Leases

3 Months Ended

Mar. 31, 2023

Note 14 - Leases

We have lease agreements with lease and non-lease components, which are accounted for as a single lease. We apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities. The operating lease ROU amortization was $120 thousand and $153 thousand for the three months ended March 31, 2023 and 2022, respectively.

Lease contracts are evaluated at inception to determine whether they contain a lease and whether we obtain the right to control an identified asset. The following table summarizes the classification of operating ROU assets and lease liabilities on the consolidated balance sheets:

(in thousands)

		As of
Operating Leases	Classification	March 31, 2023		December 31, 2022

Leased Assets
Operating lease - right of use assets	Long term assets	$	386	$	506

Lease Liabilities
Operating lease liabilities - Current	Other current liabilities		306		418
Operating lease liabilities	Long term liabilities		110		160
		$	416	$	578

We entered into a lease agreement to lease 2,200 square feet of office space on September 26, 2022, and the lease term will end on November 30, 2024. On December 15, 2022, we terminated our lease for 1332 Londontown Boulevard, Eldersburg, Maryland (our former headquarters) and entered into a release and settlement agreement whereby we agreed to pay, and the landlord agreed to accept, a reduced monthly payment through May 1, 2023 in exchange for early termination of the lease. As a part of this agreement, we assigned both active subleases to the landlord effective as of the execution date.

The table below summarizes lease income and expense recorded in the consolidated statements of operations incurred during three months ended March 31, 2023 and 2022, (in thousands):

		Three months ended
Lease Cost	Classification	March 31, 2023		March 31, 2022

Operating lease cost ⁽¹⁾	Selling, general and administrative expenses	$	128	$	186
Short-term leases costs ⁽²⁾	Selling, general and administrative expenses		15		15
Sublease income⁽³⁾	Selling, general and administrative expenses		-		(18	)
Net lease cost		$	143	$	183

⁽¹⁾ Includes variable lease costs which are immaterial.

⁽²⁾ Includes leases maturing less than twelve months from the report date.

⁽³⁾ ^{Sublease portfolio consists of two
tenants, which sublease parts of our principal executive office located at 1332 Londontown Blvd, Suite 200, Sykesville, MD.}

The Company is obligated under certain noncancelable operating leases for office facilities and equipment. Future minimum lease payments under noncancelable operating leases as of March 31, 2023 are as follows (in thousands):

(in thousands)	Gross Future Minimum Lease Payments
2023 remainder	$	266
2024		151
2025		10
2026		3
2027		-
Total lease payments	$	430
Less: Interest		14
Present value of lease payments	$	416

We calculated the weighted-average remaining lease term, presented in years below and the weighted-average discount rate for our operating leases. As noted in our lease accounting policy, we use the incremental borrowing rate as the lease discount rate.

Lease Term and Discount Rate	March 31, 2023			December 31, 2022
Weighted-average remaining lease term (years)
Operating leases		1.73			1.51
Weighted-average discount rate
Operating leases		5.00	%		5.00	%

The table below sets out the classification of lease payments in the consolidated statement of cash flows.

(in thousands)	Three months ended
Cash paid for amounts included in measurement of liabilities	March 31, 2023		March 31, 2022
Operating cash flows used in operating leases	$	169	$	299