Annual report pursuant to Section 13 and 15(d)

Leases

v3.22.1
Leases
12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
Leases

Note 5 –Leases

 

Operating Leases

 

The Company currently has two leases for office space located in Melville, NY.

 

The first lease for office space in Melville, NY commenced on September 1, 2019. The term of this lease is for three years and eleven months and runs co-terminus with our existing lease in the same building. The base annual rent is $10,764 payable in equal monthly installments of $897.

 

A second lease for office space in Melville, NY, was entered into on November 20, 2017, which commenced on April 2, 2018. The term of this lease is five years and three months at $86,268 per year with an escalation of 3% per year and expires on July 31, 2023.

 

The lease for office space in Warwick, RI, called for monthly payments of $2,324 beginning February 1, 2015, which escalated to $2,460 on February 1, 2017. This lease commenced on February 1, 2015, and expired on January 31, 2019. The Company extended this lease until January 31, 2020. This lease was further extended until January 31, 2021. The annual base rent was $31,176 payable in equal monthly installments of $2,598. The Company satisfied the terms of the lease and no longer occupies this premise.

 

On July 31, 2021, the Company signed a three-year lease for approximately 2,880 square feet of office space at 980 North Federal Highway, Boca Raton, FL. The commencement date of the lease was August 1, 2021. The monthly rent is approximately $4,500.

 

The Company leases technical space in New York, Massachusetts, North Carolina and Florida. These leases are month to month and the monthly rent is approximately $39,000.

 

In 2020, the Company entered into a new technical space lease agreement in Dallas, TX. The lease term is 13 months and requires monthly payments of $1,403 and expires on July 31, 2023.

 

On January 1, 2022, the Company entered into a lease agreement for office space with WeWork in Austin, TX. The lease term is six months and requires monthly payments of $1,470 and expires on June 30, 2022.

Finance Lease Obligations

 

On June 1, 2020, the Company entered into a lease agreement with a finance company to lease equipment. The lease obligation is payable in monthly installments of $5,008. The lease carries an interest rate of 7% and is a  three-year lease. The term of the lease ends June 1, 2023.

 

On June 29, 2020, the Company entered into a lease agreement with a finance company to lease equipment. The lease obligation is payable in monthly installments of $5,050. The lease carries an interest rate of 7% and is a  three-year lease. The term of the lease ends June 29, 2023.

 

On July 31, 2020, the Company entered into a lease agreement with a finance company to lease equipment under a finance lease. The lease obligation is payable in monthly installments of $4,524. The lease carries an interest rate of 7% and is a three-year lease. The term of the lease ends July 31, 2023.

 

On November 1, 2021, the Company entered into a lease agreement with a finance company to lease equipment under a finance lease. The lease obligation is payable in monthly installments of $3,152. The lease carries an interest rate of 6% and is a three-year lease. The term of the lease ends September 21, 2024.

 

Finance Lease Obligations – Related Party

 

On April 1, 2018, the Company entered into a lease agreement with Systems Trading Inc. (“Systems Trading”) to refinance all equipment leases into one lease. This lease obligation is payable to Systems Trading with bi-monthly installments of $23,475. The lease carries an interest rate of 5% and is a  four-year lease. The term of the lease ends April 16, 2022. Systems Trading is owned and operated by the Company’s President, Harold Schwartz.

 

On January 1, 2019, the Company entered into a lease agreement with Systems Trading. This lease obligation is payable to Systems Trading with monthly installments of $29,592. The lease carries an interest rate of 6.75% and is a  five-year lease. The term of the lease ends December 31, 2023.

 

On April 1, 2019, the Company entered into two lease agreements with Systems Trading to add new data center equipment. The first lease calls for monthly installments of $1,328 and expires on March 1, 2022. It carries an interest rate of 7%. The second lease calls for monthly installments of $461 and expires on March 1, 2022. It carries an interest rate of 6.7%.

 

On January 1, 2020, the Company entered into a new lease agreement with Systems Trading to lease equipment. The lease obligation is payable to Systems Trading with monthly installments of $10,534. The lease carries an interest rate of 6% and is a  three-year lease. The term of the lease ends January 1, 2023.

 

On March 4, 2021, the Company entered into a new lease agreement with Systems Trading effective April 1, 2021. This lease obligation is payable to Systems Trading with monthly installments of $1,567 and expires on March 31, 2024. The lease carries an interest rate of 8%.

 

The Company determines if an arrangement contains a lease at inception. Right of Use “ROU” assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company’s lease term includes options to extend the lease when it is reasonably certain that it will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company recognizes variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred. A discount rate of 5% was used in preparation of the ROU asset and operating liabilities.

 

The components of lease expense were as follows:

 

       
Components of lease expense    
    Year Ended
December 31, 2021
Finance leases:        
Amortization of assets, included in depreciation and amortization expense   $ 1,125,267  
Interest on lease liabilities, included in interest expense     166,665  
Operating lease:        
Amortization of assets, included in total operating expense     144,813  
Interest on lease liabilities, included in total operating expense     19,415  
Total net lease cost   $ 1,456,160  
         
Supplemental balance sheet information related to leases was as follows        
         
Operating Leases        
         
Operating lease right-of-use asset   $ 422,318  
         
Current operating lease liabilities   $ 205,414  
Noncurrent operating lease liabilities     226,344  
Total operating lease liabilities   $ 431,758  

 

    December 31, 2021
Finance leases:        
Property and equipment, at cost   $ 4,531,418  
Accumulated amortization     (2,759,051 )
Property and equipment, net   $ 1,772,367  
         
Current obligations of finance leases   $ 522,078  
Finance leases, net of current obligations     1,056,092  
Total finance lease liabilities   $ 1,578,170  

 

Supplemental cash flow and other information related to leases was as follows:

 

         
    Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows related to operating leases   $ 179,684  
Financing cash flows related to finance leases   $ 1,125,265  
         
Weighted average remaining lease term (in years):        
Operating leases     2.40  
Finance leases     1.72  
         
Weighted average discount rate:        
Operating leases     5 %
Finance leases     7 %

 

Long-term obligations under the operating and finance leases at December 31, 2021 mature as follows:

 

               
For the Twelve Months Ended December 30,   Operating Leases   Finance Leases
2022   $ 214,150     $  1,007,897  
2023     169,770       568,493  
2024     63,983       102,146  
Total lease payments     447,903       1,678,536  
Less: Amounts representing interest     (16,145 )     (100,366 )
Total lease obligations     431,758       1,578,170  
Less: Current     (205,414 )     (1,056,092 )
    $ 226,344     $ 522,078  

 

As of December 31, 2021, the Company had no additional significant operating or finance leases that had not yet commenced. Rent expense under all operating leases for the year ended December 31, 2021 and 2020 was $184,131 and $ 169,716, respectively.