Leases

9 Months Ended

Sep. 30, 2023

Leases

Leases

Note 6: Leases

Leasing activity generally consists of office leases. In March 2019, a new lease was signed to move the corporate headquarters to Raleigh, North Carolina. The new lease, which had a lease commencement date of October 2, 2019, expires December 31, 2027. Minimum lease payments are $2,997,000, not including a tenant improvement allowance of $488,000, which is included in fixed assets as of September 30, 2023. The Company recognized a ROU asset and corresponding lease liability of $2,596,000, which represents the present value of minimum lease payments discounted at 3.77%, the Company’s incremental borrowing rate at lease inception.

Lease liabilities totaled $1,469,000 as of September 30, 2023. The current portion of this liability of $376,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $1,093,000 is included in Lease liabilities on the Consolidated balance sheets. Rent expense consists of both operating lease expense from amortization of our ROU assets as well as variable lease expense which consists of non-lease components of office leases (i.e. common area maintenance) or rent expense associated with short-term leases. The components of lease expense were as follows (in 000’s):

	For the Three Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2023		2022		2023		2022
Lease expense
Operating lease expense	$	76	$	89	$	228	$	268
Variable lease expense		19		4		40		31
Total lease expense	$	95	$	93	$	268	$	299

The weighted-average remaining non-cancelable lease term for our operating leases was 4.25 years as of September 30, 2023. As of September 30, 2023, the weighted-average discount rate used to determine the lease liability was 3.77%. The future minimum lease payments to be made under non-cancelable operating leases on September 30, 2023, are as follows (in 000’s):

Year Ended December 31:
2023	$	94
2024		379
2025		390
2026		401
2027		412
Total lease payments		1,676
Present value adjustment		(207	)
Lease liability	$	1,469

We have performed an evaluation of our other contracts with customers and suppliers in accordance with Topic 842 and have determined that, except for the leases described above, none of our contracts contain a lease.