Annual report pursuant to Section 13 and 15(d)

OPERATING LEASES

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OPERATING LEASES
12 Months Ended
Dec. 31, 2022
Operating Leases  
OPERATING LEASES

NOTE 6 – OPERATING LEASES

 

The Company has two operating lease agreements for its warehouse and office spaces both with remaining lease terms at December 31, 2022, under a year. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for the lease and non-lease components of its leases as a single lease component. Rent expense is recognized on a straight-line basis over the lease term. The Company also has another storage facility on a twelve-month lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

 

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical collateralized borrowing rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

 

The components of rent expense and supplemental cash flow information related to leases for the period are as follows:

 

    Years Ended December 31,  
    2022     2021  
Lease Cost (in thousands)                
Operating lease cost   $ 699     $ 699  
Operating lease cost (of which $98 is included in general and administration and $601 is included in cost of sales in the Company’s statement of operations as of December 31, 2022, and $98 is included in general and administration and $601 is included in cost of sales in the Company’s statement of operations as of December 31, 2021)   $ 699     $ 699  
                 
Other Information                
Weighted average remaining lease term – operating leases (in years)     0.4       1.4  
Average discount rate – operating leases     3.75 %     3.75 %

 

The supplemental balance sheet information related to leases for the period is as follows:

 

   

At December 31,

2022

   

At December 31,

2021

 
Operating leases (in thousands)                
Long-term right-of-use assets, net of accumulated amortization of $2,577 and $1,903, respectively   $ 240     $ 914  
                 
Current portion of operating lease liabilities   $ 268     $ 721  
Noncurrent portion of operating lease liabilities           268  
Total operating lease liabilities   $ 268     $ 989  

 

 

Maturities of the Company’s lease liabilities are as follows:

 

Year Ending (in thousands)   Operating Leases  
2023   $ 280  
Total lease payments     280  
Less: Imputed interest/present value discount     (12 )
Present value of lease liabilities   $ 268  

 

Rent expense for the twelve months ended December 31, 2022 and 2021 was $975 and $903, respectively (including short-term and other rentals).