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Note 3 - Restructuring Costs
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Restructuring and Related Activities Disclosure [Text Block]

NOTE 3 – RESTRUCTURING COSTS

 

During the second quarter of 2022, the Company completed a restructuring program to reduce costs, decrease operating losses and improve cash flow. Total restructuring and restructuring-related net charges pursuant to this program were $1,893,166, which were recorded separately in the income statement as “restructuring costs”, and allocated as follows:

 

CEO separation -- On May 10, 2022, the Board of Directors accepted the resignation of Sune Mathiesen as Chief Executive Officer and a director of the Company, effective on May 12, 2022. As previously announced, Mr. Mathiesen had been on a medical leave of absence since March 17, 2022. In connection with Mr. Mathiesen’s resignation, Mr. Mathiesen and the Company entered into a Separation Agreement and Release (the “Separation Agreement”). Under the provisions of the Separation Agreement, Mr. Mathiesen received DKK1,605,000 ($228,975), which is the equivalent of six months of salary, car allowance and pension contributions, paid in a lump-sum payment, less applicable deductions and withholdings.

 

Terminated employees – In the second quarter of 2022, the Company re-aligned its corporate management structure, which involved a reduction in headcount and labor costs of approximately 25%. The new organization reflects a focused effort to align key leaders with strategic imperatives, inspire greater accountability and performance management, eliminate silos and layers of middle management, and operate a leaner, more efficient business. Provisions for salary obligations to employees amounted to $158,199, reflecting the costs related to select employees released from duties with immediate effect. No provisions were made for the employees working during the notice period.

 

China close-down – In the second quarter of 2022, the Company reduced and suspended planned capital investments, including the Company’s program to build a manufacturing and service center in China. Pursuant to the suspended plans, the Company terminated and settled agreements with consultants, select project employees, and property development providers, resulting in a net payment of termination and cancellation charges of $275,445.     

 

Capex commitments -- As part of efforts to balance future investments with expected demands and cash flow, the Company commenced the renegotiation of all material Capex commitments during the quarter, with the ambition to reduce, cancel, or delay deliveries under the contracts, which initially amounted to approximately $10,300,000. As part of the renegotiation, a provision was made during the second quarter of $668,606 regarding expected cancellation charges and contractual termination costs. During the third and fourth quarter the amount of paid cancellation charges exceeded the provision by $145,388, which explains the total amount regarding capex commitments of $813,994.    

 

Write-downs -- The re-routing of production equipment and machinery to Denmark (originally planned for China), resulted in a write-down of $240,576 on legacy installed equipment and machinery that was decommissioned as part of the arrival and implementation of new and more efficient equipment. Furthermore, review of obsolete inventory and existing product demand resulted in a write-down of $175,977.

 

The Company’s restructuring costs are as follows for the years ended December 31, 2023 and 2022:

 

  

December 31,

2023

  

December 31,

2022

 

CEO separation

 $-  $228,975 

Terminated employees

  -   158,199 

China close-down

  -   275,445 

Capex commitments

  -   813,994 

Write-downs

  -   416,553 
  $-  $1,893,166