Leases

6 Months Ended

Jun. 30, 2023

Leases

Leases

5. Leases. As of June 30, 2023, the Company leased space under a non-cancelable operating lease for its corporate headquarters, which had been renewed through December 31, 2026. The Company also had a lease for warehouse space which expired March 31, 2023. The warehouse lease was extended on a month-to-month basis effective April 1, 2023. The corporate headquarters lease had escalating lease payment terms but did not contain a contingent rent provision. The leases for both the Company’s corporate headquarters and its warehouse included both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases. The headquarters lease required the Company to provide a letter of credit, which was supported by $85,000 reflected as restricted cash on the consolidated balance sheet. The Company used its incremental borrowing rate of approximately 7.0% in determining the present value of the extended lease payments.

The cost components of the Company’s operating leases were as follows for the three and six month periods ended June 30, 2023 and 2022:

	Three months ended June 30, 2023						Six months ended June 30, 2023
	Corporate				Operating		Corporate				Operating
	Headquarters		Other		Leases		Headquarters		Other		Leases
Operating lease cost	$	10,000	$	-	$	10,000	$	21,000	$	4,000	$	25,000
Variable lease cost		2,000		-		2,000		6,000		4,000		10,000
Short-term lease cost		-		10,000		10,000		-		10,000		10,000
Total	$	12,000	$	10,000	$	22,000	$	27,000	$	18,000	$	45,000
	Three months ended June 30, 2022						Six months ended June 30, 2022
	Corporate				Operating		Corporate				Operating
	Headquarters		Other		Leases		Headquarters		Other		Leases
Operating lease cost	$	16,000	$	5,000	$	21,000	$	33,000	$	9,000	$	42,000
Variable lease cost		10,000		3,000		13,000		20,000		6,000		26,000
Total	$	26,000	$	8,000	$	34,000	$	53,000	$	15,000	$	68,000

Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs which are paid based on actual costs incurred by the lessor.

Maturities of the Company’s lease liabilities for its corporate headquarters operating lease are as follows as of June 30, 2023:

2023	$	-
2024		52,000
2025		53,000
2026		55,000
Total lease payments		160,000
Less:  Interest		21,000
Present value of lease liabilities	$	139,000

The remaining lease terms as of June 30, 2023 for the Company’s corporate headquarters lease was 3.5 years.  The cash outflows for operating leases were $0 and $10,000 for the three and six months ended June 30, 2022, respectively, and were $20,000 and $41,000 for the three and six months ended June 30, 2022, respectively. 

Subsequent to June 30, 2023, the headquarters lease was assigned to the Buyer as a part of the sale of the Legacy Business.