Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.19.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2019
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 8. Commitments and Contingencies

Leases

The Company leases certain office space, construction and office equipment, vehicles and temporary housing generally under non-cancelable operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet, and the Company generally recognizes lease expense for these leases on a straight-line basis over the lease term. As of March 31, 2019, the Company’s operating leases have remaining lease terms ranging from less than one year to 3 years, some of which include options to renew the leases. The exercise of lease renewal options is generally at the Company’s sole discretion. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is a lease at inception. Operating lease ROU assets are included in other assets, while current and long-term operating lease liabilities are included in accrued expenses and other current liabilities, and other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheet as of March 31, 2019. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The present value of future lease payments are discounted using either the implicit rate in the lease, if known, or the Company’s incremental borrowing rate for the specific lease as of the lease commencement date. The ROU asset is also adjusted for any prepayments made or incentives received. The lease terms include options to extend or terminate the lease only to the extent it is reasonably certain any of those options will be exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company accounts for lease components (e.g., fixed payments) separate from the non-lease components (e.g., common-area maintenance costs). The Company does not have any material financing leases.

The Company leases its office under an operating lease beginning March 1, 2014 and ending July 31, 2019.

 

The Company shares this  space and the related costs associated with this operating lease with a related party (see Note 5) that also performs legal services associated with the collection of delinquent assessments.  The Company entered into a sub-lease with an unrelated party but we stopped receiving such sub-lease rental income in September 2018. Net rent expense recognized for the three months ended March 31, 2019 and 2018 were approximated $51,000 and $19,000, respectively.

 

The following table presents components of lease expense for the three months ended March 31, 2019:

 

 

Three Months Ended

March 31, 2019

Operating lease expense

$ 50,392

 

$ 50,392

 

The following table presents supplemental balance sheet information related to operating leases as of March 31, 2019:

 

 

 

Balance Sheet

Line Item

Three Months Ended

March 31, 2019

Assets

 

 

ROU assets

Right of use asset, net

$ 24,259

Total lease assets

 

$ 24,259

 

 

 

Liabilities

 

 

Current lease liabilities

Lease liability

$9,215

Long-term lease liabilities

Lease liability

15,279

Total lease liabilities

 

$ 24,494

 

 

 

Weighted-average remaining lease term (in years)

 

2.5

Weighted-average discount rate

 

8.02%

 

 

 

 

The following table presents supplemental cash flow information and non-cash activity related to operating leases for the three months ended March 31, 2019:

 

Operating Leases

Operating cash flow information

 

   Cash paid for amounts included in the measurement of lease liabilities

$ 2,191

Non-cash activity:

 

   ROU assets obtained in exchange for lease liabilities

26,685

 

 

The following table presents maturities of operating lease liabilities on an undiscounted basis as of March 31, 2019:

 

Year

Operating Leases

2019 (excluding the three months ended March 31, 2019)

$ 6,842

2020

9,784

2021

7,868

 

$ 24,494

 

Legal Proceedings

Other than the lawsuits described below, we are not currently a party to material litigation proceedings. However, we frequently become party to litigation in the ordinary course of business, including either the prosecution or defense of claims arising from contracts by and between us and client Associations. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense, and settlement costs, diversion of management resources and other factors.

 

The Company accrues for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters.