LEASE LIABILITIES AND RIGHT OF USE ASSETS

6 Months Ended

Jun. 30, 2022

LEASE LIABILITIES AND RIGHT OF USE ASSETS

LEASE LIABILITIES AND RIGHT OF USE ASSETS

NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS

We determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

Finance Leases

The Company has finance leases to purchase computer equipment. The amortization expense of the leased equipment is included in depreciation expense. As of June 30, 2022 and December 31, 2021, the Company’s outstanding finance lease obligations totaled $71,000 and $102,000, respectively. The effective interest rate of the finance leases is estimated at 6.0% based on the implicit rate in the lease agreements.

NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS (continued)

The following summarizes the assets acquired under finance leases, included in property and equipment, net of disposals:

	June 30,		December 31,
(in thousands)	2022		2021
Computer equipment	$	234	$	256
Less: accumulated depreciation		(167)		(156)
Assets acquired under finance leases, net	$	67	$	100

Operating Leases

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company has operating leases for office space in Tucson, Arizona, Marietta, Georgia, Miami Beach, Florida, and New York, New York. The lease for the principal office located in Tucson consists of approximately 5,200 square feet and ends in October 2022. The lease for the Marietta office, which consists of approximately 6,700 square feet, commenced in June 2019 and expires in August 2024. The lease for the Miami Beach office, which consists of approximately 2,739 square feet, commenced in October 2021 and will expire in May 2024.

The Company entered into a lease agreement for new office space in New York, New York, consisting of approximately 5,000 square feet. The new lease commenced in January 2022 and will expire in December 2026. Upon commencement of the new lease, we recorded a right-of-use asset and corresponding operating lease liability of $876,000.

In addition, the Company entered into membership agreements to occupy shared office space in Austin, Texas, Portland, Oregon, and Seattle, Washington. The membership agreements do not qualify as a lease under ASC 842, therefore the Company expenses membership fees as they are incurred. See Note 5 - Commitments and Contingencies for further details on our shared office arrangements.

The Company made operating lease payments in the amount of $291,000 and $130,000 during the six months ended June 30, 2022 and 2021, respectively.

NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS (continued)

The following summarizes the total lease liabilities and remaining future minimum lease payments at June 30, 2022 (in thousands):

Year ending June 30,	Finance Leases		Operating Leases		Total
2022 (6 months remaining)	$	28	$	323	$	351
2023		40		528		568
2024		7		362		369
2025		—		219		219
2026		—		225		225
Total minimum lease payments		75		1,657		1,732
Less: present value discount		(4)		(162)		(166)
Total lease liabilities		71		1,495		1,566
Current portion of lease liabilities		48		511		559
Long term portion of lease liabilities	$	23	$	984	$	1,007

The following summarizes expenses associated with our finance and operating leases for the six months ended June 30, 2022 and 2021:

	Six months ended June 30,
(in thousands)	2022			2021
Finance lease expenses:
Depreciation expense	$	29	$	42
Interest on lease liabilities		2		4
Total Finance lease expense		31		46
Operating lease expense		323		128
Short-term lease and related expenses		79		104
Total lease expenses	$	433	$	278

The following table provides information about the remaining lease terms and discount rates applied as of June 30, 2022 and 2021:

	June 30,
	2022	2021
Weighted average remaining lease term (years)
Operating Leases	3.40	2.52
Finance Leases	1.57	2.26
Weighted average discount rate (%)
Operating Leases	6.00	6.00
Finance Leases	6.00	6.00