LEASES AND LEASED PREMISES

6 Months Ended

Jun. 30, 2024

Leases And Leased Premises

LEASES AND LEASED PREMISES

NOTE 12 – LEASES AND LEASED PREMISES

Rental Payments under Non-cancellable Operating Leases and Equipment Leases

The Company through its purchase of Champion acquired several long-term (more than month-to-month) leases for two manufacturing facilities, three office spaces, five distribution centers and five retail spaces. Four of its distribution centers also have retail operations for which it leases its facilities. Lease terms on the various spaces’ expiry from a month-to-month lease (30 days) to a long-term lease expiring in September of 2028.

Rent expense for operating leases totaled approximately $185,000 and $225,000 and $370,000 and $450,000 for the three and six-months ended June 30, 2024, and 2023, respectively. These amounts are included in our condensed consolidated statement of operations in Rental expense, warehousing, outlet expense and Administrative and other. Rental expense, warehousing, outlet expense is specific to warehousing and final manufacturing of our products.

The Company does not have any equipment leases whereby we finance this equipment needed for operations at competitive finance rates. New equipment to be financed in the near term, if necessary, may not be obtainable at competitive pricing with increasing interest rates.

Right of Use Assets and Lease Liabilities

Lease expense for operating leases consists of the lease payments plus any initial direct costs, net of lease incentives, and is recognized on a straight-line basis over the lease term.

The Company’s operating leases are comprised primarily of facility leases and as such we have no finance leases for our vehicles or equipment currently at this time. The Company added approximately $1,000,000 in right-of-use lease assets offset by right-of-use lease liabilities during the 4^th quarter for the year ended December 31, 2023, this included multiple leases that were increased in size and as well as several leases that were extended or options to extend were added in the lease terms.

Balance sheet information related to our leases is presented below:

	Balance Sheet location	June 30, 2024		December 31, 2023
		(unaudited)		(unaudited)
Operating leases:
Right-of-use lease assets	Right-of-use operating lease assets	$	1,312,831	$	1,946,567
Right-of-use lease liability, current	Other current liabilities		791,222		1,039,081
Right-of-use lease liability, long-term	Right-of-use operating lease liability		521,609		907,486

Other information related to leases is presented below:

	Six Months Ended June 30,
	2024			2023
	(unaudited)			(unaudited)
Cash Paid for Amounts Included in Measurement of Liabilities:
Operating cash flows from operating leases	$	328,118		$	243,501
Weighted Average Remaining Lease Term:
Operating leases		2.8 years			3.0 years
Weighted Average Discount Rate:
Operating leases		10.00	%		5.00	%

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:

	Operating leases
July 1, 2024 – June 30, 2025	$	638,836
July 1, 2025 – June 30, 2026		312,295
July 1, 2026 – June 30, 2027		267,302
July 1, 2027 – June 30, 2028		256,782
July 1, 2028 – June 20, 2029		64,754
Thereafter		-
Total future minimum lease payments, undiscounted		1,539,969
Less: Imputed interest		(227,138	)
Present value of future minimum lease payments	$	1,312,831