INTRUSION INC Leases Disclosure
5. Right-of-use Assets and Leasing Liabilities
The Company has operating, and finance leases and records right-of-use assets and related lease liabilities as required under ASC Topic 842. The lease liabilities are determined by the net present value of the total lease payments and amortized over the life of the lease. The Company 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 two and three year lives and are in various stages of completion. | |
| · | Office space – The Company’s operating lease right-of-use assets include rental agreements for 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 that commenced upon completion of tenant improvements. A temporary lease was signed and was effective until the tenant improvements were completed on March 31, 2024. The data service center operating lease liability has a life of nine months as of December 31, 2024. |
Lease balances are recorded on the Consolidated Balance Sheets as follows (in thousands):
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Assets: | ||||||||
| Finance leases, right-of-use assets, net | $ | 491 | $ | 382 | ||||
| Operating leases, right-of-use assets, net | 1,356 | 1,637 | ||||||
| Total lease assets | $ | 1,847 | $ | 2,019 | ||||
| Liabilities: | ||||||||
| Current: | ||||||||
| Finance leases liabilities, current portion | $ | 405 | $ | 384 | ||||
| Operating leases liabilities, current portion | 209 | 178 | ||||||
| Noncurrent: | ||||||||
| Finance leases liabilities, noncurrent portion | 172 | 3 | ||||||
| Operating leases liabilities, noncurrent portion | 1,414 | 1,539 | ||||||
| Total lease liabilities | $ | 2,200 | $ | 2,104 | ||||
| Weighted average remaining lease term – Finance leases | 0.94 years | 0.58 years | ||||||
| Weighted average remaining lease term – Operating leases | 9.42 years | 9.66 years | ||||||
| Weighted average discount rate – Finance leases | 29.80% | 3.32% | ||||||
| Weighted average discount rate – Operating leases | 8.06% | 7.67% | ||||||
If the implicit rate is not readily determinable for the Company's lease agreement, the Company uses an estimated incremental borrowing rate available at the lease commencement to determine the initial present value of lease payments.
Certain lease agreements have options to extend the lease after the expiration of the initial term. The Company recognizes the cost of a lease over the expected total term of the lease, including optional renewal periods that the Company can reasonably expect to exercise. The Company does not have material obligations whereby the Company guarantees a residual value on assets the Company leases, nor do the Company’s lease agreements impose restrictions or covenants that could affect the Company’s ability to make distributions.
Schedule of Items Appearing in the Statement of Operations (in thousands):
| Year Ended | ||||||||
| December 30, 2024 | December 31, 2023 | |||||||
| Operating expense: | ||||||||
| Amortization expense – Finance ROU | $ | 666 | $ | 666 | ||||
| Lease expense – Operating ROU | 472 | 328 | ||||||
| Other expense: | ||||||||
| Interest expense – Finance ROU | 9 | 13 | ||||||
| Total Lease Expense | $ | 1,147 | $ | 1,007 | ||||
Other supplemental information related to the Company’s leases is as follows (in thousands):
| Year Ended | ||||||||
| December 30, 2024 | December 31, 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows for operating leases | $ | (269 | ) | $ | (269 | ) | ||
| Financing cash flows for finance leases | (504 | ) | (290 | ) | ||||
Future minimum lease obligations consisted of the following as of December 31, 2024 (in thousands):
| Operating | Finance | |||||||||||
| Year ending December 31, | ROU Leases | ROU Leases | Total | |||||||||
| 2025 | $ | 333 | $ | 484 | $ | 817 | ||||||
| 2026 | 214 | 187 | 401 | |||||||||
| 2027 | 146 | 4 | 150 | |||||||||
| 2028 | 223 | 3 | 226 | |||||||||
| 2029 | 228 | – | 228 | |||||||||
| Thereafter | 1,308 | – | 1,308 | |||||||||
| $ | 2,452 | $ | 678 | $ | 3,130 | |||||||
| Less Interest* | (829 | ) | (101 | ) | ||||||||
| $ | 1,623 | $ | 577 | |||||||||
| * | Interest is imputed for operating ROU leases and classified as lease expense and is included in operating expenses in the accompanying Consolidated Statements of Operations. |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.