Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases

NOTE 10 – LEASES

 

The Company has entered into various operating and finance lease agreements. The finance lease agreements include equipment and vehicles for the use in daily operations and range from five to six-year terms.

 

The Company currently has seventeen office leases. The first operating lease is for its welding supply store in Clearwater, FL, effective September 1, 2018, for ten years. The initial lease rate was $6,728 per month with escalating payments. The second operating lease is for its welding supply store in Spring Hill, FL. This lease was effective May 1, 2018 and will end on April 30, 2019. The current lease rate is $1,338 per month. The third operating lease is for its welding supply store in Lakeland, FL, from March 31, 2016 through March 31, 2020. The initial lease rate was $2,100 per month with escalating payments. The fourth operating lease is for its welding supply store in Sarasota, FL, from August 1, 2016 through July 31, 2021. The current lease rate is $1,700 per month. The fifth operating lease is for its welding supply store in Sulphur Springs, TX, from February 1, 2019 through January 31, 2020. The current lease rate is $2,000 per month. The sixth operating lease is for its welding supply store in Woodland, CA, from April 4, 2018 through April 3, 2019. The current lease rate is $14,000 per month. The seventh operating lease is for its gas fill plant in Flint, TX, from August 24, 2015 through August 23, 2020. The current lease rate is $900 per month. The eighth operating lease is for its storage facility in Flint, TX, from August 1, 2016 through August 23, 2020. The current lease rate is $5,500 per month. The ninth operating lease is for its welding supply store in Shreveport, LA, from December 1, 2015 through May 31, 2021. The initial lease rate was $2,846 per month with escalating payments. The tenth operating lease is for its welding supply store in Palestine, TX, from August 13, 2015 through August 12, 2020. The current lease rate is $1,800 per month. The eleventh operating lease is for its welding supply store in Paris, TX, from October 18, 2018 through October 17, 2020. The current lease rate is $3,000 per month. The twelfth operating lease is for its welding supply store in Longview, TX, from October 27, 2018 through October 26, 2020. The current lease rate is $2,000 per month. The thirteenth operating lease is for its cylinder repair shop in Tyler, TX, from February 16, 2019 through February 15, 2020. The current lease rate is $2,500 per month. The fourteenth operating lease is for its welding supply store in Tyler, TX, from January 17, 2019 through January 16, 2020. The current lease rate is $6,500 per month. The fifteenth operating lease is for its welding supply store in Compton, CA, from February 22, 2019 through October 31, 2026. The current lease rate is $29,400 per month. The sixteenth operating lease is for its welding supply store in Pomona, CA, from February 22, 2019 through October 31, 2026. The current lease rate is $11,200 per month. The seventeenth operating lease is for its welding supply store in Oxnard, CA, from February 22, 2019 through February 1, 2020. The initial lease rate was $3,394 per month with escalating payments. The eighteenth operating lease is for its welding supply store in Lynwood, CA, from April 1, 2019 through September 30, 2023. The initial lease rate was $2,000 per month with escalating payments. The Company has no other operating with terms greater than 12 months.

 

The Company adopted ASC Topic 842 effective January 1, 2019 using the prospective approach. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use asset of $4,037,472, lease liability of $4,037,472 and eliminated deferred rent of $0. The Company determined the lease liability using the Company’s estimated incremental borrowing rate of 8.0% to estimate the present value of the remaining monthly lease payments.

 

Supplemental balance sheet information related to leases was as follows:

 

Operating Leases:        
Operating lease right-of-use assets   $ 3,750,420  
         
Current portion included in current liabilities   $ 670,055  
Long-term portion included in non-current liabilities     3,080,365  
Total operating lease liabilities   $ 3,750,420  
         
Finance Leases:        
Property and equipment, gross   $ 414,685  
Accumulated depreciation     (166,240 )
Property and equipment, net   $ 248,445  
         
Other current liabilities   $ 90,303  
Other long-term liabilities     158,142  
Total finance lease liabilities   $ 248,445  

 

Supplemental lease expense related to leases was as follows:

 

    For the Three Months
Ended 6/30/2019
    For the Six Months
Ended 6/30/2019
 
Operating lease expense   $ 319,935     $ 473,566  
                 
Finance lease expense:                
Amortization of right-of-use assets   $ 19,068     $ 38,136  
Interest on lease liabilities     2,930       6,083  
Total finance lease expense   $ 21,998     $ 44,219  
                 
Total lease expense   $ 341,933     $ 517,785  

 

Other information related to leases where the Company is the lessee is as follows:

 

    For the Six Months
Ended 6/30/2019
 
Weighted average remaining lease term:        
Operating leases     6.5 years  
Finance leases        
         
Weighted average discount rate:        
Operating leases     2.5 %
Finance leases     4.7 %

 

Supplemental cash flow information related to leases was as follows:

 

    For the Three Months
Ended 6/30/2019
    For the Six Months
Ended 6/30/2019
 
Cash paid for amounts included in the measurement of lease liabilities:                
                 
Operating cash flows from operating leases   $ 261,248     $ 509,691  
Operating cash flows from finance leases (interest payments)     2,930       6,083  
Financing cash flows from finance leases     22,576       45,152  
                 
Right-of-use assets obtained in exchange for lease obligations:                
Operating leases   $ 104,537     $ 3,024,084  
Finance leases     -       -  

 

Maturities of lease liabilities were as follows:

 

    Operating Leases     Finance Leases  
Remainder of 2019   $ 509,798     $ 50,330  
2020     801,911       91,420  
2021     626,571       70,820  
2022     595,541       40,034  
Thereafter     2,361,431       15,236  
Total lease payments     4,895,252       267,840  
Less: Present value adjustment     (1,144,832 )     (19,395 )
Total liability   $ 3,750,420     $ 248,445