, the aggregate future minimum lease payments and accrued interest under this finance lease in the amount of $0.2 million are deemed to be immediately due.
(2)	Expenses are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

Aggregate future minimum lease payments under right-of-use operating and finance leases are as follows:

	Right-of-Use Operating Leases			Finance Lease
Twelve months ending September 30:
2024	$	217,839		$	224,252
2025		223,795			-
2026		18,650			-
2027		-			-
2028		-			-
Thereafter		-			-
Total		460,284			224,252
Less interest		(59,347	)		(3,791	)
Present value of minimum lease payments		400,937			220,461
Less current portion of lease obligations		(175,923	)		(220,461	)
Lease obligations, net of current portion	$	225,014		$	-