Note 11 - Leases

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

11.  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 December 31, 2021, such assets and liabilities aggregated approximately $847,000 and $1,298,000, respectively. The Company determined that it had no arrangements representing finance leases.

The Company evaluates its operating lease right-of-use assets for impairment. As of December 31, 2021, and through the date of this report, management’s review indicated that there was an impairment of an operating lease right-of-use asset and the Company recorded an impairment loss of approximately $333,000. Impairment is based on the excess of the carrying amount over the fair value, based on market value when available, or expected future economic benefits to the company from the operating lease right-of-use asset and is recorded in the period in which the determination is made. Such amount is included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2021 under the caption “General and administrative” expense.

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.

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 year ended December 31, 2021, the Company recorded approximately $645,000 in lease expense using the straight-line method. For the twelve months ended December 31, 2020 the Company recorded approximately $657,000 in operating lease expense. 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 December 31, 2021 is 1.50 years. Cash payments under operating leases aggregated approximately $664,000 for the twelve months ended December 31, 2021 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 of January 1, 2019 as its term is less than 12 months.

At December 31, 2021, future minimum undiscounted lease payments are as follows for the years ending:

($ in thousands)
2022	$	653
2023		424
2024		387
2025		132
Thereafter		—
Total	$	1,596
Present Value effect on future minimum undiscounted lease payments at December 31, 2021		298
Lease liability at December 31, 2021	$	1,298
Less current portion		496
Non-current lease liability at December 31, 2021	$	802