Quarterly report pursuant to Section 13 or 15(d)

OPERATING LEASES

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OPERATING LEASES
 9 Months Ended
Sep. 30, 2023
Operating Leases  
OPERATING LEASES

NOTE 8 – OPERATING LEASES

 

The Company has two operating lease agreements for its warehouse and office facilities. The first lease, originally signed in 2019, expired in February 2023. In January 2023, the Company signed an amendment to the first lease and extended the first lease for three years commencing March 1, 2023 to February 28, 2026. Lease payments for the amended first lease total $2,596, with monthly lease payments ranging from $58 beginning in March 2023, to $74 beginning in March 2024, to $84 from March 2025 to February 2026. The lease amendment to the first operating lease was considered a new lease agreement and as a result, the Company recognized an operating lease right-of-use asset and related operating lease liability of $2,392.

 

 

The Company’s second operating lease, originally signed in 2018, expired in August 2023. In May 2023, the Company signed an amendment to the second lease and extended the second lease for three years commencing September 1, 2023 to August 31, 2026. Lease payments for the amended second lease will total $1,300, with monthly lease payments ranging from $31 beginning in September 2023, to $37 beginning in September 2024, to $41 from September 2025 to August 2026. The lease amendment to the second operating lease is also considered a new lease agreement and as a result, the Company recognized an operating lease right-of-use asset and related operating lease liability of approximately $1,184 upon commencement of the new term.

 

The Company also has a third lease on a month-to-month basis and is charged $25 per month. 

 

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

 

   

Nine Months
Ended

September 30,
2023

   

Nine Months
Ended

September 30,
2022

  
Lease Cost                
Operating lease cost   $ 1,013     $ 726  
Operating lease cost (of which $327 is included in general and administration and $686 is included in cost of sales in the Company’s statement of operations for the nine months ended September 30, 2023, and $275 and $451 for the same period in 2022, respectively)   $ 1,013     $ 726  
                 
Other Information                
Weighted average remaining lease term – operating leases (in years)     2.7       0.7  
Average discount rate – operating leases     5.13 %     3.75 %

 

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

 

    At
September 30,
2023		     At
September 30,
2022		  
Operating leases                
Long-term operating right-of-use assets, net of accumulated amortization of $409 and $2,406, respectively   $ 3,103     $ 411  
                 
Short-term operating lease liabilities   $ 1,045     $ 453  
Long-term operating lease liabilities     2,162       —  
Total operating lease liabilities   $ 3,207     $ 453  

 

Maturities of the Company’s lease liabilities are as follows (in thousands):

 

Year Ending   Operating Leases  
2023 (remaining 3 months)   $ 267  
2024     1,250  
2025     1,446  
2026     496  
Total lease payments     3,459  
Less: Imputed interest/present value discount     (252 )
Present value of lease liabilities   $ 3,207  

 

Rent expense for the nine months ended September 30, 2023 and 2022 was $1,023 and $726, respectively.