Operating Lease Liabilities and Right-of-Use Assets

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Operating Lease Liabilities and Right-of-Use Assets

Operating Lease Liabilities and Right-of-Use Assets

We lease three facilities in Los Angeles, California providing office space and one facility in City of Industry, California, providing warehouse space. These leases expire between 2023 and 2024. During 2022, and through the date of this filing, we exited office space leases in Boston, Massachusetts, Dallas, Texas, Austin, Texas, and a residential lease in Los Angeles, California. We currently occupy the warehouse space in City of Industry; however, we do not occupy any of the office space in Los Angeles. We have a sublease in place for one of the Los Angeles properties and have impaired the right-of-use assets associated with the other two Los Angeles properties. With the exception of these spaces described above, we currently operate out of remote employment sites with a remote office located at 25587 Conifer Road, Suite 105-231, Conifer, Colorado 80433.

Lease expenses, net of common charges, for the years ended December 31, 2022 and 2021 were $502,000 and $778,000, respectively. Sublet proceeds for the years ended December 31, 2022 and 2021 were $140,000 and $321,000, respectively.

The following provides balance sheet information related to leases as of December 31, 2022 and 2021 (in thousands):

		December 31,
		2022		2021
Assets
	Operating lease, right-of-use asset, net	$	142	$	659
Liabilities
	Current portion of operating lease liabilities	$	219	$	492
	Operating lease liabilities, net of current portion	17		236
	Total operating lease liabilities	$	236	$	728

The following table summarizes the future undiscounted cash payments reconciled to the lease liability (in thousands):

Year Ending December 31,
2023	$	225
2024	17
Total lease payments	242
Effect of discounting	(6)
Total lease liability	236
Less: current portion of lease liabilities	219
Operating lease liabilties, net of current portion	$	17

The following table provides a reconciliation of activity for our right-of-use (“ROU”) assets and lease liabilities (in thousands):

	Right-of-Use Asset		Operating Lease Liability
Balance at December 31, 2020	$	903	$	1,432
Additions	60		60
Terminations and Modifications	192		156
Amortizations and Reductions	(496)		(920)
Balance at December 31, 2021	659		728
Additions	11		11
Terminations and Modifications	—		—
Amortizations and Reductions	(349)		(503)
Impairment Charges	(179)		—
Balance at December 31, 2022	$	142	$	236

The ROU assets and lease liabilities are recorded on the Company’s consolidated balance sheets as of December 31, 2022 and December 31, 2021.

During the year ended December 31, 2022, we entered into a residential lease in Los Angeles, CA. The new lease commenced in August 2022 and had a term of five months. The new lease resulted in an addition to ROU Assets, and corresponding increase to lease liability, of $11,000.

During the year ended December 31, 2022, we vacated two of the properties in Los Angeles, California. These properties are under leases until May 2023 and management does not expect to be able to sublet the properties given the limited time remaining on the leases. Therefore, an impairment charge of $179,000 was recorded for these assets during the year ended December 31, 2022.

During the year ended December 31, 2022, the Company exited three of its leases, one in Dallas, Texas, one in Boston, Massachusetts, and one in Los Angeles, California. The Boston lease expired in the first quarter of 2022, the Dallas lease expired in the second quarter of 2022, and the Los Angeles residential lease expired in the fourth quarter of 2022. The Company elected to not renew the expired releases. In February 2023, the Company exited the Austin, Texas lease upon its expiration.