Right-of-use Asset and Leasing Liabilities

3 Months Ended

Mar. 31, 2024

Right-of-use Asset And Leasing Liabilities

Right-of-use Asset and Leasing Liabilities

3. Right-of-use Asset and Leasing Liabilities

The Company has operating and finance leases where it records the right-of-use assets and a related lease liability as required under the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC”) 842. The lease liabilities are determined by the net present value of total lease payments and amortized over the life of the lease. The Company’s leases are for the following types of assets:

· Computer hardware and copy machines- The Company’s finance lease right-of-use assets consist of computer hardware and copy machines. These leases have a three-year life and are near completion.

· Office space - The Company’s operating lease right-of-use assets include its rental agreements for its offices in Plano, TX, and a data service center in Allen, TX. The Plano offices operating lease expired on September 30, 2023. In October 2023, the Company signed a new lease with a term of eleven years and one month and commences upon completion of tenant improvements. The data service center operating lease liability has a life of one year and six months as of March 31, 2024.

In accordance with ASC 842, the Company has elected practical expedients to combine lease and non-lease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.

As the implicit rate is not readily determinable for the Company's lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. This discount rate for the leases approximates the federal reserve’s prime rate.

For the three months ended March 21, 2024, and 2023, the Company had $5 thousand and $86 thousand, respectively, in lease payments related to operating leases and had $0.1 million and $14 thousand, respectively, in lease payments related to financing leases.

Schedule of Items Appearing on the Unaudited Condensed Consolidated Statements of Operations (in thousands):

	Three Months Ended
	March 31, 2024		March 31, 2023
Operating expense:
Amortization Expense – Finance ROU	$	166	$	166
Lease expense – Operating ROU	$	83	$	77
Other expense:
Interest Expense – Finance ROU	$	–	$	6

Future minimum lease obligations consisted of the following as of March 31, 2024 (in thousands):

	Operating			Finance
Year ending December 31,	ROU Leases			ROU Leases		Total
Remaining 2024	$	286		$	283	$	569
2025		256			3		259
2026		196			–		196
2027		165			–		165
2028		223			–		223
Thereafter		1,517			–		1,517
	$	2,643		$	286	$	2,929
Less Interest*		(916	)		–
	$	1,727		$	286

* Interest is imputed for operating ROU leases and classified as lease expense and is included in operating expenses in the accompanying unaudited condensed consolidated statements of operations.