Note 7 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 7 – Commitments and Contingencies 

As of September 30, 2022, the Company leases facilities and certain equipment under lease commitments that expire through September 2026. Future minimum lease payments for these operating and finance lease commitments for the twelve months ending September 30 are as follows (in thousands):

	Operating Leases			Finance Leases
2023	$	675		$	14
2024		583			12
2025		384			1
2026		269			-
Total future lease payments		1,911			27
Impact of discounting		(183	)		(2	)
Discounted value of lease obligations	$	1,728		$	25

The following table summarizes the components of our gross operating and finance lease costs incurred for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Operating lease cost:
Current lease cost	$	13	$	24	$	62	$	57
Long-term lease cost		183		256		637		768
Total operating lease cost	$	196	$	280	$	699	$	825
Finance lease cost:
Amortization of right-of-use assets	$	3	$	7	$	16	$	54
Interest on lease liabilities		-		1		1		5
Total finance lease cost	$	3	$	8	$	17	$	59

Our weighted-average lease term and discount rate used for the nine months ended September 30, 2022 and 2021 are as follows:

	For the Nine Months Ended
	September 30,
	2022			2021
Operating:
Weighted-average lease term (years)		3.07			3.57
Weighted-average discount rate		6.38	%		6.09	%
Finance:
Weighted-average lease term (years)		1.99			2.36
Weighted-average discount rate		5.59	%		5.72	%

Self-Insurance

In June 2015, the Company became self-insured under its Employee Group Medical Plan, and under that plan was 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 no accrued liability as of September 30, 2022 and December 31, 2021, respectively, for insurance claims that it anticipates paying in the future related to claims that occurred prior to December 31, 2021. 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 was no longer 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). Per the terms of our insurance policy, through March 31, 2022, 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 the fourth quarter of 2021, the final remaining claim was settled resulting in no additional liability to the Company at that time. Concurrent with this settlement, the Company was provided with a range of most likely amounts which would 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 collected the remaining unused deposit that was being held by the underwriter in the second quarter of 2022.

Litigation

On November 8, 2021, a plaintiff who is 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 the plaintiff on November 19, 2019. On  August 9, 2022, the Company, its insurance carriers, and the plaintiff entered into a mediated settlement of all claims against all parties in the matter of the auto liability claim. The $9.3 million settlement agreement was executed by all parties in  September 2022. The insurance claim payment to the plaintiff was covered by the Company’s insurance policies.

On May 22, 2022, Ali Safe, acting individually and on behalf of others, filed a class action complaint in United States District Court for the District of Colorado alleging that the Company and certain of its officers violated securities laws in relation to certain of its SEC Form 10-Q filings in 2021 which required amendments and restatements to such filings. On November  28, 2022, the plaintiff amended their complaint primarily to add Jan Lambert as lead plaintiff and to include Cross River Partners, L.P. and Cross River Capital Management, LLC as defendants.

We believe the claims are without merit and have engaged counsel to vigorously defend the Company against such claims. The Company has Director’s and Officer’s insurance coverage to defend against such claims and the Company's insurance carriers have been notified about the lawsuit. While we believe the claims are without merit, there can be no assurances that a favorable final outcome will be obtained, and defending any lawsuit can be costly and can impose a significant burden on management and employees. Any litigation to which we are a party may result in an unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle such lawsuit on similarly unfavorable terms, either of which could materially adversely affect our business, financial condition, or results of operations. Furthermore, there can be no assurances that our insurance coverage will be available in sufficient amounts to cover such claim, or at all.