Note 9 - Lease Commitments

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note 9 – Lease Commitments

In accordance with ASC Topic 842, "Leases" ("ASC 842"), the Company determines if an arrangement contains a lease at inception. A lease is an operating or financing contract, or part of a contract, that conveys the right to control the use of an identified tangible asset for a period of time in exchange for consideration.

At lease inception, the Company recognizes a lease liability equal to the present value of the remaining lease payments, and a right of use asset equal to the lease liability, subject to certain adjustments, such as for lease incentives. In determining the present value of the lease payments, the Company calculates an incremental borrowing rate, which is determined by estimating the Company’s applicable, fully collateralized borrowing rate, with adjustment as appropriate for lease term. The lease term at the lease commencement date is determined based on the non-cancellable period for which the Company has the right to use the underlying asset, together with any periods covered by an extension option if the Company is reasonably certain to exercise that option.

Assumptions made by the Company at the commencement date of each lease are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

Right-of-use assets and obligations for leases with an initial term of 12 months or less are considered short term and are a) not recognized in the consolidated balance sheet and b) recognized as an expense on a straight-line basis over the lease term. The Company does not sublease any of its leased assets to third parties and the Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. The Company has lessor agreements that contain lease and non-lease components, but the Company is accounting for the complete agreement under ASC 606 after determining that the non-lease component is the predominant component of these agreements.

ASC 842 includes a number of reassessment and remeasurement requirements for lessees based on certain triggering events or conditions. There were no impairment indicators identified during the three months ended March 31, 2024 that would require impairment testing of the Company’s right-of-use assets.

Certain of the Company’s leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer a distinct service to the Company, such as common area maintenance services. The Company has elected to separate the accounting for lease components and non-lease components for real estate and equipment leases.

In  January 2024, in anticipation of the  March 2024 end date of its leased warehouse in Nashua, NH, the Company entered into a 36 month lease for a new warehouse beginning  February 1, 2024 through 2027.  The new warehouse space, also in Nashua, NH, is for approximately 3,000 square feet with annual rent payments totaling approximately $46,000 for the duration of the lease.  The new lease includes an option to extend the term for two one year periods.  The Company recorded a right-of-use asset and lease liability upon commencement of the lease for approximately $0.1 million.

Components of Leases:

The Company has leases for office space and office equipment. The leases expire at various dates through 2028.

		Three Months Ended
Lease Cost	Classification	March 31, 2024
Operating lease cost - Right of Use Asset	Operating expenses	$	71

Other information related to leases was as follows:

	Three Months
	Ended March 31, 2024
Cash paid from operating cash flows for operating leases	$	71

	As of March 31,
	2024
Weighted-average remaining lease term of operating leases (years)		2.4
Weighted-average discount rate for operating leases		7.2	%

Maturity of the Company’s lease liabilities as of March 31, 2024 was as follows:

2024	$	190
2025		250
2026		131
2027		4
Total lease payments		575
Less: effects of discounting		(53	)
Total lease liabilities		522
Less: current portion of lease liabilities		216
Long-term lease liabilities	$	306