Note 5 - Leases

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE 5. LEASES

The Company is a party to certain contractual arrangements for office space which meet the definition of leases under ASC 842 - Leases. In accordance with ASC 842, the Company has determined that such arrangements are operating leases and accordingly the Company has, as of January 1, 2019, initially recorded operating lease right-of-use assets and related lease liability for the present value of the lease payments over the lease terms using the Company’s estimated weighted-average incremental borrowing rate of approximately 14.5% as the discount rates implicit in the Company’s leases cannot be readily determined. At December 31, 2020, such assets and liabilities aggregated approximately $1,557,000 and $1,718,000, respectively. At September 30, 2021, such assets and liabilities aggregated approximately $1,278,000 and $1,409,000, respectively. The Company determined that it had no arrangements representing finance leases.

Our corporate headquarters is located in San Diego, California, where we now occupy approximately 500 square feet of office space at a cost of approximately $2,000 per month. We entered into this facility’s lease in February 2021, with the new lease commencing on March 1, 2021 on a month-to-month basis. In addition to our corporate headquarters, we also occupied the following spaces at September 30, 2021:

● 9,720 square feet in Portland, Oregon, at a cost of approximately $23,000 per month until the expiration of the lease on February 28, 2023.

Prior to entering into our current lease agreement in January 2021 and moving our corporate headquarters to a new location, we occupied 8,511 square feet of office space in San Diego, at a cost of approximately $28,000 per month. In January 2021, we entered in a subleasing agreement for our previously occupied corporate headquarters located in San Diego, California. The term of the sublease commenced on April 1, 2021 and expires on April 30, 2025 coterminous with the expiration of the Company’s master lease. Sublease payments due the Company approximate $26,000 per month over the term of the sublease.

The above leases contain no residual value guarantees provided by the Company and there are no options to either extend or terminate the leases.

For the three months ended September 30, 2021 and 2020, the Company recorded approximately $162,000 and $169,000, respectively, in lease expense using the straight-line method. For the nine months ended September 30, 2021 and 2020, the Company recorded approximately $492,000 and $508,000 respectively, in lease expense using the straight-line method. Under the provisions of ASC 842, lease expense is comprised of the total lease payments under the lease plus any initial direct costs incurred less any lease incentives received by the lessor amortized ratably using the straight-line method over the lease term. The weighted-average remaining lease term of the Company’s operating leases as of September 30, 2021 is 1.7 years. Cash payments under operating leases aggregated approximately $165,000 and $504,000, respectively, for the three and nine months ended September 30, 2021 and $162,000 and $485,000, respectively, for the comparable periods in 2020, and are included in operating cash flows.

The Company’s lease liability was computed using the present value of future lease payments. The Company has utilized the practical expedient regarding lease and non-lease components and combined such components into a single combined component in the determination of the lease liability. The Company has excluded the lease of its office space in Mexico City, Mexico in the determination of the lease liability as its term is less than 12 months.

At September 30, 2021, future minimum undiscounted lease payments are as follows:

($ in thousands)
2021 (three months)	$	161
2022		652
2023		424
2024		387
2025		132
Total		1,756
Present Value effect on future minimum undiscounted lease payments at September 30, 2021		(347	)
Lease liability at September 30, 2021		1,409
Less current portion		(494	)
Non-current lease liability at September 30, 2021	$	915