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Leases

9 Months Ended

Sep. 30, 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 $311 thousand and $467 thousand for the nine months ended September 30, 2023 and 2022, respectively. For the three months ended September 30, 2023 and 2022, we recorded ROU amortization of $81 thousand and $159 thousand, 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	September 30, 2023		December 31, 2022

Leased Assets
Operating lease - right of use assets	Long term assets	$	518	$	506

Lease Liabilities
Operating lease liabilities - Current	Other current liabilities		226		418
Operating lease liabilities	Long term liabilities		315		160
		$	541	$	578

On June 7, 2023 we entered into an office lease agreement to lease 2,704 square feet in Fort Worth, Texas for an initial lease term ending November 7, 2030. We entered into a lease agreement to lease 2,200 square feet of office space in Columbia, Maryland on September 26, 2022, through 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 the three and nine months ended September 30, 2023 and 2022, (in thousands):

		Three months ended					Nine months ended
Lease Cost	Classification	September 30, 2023		September 30, 2022			September 30, 2023		September 30, 2022

Operating lease cost ⁽¹⁾	Selling, general and administrative expenses	$	90	$	174		$	333	$	534
Short-term leases costs ⁽²⁾	Selling, general and administrative expenses		2		15			27		45
Sublease income⁽³⁾	Selling, general and administrative expenses		-		(18	)		-		(55	)
Net lease cost		$	92	$	171		$	360	$	524

⁽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 subleased 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 September 30, 2023 are as follows:

(in thousands)	Gross Future Minimum Lease Payments
2023 remainder	$	62
2024		220
2025		96
2026		91
2027		142
Thereafter		-
Total lease payments	$	611
Less: Interest		70
Present value of lease payments	$	541

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

Lease Term and Discount Rate	September 30, 2023			December 31, 2022
Weighted-average remaining lease term (years)
Operating leases		3.59			1.51
Weighted-average discount rate
Operating leases		6.21	%		5.00	%

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

(in thousands)	Nine months ended
Cash paid for amounts included in measurement of liabilities	September 30, 2023		September 30, 2022
Operating cash flows used in operating leases	$	410	$	934