Leases

12 Months Ended

Dec. 31, 2022

As a lessee, ADDvantage leases its corporate office headquarters in Carrollton, Texas, and conducts its business operations through various regional offices located throughout the United States. These operating locations typically

include regional offices, storage and maintenance facilities sufficient to support its operations in the area. ADDvantage leases these properties under either non-cancelable term leases many of which contain renewal options that can extend the lease term from one to five years and some of which contain escalation clauses, or month-to-month operating leases. Options to renew these leases are generally not considered reasonably certain to be exercised. Therefore, the periods covered by such optional periods are not included in the determination of the term of the lease. ADDvantage may lease equipment under cancellable short-term or contracts which are less than 30 days. Due to the nature of the Company's business, any option to renew these short-term leases is generally not considered reasonably certain to be exercised. Therefore, the periods covered by such optional periods are not included in the determination of the term of the lease, and the lease payments during these periods are similarly excluded from the calculation of ROU lease asset and lease liability balances.

The components of lease expense for the year ended December 31, 2022, the transition period of three months ended December 31, 2021, and the year ended September 30, 2021 are as follows, in thousands:


	Year Ended		Three Months Ended		Year Ended
	December 31,		December 31,		September 30,
	2022		2021		2021
Right-of-use lease cost
Right-of-use lease cost	$	1,087	$	319	$	1,160
Finance lease costs
Amortization assets under finance leases	$	604	$	139	$	412
Interest on finance lease liabilities	155		37		75
Total finance lease cost	$	759	$	176	$	487

Supplemental cash flow information related to leases for the year ended December 31, 2022, the transition period of three months ended December 31, 2021, and the year ended September 30, 2021 are as follows, in thousands:


	Year Ended		Three Months Ended		Year Ended
	December 31,		December 31,		September 30,
	2022		2021		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from right-of-use leases	$	1,087	$	319	$	1,160
Operating cash flows from finance leases	$	155	$	37	$	75
Financing cash flows from finance leases	$	899	$	155	$	484

Supplemental balance sheet information related to leases at December 31, 2022, 2021, and September 30, 2021 are as follows, in thousands:


	December 31,			December 31,			September 30,
	2022			2021			2021
Right-of-use leases
Right-of-use lease assets	$	1,540		$	2,466		$	2,730

Right-of-use lease obligations - current	$	1,204		$	1,177		$	1,198
Right-of-use lease obligations	635			1,839			2,141
Total right-of-use lease liabilities	$	1,839		$	3,016		$	3,339

Finance leases
Property and equipment, gross	$	3,409		$	3,115		$	2,843
Accumulated depreciation	(1,244)			(846)			(707)
Property and equipment, net	$	2,165		$	2,269		$	2,136

Financing lease obligations - current	$	636		$	652		$	582
Financing lease obligations	1,254			1,484			1,429
Total finance lease liabilities	$	1,890		$	2,136		$	2,011

Weighted Average Remaining Lease Term
Right-of-use leases	1.64 years			2.63 years			2.78 years
Finance leases	3.25 years			3.47 years			3.75 years
Weighted Average Discount Rate
Right-of-use leases	5.00		%	5.00		%	5.00		%
Finance leases	7.77		%	6.76		%	6.72		%

Maturities of lease liabilities are as follows for the year ending December 31, 2022, in thousands:


	Right-of-use Leases		Finance Leases
2023	$	1,316	$	760
2024	621		675
2025	65		415
2026	—		223
2027	—		78
Thereafter	—		—
Total lease payments	2,002		2,151
Less: imputed interest	163		261
Total lease obligations	$	1,839	$	1,890

Leases


	Year Ended		Three Months Ended		Year Ended
	December 31,		December 31,		September 30,
	2022		2021		2021
Right-of-use lease cost
Right-of-use lease cost	$	1,087	$	319	$	1,160
Finance lease costs
Amortization assets under finance leases	$	604	$	139	$	412
Interest on finance lease liabilities	155		37		75
Total finance lease cost	$	759	$	176	$	487


	Year Ended		Three Months Ended		Year Ended
	December 31,		December 31,		September 30,
	2022		2021		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from right-of-use leases	$	1,087	$	319	$	1,160
Operating cash flows from finance leases	$	155	$	37	$	75
Financing cash flows from finance leases	$	899	$	155	$	484

Supplemental balance sheet information related to leases at December 31, 2022, 2021, and September 30, 2021 are as follows, in thousands:


	December 31,			December 31,			September 30,
	2022			2021			2021
Right-of-use leases
Right-of-use lease assets	$	1,540		$	2,466		$	2,730

Right-of-use lease obligations - current	$	1,204		$	1,177		$	1,198
Right-of-use lease obligations	635			1,839			2,141
Total right-of-use lease liabilities	$	1,839		$	3,016		$	3,339

Finance leases
Property and equipment, gross	$	3,409		$	3,115		$	2,843
Accumulated depreciation	(1,244)			(846)			(707)
Property and equipment, net	$	2,165		$	2,269		$	2,136

Financing lease obligations - current	$	636		$	652		$	582
Financing lease obligations	1,254			1,484			1,429
Total finance lease liabilities	$	1,890		$	2,136		$	2,011

Weighted Average Remaining Lease Term
Right-of-use leases	1.64 years			2.63 years			2.78 years
Finance leases	3.25 years			3.47 years			3.75 years
Weighted Average Discount Rate
Right-of-use leases	5.00		%	5.00		%	5.00		%
Finance leases	7.77		%	6.76		%	6.72		%

Maturities of lease liabilities are as follows for the year ending December 31, 2022, in thousands:


	Right-of-use Leases		Finance Leases
2023	$	1,316	$	760
2024	621		675
2025	65		415
2026	—		223
2027	—		78
Thereafter	—		—
Total lease payments	2,002		2,151
Less: imputed interest	163		261
Total lease obligations	$	1,839	$	1,890