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Note 7 - Leases

9 Months Ended

Sep. 30, 2024

Lessee, Operating and Finance Leases [Text Block]

NOTE 7 – LEASES

The Company leases certain vehicles, real property, production equipment and office equipment under lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating lease or finance lease for financial reporting purposes. The majority of our operating leases are non-cancelable leases for production and office space in Hobro and Copenhagen, Denmark.

The Company has entered into a new lease agreement to relocate its office and warehouse space from Aarhus to Hobro, Denmark. The lease commenced in the current quarter and shall expire on April 30, 2034. Under the terms of the lease, the Company will lease the premises at the monthly rate of approximately $14,500 for the first year, with scheduled annual increases. The lease agreement contains customary events of default, representations, warranties, and covenants. The measurement of the ROU asset and liability associated with this operating lease was $1,260,508.

During the nine months ended September 30, 2024, cash paid for amounts included for the measurement of finance lease liabilities was $1,356,795, and the Company recorded finance lease expenses in other income (expenses) of $131,913.

During the nine months ended September 30, 2024, cash paid for amounts included for the measurement of operating lease liabilities was $691,687, and the Company recorded operating lease expense of $689,054.

Supplemental balance sheet information related to leases as of September 30, 2024 and December 31, 2023 was as follows:

	*September 30,*			*December 31,*
	*2024*			*2023*
Operating leases:
Operating lease right-of-use assets	$	4,914,954		$	4,055,837

Operating lease liabilities – current	$	577,628		$	531,355
Operating lease liabilities – long-term		4,337,326			3,527,082
Total operating lease liabilities	$	4,914,954		$	4,058,437

Finance leases:
Property and equipment, at cost	$	4,150,732		$	5,443,287
Accumulated depreciation		(1,149,871	)		(877,578	)
Property and equipment, net	$	3,000,861		$	4,565,709

Finance lease liabilities – current	$	479,779		$	590,550
Finance lease liabilities – long-term		1,764,671			2,879,932
Total finance lease liabilities	$	2,244,450		$	3,470,482

Weighted average remaining lease term:
Operating leases		8.3			8.3
Finance leases		3.4			4.3

Weighted average discount rate:
Operating leases		6.8	%		6.7	%
Finance leases		5.5	%		6.0	%

Maturities of lease liabilities at September 30, 2024 were as follows:

	*Operating*			*Finance*
	*Leases*			*Leases*
2024 (remaining 3 months)	$	223,837		$	151,724
2025		889,160			600,486
2026		878,260			563,615
2027		878,260			1,094,959
2028		750,895			77,271
Thereafter		2,779,094			130,899
Total payment under lease agreements		6,399,506			2,618,954
Less imputed interest		(1,484,552	)		(374,504	)
Total lease liabilities	$	4,914,954		$	2,244,450