LEASES

3 Months Ended

Mar. 31, 2019

NOTE 14 – LEASES

The Company has operating and finance leases for administrative offices, motor vehicles and certain machinery and equipment. The Company’s leases have remaining lease terms of 1 year to 2 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise those options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability. The Company's lease agreements do not contain any material restrictive covenants.

At adoption of ASC 842, the Company recognized right of use assets and liabilities for operating leases of $139,048. The Company’s existing capital leases under ASC 840 are classified as a finance leases under ASC 842.

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at March 31, 2019:


Lease Position	March 31, 2019
Operating Leases
Operating lease right-of-use assets	$	103,369
Right of use liability operating lease short term	$	88,025
Right of use liability operating lease long term		31,344
Total operating lease liabilities	$	119,369

Finance Leases
Equipment	$	166,255
Accumulated depreciation		(25,498	)
Property and equipment, net	$	140,757
Right of use liabilities – finance leases short term		162,952
Right of use liabilities – finance leases long term		75,720
Total finance lease liabilities	$	238,672

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable.

Schedule of incremental borrowing rate
Lease Term and Discount Rate	March 31, 2019
Weighted-average remaining lease term (years)
Operating leases		1.3
Finance leases		1.1
Weighted-average discount rate
Operating leases		13.0	%
Finance leases		10.6	%

The following table provides the Company’s undiscounted cash payment obligations for its operating and finance lease liabilities with initial terms of more than twelve months at March 31, 2019:


	Operating Leases			Finance Leases
2019	$	72,000		$	135,585
2020		56,000			117,807
2021		-			-
2022		-			-
2023		-			-
2024 and thereafter		-			-
Total future undiscounted lease payments	$	128,000		$	253,392
Less: Interest		(8,631	)		(14,720	)
Present value of lease liabilities	$	119,369		$	238,672

At March 31, 2019, the Company had no additional leases which had not yet commenced.

The Company also rents yard storage for $1,000 per month or $12,000 per year beginning on March 1, 2017. The terms of the yard storage lease are month to month. The Predecessor subleased a portion of the office space to Fleaux Services of Louisiana, LLC, a related party. The Predecessor recognized rental income of $2,000, during the period from January 1, 2018 through January 28, 2018, and the Successor recognized rental income of $4,000 for the period from January 29, 2018 through March 31, 2018. The income was recognized as a component of selling, general and administrative expenses. The Predecessor received cash payment of $20,000 from Fleaux Services in January 2018.

Additionally, the Company rents space in Fort Worth, Texas for corporate facilities for $109 monthly or $1,308 per year, and additional office space for $950 per month. The terms of both agreements are month to month.

Galenfeha, Inc. 10-Q