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Leases

9 Months Ended

Sep. 30, 2024

Note 5. Leases

The following provides balance sheet information related to leases as of September 30, 2024 and December 31, 2023:

	September 30, 2024		December 31, 2023
Assets
Operating lease, right-of-use asset, net	$	286,635	$	228,295
Liabilities
Current portion of operating lease liabilities	$	197,291	$	172,975
Operating lease liabilities, net of current portion		93,953		61,496
Total operating lease liabilities	$	291,244	$	234,471

At September 30, 2024, the future estimated minimum lease payments under non-cancelable operating leases are as follows:


2024 (remaining three months)	$	54,129
2025		205,315
2026		54,744
Total minimum lease payments		314,188
Less amount representing interest		22,944
Present value of future minimum lease payments		291,244
Less current portion of operating lease liabilities		197,291
Operating lease liabilities, net of current portion	$	93,953

In April 2021, the Company entered into two operating leases for office space that commenced in May 2021. The lease terms were set to expire in April 2023, subject to automatic renewal on a month-to-month basis unless the Company provided three-months written notice to the landlord prior to initial expiration. In January 2023, the Company renewed one of the operating leases (“Colony Square Lease”) for an additional two years and notified the landlord of its intent not to renew the other lease. In January 2023, the Company also entered into two new leases that commenced in March 2023 and May 2023, respectively, and continued through April 2025 (“Legacy West Leases”).

Effective April 30, 2024, the Legacy West Leases were terminated in conjunction with a new lease with the same landlord. The new lease began May 1, 2024 for a period of 19 months, requires payments of approximately $11,200 per month, and is subject to automatic renewal on a month-to-month basis unless the Company provides three-months written notice to the landlord. The exercise of lease renewal options is at the Company’s sole discretion and is assessed as to whether to include any renewals in the lease term at inception.

Effective August 31, 2024, the Colony Square Lease was terminated in conjunction with a new lease with the same landlord. The new lease began September 1, 2024 for a period of 24 months, requires payments of approximately $6,800 per month, and is subject to automatic renewal on a month-to-month basis unless the Company provides three-months written notice to the landlord. The exercise of lease renewal options is at the Company’s sole discretion.

The following table provides a reconciliation for our operating right-of-use assets and operating lease liabilities:

	Operating			Operating
	Right-of- Use			Lease
	Assets			Liabilities
Balance at December 31, 2023	$	228,295		$	234,471
Operating right-of-use asset acquired through operating lease liability		348,623			348,623
Early termination of operating leases		(163,722	)		(163,722	)
Amortizations and reductions		(126,561	)		(128,128	)
Balance at September 30, 2024	$	286,635			291,244

Other supplemental information related to operating leases is as follows:

	2024			2023
	As of September 30,
	2024			2023
Weighted average remaining term of operating leases (in years)		1.54			1.58
Weighted average discount rate of operating leases		9.50	%		7.36	%

The Company also leased office space in Dallas, Texas under month-to-month lease arrangements during the nine months ended September 30, 2024 and 2023. In April 2023, the Company entered into a two-year lease for material storage and handling. The lease is cancellable with 45-days written notice. Under these short-term leases, the Company elected the short-term lease measurement and recognition exemption under ASC 842 and recorded rent expense as incurred.

The components of lease expense were approximately as follows for the three and nine months ended September 30, 2024 and 2023:

Schedule of Lease Expense

	2024		2023		2024		2023
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Operating lease cost	$	48,300	$	45,000	$	138,300	$	154,000
Short-term lease cost		4,800		4,000		14,100		9,000
Lease expense	$	53,100	$	49,000	$	152,400	$	163,000

During the nine months ended September 30, 2024 and 2023, cash used in operating activities associated with operating leases was approximately $140,000 and $156,000, respectively.