Note 9 - Leases

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

9.          LEASES

The Company determines if an arrangement is a lease at inception. The guidance in FASB ASC Topic 842, Leases defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating lease right of use (“ROU”) assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. The Company’s leases do not provide an implicit rate. Due to a lack of financing history or ability, the Company uses an estimate of low-grade debt rate published by the Federal Reserve Bank as its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The ROU asset includes any lease payments made and excludes lease incentives and initial direct costs incurred.

For leases beginning on or after January 1, 2019, lease components are accounted for separately from non-lease components for all asset classes. On January 21, 2023, the Company’s lease was amended to extend the expiration date to July 31, 2025. Upon execution of the amendment, which was deemed a lease modification, the Company reassessed the lease liability using the discount rate determined at the modification date and recorded an additional ROU asset for the same amount. The Company’s lease contains renewal provisions and escalating rental clauses and generally requires the Company to pay utilities, insurance, taxes and other operating expenses. The renewal provisions of the existing lease agreement were not included in the determination of the operating lease liabilities and the ROU assets. The Company also reassessed the lease classification and concluded that the lease continues to be an operating lease.

Amortization of ROU operating lease assets was $71 and $26 for the three months ended March 31, 2024, and 2023, respectively.

Operating lease expense for capitalized operating leases included in operating activities was $249 and $49 for the three months ended March 31, 2024, and 2023, respectively. Operating lease obligations recorded on the balance sheet at March 31, 2024 are:

Operating lease liability- short term	$	619
Operating lease liability - long term	$	1,708
Total Operating Lease Liability	$	2,327

Future lease payments included in the measurement of lease liabilities on the balance sheet at March 31, 2024 for future periods are as follows:

2024 (9 months)	$	372
2025		567
2026		507
2027		522
2028		538
Thereafter		1,273
Total future minimum lease payments	$	3,779
Less imputed interest	$	(1,452	)
Total	$	2,327

The weighted average remaining lease term is 6.60 years, and the weighted average discount rate is 14.3%.

Certain leases contain provisions for payment of real estate taxes, insurance and maintenance costs by the Company. These expenses are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. The Company had $9 and $14 variable lease expenses during the three months ended March 31, 2024, and 2023, respectively.

The Company had $11 and $14 short-term lease expense during the three months ended March 31, 2024, and 2023, respectively. The Company does not have any finance leases.