CAPITAL LEASE OBLIGATIONS

12 Months Ended

Dec. 31, 2023

Leases of Lessee Disclosure [Text Block]

LEASES

The Company leases office space and equipment from third-party lessors and accounts for leases in accordance with ASC Topic 842. Right of use assets represent the Company’s right to use an underlying asset over the lease term and lease liabilities represent the Company’s obligation to make future lease payments arising from the lease.

Operating lease liabilities and finance lease liabilities with terms greater than 12 months are recorded at the present value of the lease payments at the commencement date. The related right of use assets are recorded on the same date at the amount of the initial liability, adjusted for incentives received, prepayments made to the lessor, and any initial direct costs incurred, as applicable. The Company uses the discount rate implicit in the lease when it is readily determinable. When it is not readily available, future lease payments are discounted using the incremental borrowing rate available to the Company. The incremental borrowing rate is the rate available to the Company for a fully collateralized, fully amortizing loan with the same term as the lease. Lease components, such as office space, are accounted for separately from the non-lease components, such as maintenance fees. Certain of the Company's leases may also include rent escalation clauses or options to extend or terminate the lease. These options are included in the present value recorded for the leases when it is reasonably certain that the Company will exercise that option. None of the Company’s current leases contain guarantees of residual value. Leases with an initial term of 12 months or less are considered short term and are not recorded on the balance sheet. The Company recognizes a lease expense for short term leases on a straight-line basis over the lease term.

Generally, the Company’s operating leases relate to office space used in Mannatech’s operations, including its headquarters in Flower Mound, Texas and office space in international locations in which the Company does business. As of December 31, 2023 and 2022, all of the Company’s finance leases pertain to certain equipment used in the business.

On March 10, 2023, the Company entered into a five-year agreement to sublease 10,000 rentable square feet of the Company's leased office space in Flower Mound, Texas to a subtenant. There was no modification or impairment by entering into the sublease agreement because the Company was not released from its obligations under the head lease. The Company earned $0.1 million and $0 sublease revenue for the year ended December 31, 2023 and 2022, respectively, which is presented as a component of net sales on the Company's Consolidated Statements of Operations. The Company has made a policy election in accordance with ASC 842-10-15-39A to exclude from consideration taxes that are assessed on and collected from the sublessee from consideration.

As of December 31, 2023 and 2022, our leased assets and liabilities consisted of the following (in thousands):


Leases	Classification	December 31, 2023		December 31, 2022
Right of Use Assets
Operating leases	Other assets	$	3,315	$	4,649
Finance leases	Property and equipment, net	1,236		182
Total leased assets		$	4,551	$	4,831

Lease Liabilities
Current Portion
Operating leases	Accrued expenses	$	1,660	$	1,600
Finance leases	Current portion of finance leases	269		61

Long-Term Portion
Operating leases	Other long-term liabilities	2,582		4,153
Finance leases	Finance leases, excluding current portion	956		88
Total leased liabilities		$	5,467	$	5,902

Operating lease costs are recognized on a straight-line basis over the lease term. Finance lease costs are composed of the amortization of the right of use asset and the amounts recorded as interest. For the years ended December 31, 2023 and 2022, we incurred the following lease costs related to our operating and finance leases (in thousands):


Lease Cost	Classification	2023		2022
Operating leases
Operating lease costs	Selling and administrative expenses	$	1,910	$	2,137
Short term lease costs	Selling and administrative expenses	232		279

Finance leases
Amortization of leased assets	Depreciation and amortization	252		89
Interest on lease liabilities	Interest expense	65		9
Total lease cost		$	2,459	$	2,514

For the years ended December 31, 2023 and 2022, cash paid for amounts included in the measurement of lease liabilities included (in thousands):


	2023		2022

Operating cash flows from operating leases	$	1,948	$	2,017
Financing cash flows from finance leases	$	211	$	76

As of December 31, 2023 and 2022 the Company's lease terms and discount rates were:


	2023		2022
Operating leases
Weighted-average remaining lease term (years)	3.33		4.07
Weighted-average discount rate	4.61	%	4.35	%

Finance leases
Weighted-average remaining lease term (years)	4.18		3.25
Weighted-average discount rate	6.46	%	7.43	%

As of December 31, 2023 future minimum lease payments were as follows (in thousands):


	December 31, 2023
Maturity of lease liabilities	Operating Leases		Finance Leases		Sublease Income


2024	$	1,819	$	337	$	(132)
2025	1,134		327		(132)
2026	723		327		(132)
2027	650		315		(132)
2028	268		90		(55)
Thereafter	—		—		—
Total future minimum lease payments	$	4,594	$	1,396	$	(583)
Imputed interest	(352)		(171)		—
Present value of minimum lease payments	$	4,242	$	1,225	$	(583)