Note 9 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 9 – Commitments and Contingencies

As of December 31, 2021, the Company leases facilities and certain equipment under lease commitments that expire through June 2026. Future minimum lease payments for these operating and finance lease commitments are as follows (in thousands):

	Operating Leases			Finance Leases
For the year ended December 31,
2022	$	799		$	21
2023		641			14
2024		465			10
2025		354			-
2026		179			-
Thereafter		-			-
Total future lease commitments		2,438			45
Impact of discounting		(254	)		(2	)
Discounted value of lease obligations	$	2,184		$	43

The following table summarizes the components of our gross operating and finance lease costs incurred during the years ended December 31, 2021 and 2020 (in thousands):

	For the Year Ended December 31,
	2021			2020
Operating lease expense:
Current lease cost	$	82	$	55
Long-term lease cost		1,026		1,107
Total operating lease cost	$	1,108	$	1,162
Finance lease expense:
Amortization of right-of-use assets	$	64	$	189
Interest on lease liabilities		6		19
Total finance lease cost	$	70	$	208

Our weighted-average lease term and discount rate used during the years ended December 31, 2021 and 2020 are as follows:

	For the Year Ended December 31,
	2021			2020
Operating:
Weighted-average lease term (years)		3.42		4.08
Weighted-average discount rate		6.09	%	6.08	%
Finance:
Weighted-average lease term (years)		2.35		2.09
Weighted-average discount rate		5.67	%	5.94	%

Self-Insurance 

In June 2015, the Company became self-insured under its Employee Group Medical Plan, and currently is responsible to pay the first $50,000 in medical costs per individual participant for claims incurred in the calendar year up to a maximum of approximately $1.8 million per year in the aggregate based on enrollment. The Company had an accrued liability of $0 and $150,000 as of December 31, 2021 and 2020, respectively, for insurance claims that it anticipates paying in the future related to claims that occurred prior to December 31, 2020. The Company's trailing potential liability for unsubmitted claims under the self-insured plan expired on December 31, 2021, and the remaining $92,000 was recorded to other income on that date.

Effective January 1, 2021, the Company moved onto a traditional Employee Group Medical Plan and will no longer be self-insured for claims occurring after that date.

Effective April 1, 2015, the Company had entered into a workers’ compensation and employer’s liability insurance policy with a term through March 31, 2018.  Under the terms of the policy, the Company was required to pay premiums in addition to a portion of the cost of any claims made by our employees, up to a maximum of approximately $1.8 million over the term of the policy (an amount that was variable with changes in annualized compensation amounts). As of December 31, 2021, a former employee of ours had an open claim relating to injuries sustained while in the course of employment, and the projected maximum cost of the policy as determined by the insurance carrier included estimated claim costs that have not yet been paid or incurred in connection with the claim. During the year ended December 31, 2017, our insurance carrier formally denied the workers' compensation claim and has moved to close the claim entirely. Per the terms of our insurance policy, through December 31, 2021 we had paid in approximately $1.8 million of the projected maximum plan cost of $1.8 million, and had recorded approximately $1.6 million as expense over the term of the policy. In  September 2020, the claim was officially denied by the Kansas Division of Workers Compensation Judicial Unit. In the fourth quarter of 2021, the claim was settled and there is no further liability for the claim. Upon settlement, the Company was provided with a range of most likely amounts which will be returned. During the fourth quarter of 2021, the Company reduced the deposit to the lowest amount in the range, or $126,000. The Company expects to collect the remaining unused deposit that is being held by the underwriter in the first or second quarter of 2022.

Effective  April 1, 2018, we entered into a new workers’ compensation policy with a fixed premium amount determined annually, and therefore are no longer partially self-insured for workers' compensation and employer's liability.

Litigation

On November 8, 2021, Amanda Mordica, a Texas resident, filed a complaint in Texas State Court in Atascosa County, against the Company, its wholly owned subsidiary, Heat Waves Hot Oil Service LLC, and two individual former Company employees alleging negligence by the Company and its subsidiary in connection with a traffic accident sustained by Ms. Mordica on November 19, 2019. Ms. Mordica’s claim is in excess of $1.0 million. The Company has tendered this litigation to its insurer who has preliminarily indicated that they have accepted coverage. While the Company’s insurer has reserved its rights in cases of gross negligence, the Company, based upon the advice of litigation counsel, does not believe that it was grossly negligent in this matter.

On November 22, 2021, the Company’s insurance company and Ms. Mordica held a mediation in which the Company participated, which did not result in a settlement. Based on an initial offer by the insurer to Ms. Mordica, as of December 31, 2021, the Company has recorded an accrued liability of $400,000 and a corresponding current receivable in the same amount to reflect insurance coverage. Ms. Mordica has sought an amount up to approximately $10.7 million. The ultimate resolution of the matter could result in a liability over the amount accrued, for which the Company believes insurance coverage is probable. As such, the Company does not believe that this litigation will have a material adverse impact on the Company. However, this conclusion is subject to the inherent uncertainties affecting the outcome of litigation if it occurs.