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LEASES

12 Months Ended

Dec. 31, 2023

NOTE 14: LEASES

The Company recognizes leases with a duration greater than 12 months on the balance sheet with a Right-Of-Use (“ROU”) asset and liability at the present value of lease payments over the term. Renewal options are factored into the determination of lease payments when appropriate. There are no residual value guarantees on the existing leases. The Company estimates its incremental borrowing rate, at lease commencement, to determine the present value of lease payments, since most of the Company’s leases do not provide an implicit rate of return. ROU assets exclude lessor incentives received. The Company’s lease population consists primarily of office equipment. During the year ended December 31, 2023, the Company entered into new leases or modified existing leases that resulted in an increase of ROU assets in exchange for operating lease liabilities as disclosed below.

The Company does not have any finance leases. As of December 31, 2023, the Company had no operating leases that had not yet commenced.

Lease position:

The table below presents the assets and liabilities related to operating leases recorded on the balance sheet:


		December 31,
(in thousands)	Classification on Consolidated Balance Sheet	2023		2022
Assets:
Operating lease right-of-use assets	Other assets	$	295	$	239

Liabilities:
Current portion of operating lease liabilities	Accrued expenses and other liabilities	$	77	$	57
Long-term operating lease liabilities	Other long-term liabilities		220		180
Total lease liabilities		$	297	$	237

Lease Costs:

The components of lease expense are included in selling, general and administrative expenses in the consolidated statements of operations as disclosed below:


(in thousands)	2023		2022
Operating lease cost	$	93	$	59
Short-term lease cost		—		—
Variable Lease Cost		3		—
Total lease cost	$	96	$	59

Other information:


As of December 31,	2023			2022
Cash paid for amounts included in the measurement of operating lease liabilities (in thousands)	$	77		$	55
ROU assets obtained in exchange for operating lease liabilities (in thousands)		127			222
Weighted average remaining lease term — operating leases (years)		3.7			4.2
Weighted average discount rate — operating leases		4.85	%		4.97	%

Lease Commitments:

Maturity of lease liabilities - Operating Leases:


As of December 31,	2023		2022
(in thousands)
2023	$	—	$	68
2024		89		58
2025		88		56
2026		85		55
2027		55		26
2028		6		—
Total lease payments		323		263
Less: Amounts representing interest		(26)		(26)
Present value of lease liabilities	$	297	$	237

The Company is party to an operating lease as the lessor for certain real estate leased to a third party with an initial term of 36 months that was renewed in 2022 for an additional 36 months. The lease requires fixed monthly payments and does not contain clauses for future rent escalations or renewal options. There are no terms and conditions under which the lessee has the option to purchase this asset. As of December 31, 2023, projected future lease income on this lease totaled $300 thousand scheduled to be received as follows: 2024 — $240 thousand and 2025 — $60 thousand. The Company recorded rental income of $240 thousand in 2023, $239 thousand in 2022 and $236 thousand in 2021 that is recorded as part of selling, general and administrative expenses on the consolidated statements of operations.

During 2023, the Company entered into a lease agreement related to a warehouse as a lessor for a period of less than a year that provided the lessee with an option to purchase the asset at the end of the lease term. The consideration included required weekly payments with a purchase price of $2.0 million less lease payments. The lessee was reasonably certain to exercise this purchase option and therefore, the Company concluded that the agreement qualified to be a sales type lease. As part of this transaction, the Company recognized a gain of approximately $1.8 million which has been reported as part of Gain on disposition of assets, net on the Consolidated Statement of Operations. The purchase option was exercised in December 2023.