Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Note 12 - Commitments and Contingencies

Operating Leases

We currently lease three facilities in Los Angeles, California, one facility in Boston, Massachusetts, and one facility in Dallas, Texas, all providing office space. We also lease space in City of Industry, California, providing warehouse space. These leases expire between 2022 and 2023. During 2020, we exited leases in Herndon, Virginia; Atlanta, Georgia; Houston, Texas; London, England, and a warehouse space in Los Angeles, California. In February 2021, we exited an office space lease in Los Altos, California, when the Company elected to not renew the lease. In June 2021, we entered into a settlement agreement with the landlord of our Munich, Germany office space, to exit the lease early in exchange for €125,000. At the time of the settlement, the remaining liability was €316,000, resulting in a gain of €191,000 ($227,000), which is recorded as other income on the condensed consolidated statement of operations during the nine months ended September 30, 2021. We currently occupy two of the facilities in Los Angeles and the warehouse space in City of Industry; we have subleases in place for the third Los Angeles property, the Dallas property, and the Boston property. Lease expenses, net of common charges and sublet proceeds, for the three and nine months ended September 30, 2021 and 2020 were $85,000, $252,000, $267,000, and $915,000, respectively.

The Company primarily leases facilities for office and data center space under non-cancellable operating leases for its U.S. and international locations that expire at various dates through 2023. For leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability based on the present value of lease payments over the lease term. Variable lease payments are not included in the lease payments to measure the lease liability and are expensed as incurred. The Company’s leases have remaining terms of one to three years and some of the leases include a Company option to extend the lease term for less than twelve months to five years, or more, which if reasonably certain to exercise, the Company includes in the determination of lease payments. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the Company's leases do not provide a readily determinable implicit rate, the Company uses the incremental borrowing rate at lease commencement, which was determined using a portfolio approach, based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Operating lease expense is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recognized on the balance sheet and the expense for these short-term leases is recognized on a straight-line basis over the lease term. Common area maintenance fees (or CAMs) and other charges related to these leases continue to be expensed as incurred.

The following provides balance sheet information related to leases were as follows (in thousands):


		September 30, 2021
Assets
	Operating lease, right-of-use asset, net	$	531

Liabilities
	Current portion of operating lease liabilities	$	475
	Operating lease liabilities, net of current portion	182
	Total operating lease liabilities	$	657

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


Remaining Lease Payments

Remainder of 2021	$	189
2022	379
2023	116
Total lease payments	$	684
Effect of discounting	(27)
Total operating lease liabilities	$	657

COVID-19

On March 11, 2020, the World Health Organization announced that infections of the novel Coronavirus (COVID-19) had become pandemic, and on March 13, 2020, the U.S. President announced a National Emergency relating to the disease. There is a possibility of continued widespread infection in the United States and abroad, with the potential for catastrophic impact. National, state and local authorities have required or recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures, while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. The sweeping nature of the coronavirus pandemic makes it extremely difficult to predict how the Company’s business and operations will be affected in the longer run. The COVID-19 pandemic has materially affected our revenue and results of operations for the three and nine months ended September 30, 2021. The decreases in our revenue are primarily attributable to the effects of the global pandemic on our channel partners and customers as they evaluate how and when to re-open their commercial real estate footprints. The Company’s results reflect the challenges due to long and unpredictable sales cycles, delays in customer retrofit budgets, project starts, and supply delayed orders in our distribution channels as a direct result of customer implementation schedules shifting due to the COVID-19 pandemic. The COVID-19 pandemic in particular has, and may continue to have, a significant economic and business impact on our Company. In the first nine months of 2021, following a slowdown throughout 2020, we have seen a continuing weakness in revenue as our customers across all sectors delayed order placements in reaction to the ongoing impacts of the COVID-19 pandemic that caused our customers to suspend or postpone real estate retrofit projects due to budget and occupancy uncertainties. We continue to monitor the impact of the COVID-19 pandemic on our customers, suppliers and logistics providers, and to evaluate governmental actions being taken to curtail and respond to the spread of the virus. The significance and duration of the ongoing impact on us is still uncertain. Material adverse effects of the COVID-19 pandemic on market drivers, our customers, suppliers or logistics providers could significantly impact our operating results. We will continue to actively follow, assess and analyze the ongoing impact of the COVID-19 pandemic and adjust our organizational structure, strategies, plans and processes to respond. Because the situation continues to evolve, we cannot reasonably estimate the ultimate impact to our business, results of operations, cash flows and financial position that the COVID-19 pandemic may have. Continuation of the COVID-19 pandemic and government actions in response thereto could cause further disruptions to our operations and the operations of our customers, suppliers and logistics partners and could significantly adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows.