Leases

12 Months Ended

Dec. 31, 2023

16. 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 $388 thousand and $632 thousand for the twelve months ended December 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)

Operating Leases	Classification	December 31, 2023		December 31, 2022
Leased Assets
Operating lease - right of use assets	Long term assets	$	413	$	506

Lease Liabilities
Operating lease liabilities - Current	Other current liabilities		234		418
Operating lease liabilities	Long term liabilities		357		160
		$	591	$	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, following a March 18, 2022 building fire that impacted our space and ensuing dispute among us and the landlord, 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. The lease termination resulted in a gain of $94 thousand and is reflected in other (loss) income, net for the year ended December 31, 2022. As a part of this agreement, we assigned both active subleases to the landlord effective as of the execution date.

The table below summarizes the lease income and expenses recorded in the consolidated statements of operations incurred year to date ended December 31, 2023, (in thousands):

Lease Cost	Classification	Twelve months ended, December 31, 2023		Twelve months ended, December 31, 2022
Operating lease cost ⁽¹⁾	Selling, general and administrative expenses	$	418		700
Short-term leases costs ⁽²⁾	Selling, general and administrative expenses		29		60
Sublease income⁽³⁾	Selling, general and administrative expenses		-		(62	)
Net lease cost		$	447		698

⁽¹⁾ Includes variable lease costs which are immaterial.

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

⁽³⁾Sublease portfolio consists of 2 tenants, which sublease parts of our principal executive office located at 1332 Londontown Blvd, Suite 200, Sykesville, MD.

We are obligated under certain noncancelable operating leases for office facilities and equipment. Future minimum lease payments under our noncancelable operating leases as of December 31, 2023 are as follows:

(in thousands)	Gross Future
	Minimum Lease
	Payments

2024	$	263
2025		150
2026		96
2027		90
2028		61
Thereafter		-
Total	$	660
Less: Interest		69
Present value of lease payments	$	591

The below table summarizes the weighted-average remaining lease term, presented in years, and the weighted-average discount rate for our operating leases included in the consolidated balance sheet as of December 31, 2023:

Lease Term and Discount Rate	Twelve months ended December 31, 2023
Weighted-average remaining lease term (years)
Operating leases		3.38
Weighted-average discount rate
Operating leases		6.10	%

There was right-of-use assets obtained in exchange for operating lease liabilities of $460 thousand during the year ended December 31, 2023. The table below sets out the classification of lease payments in the consolidated statements of cash flows:

(in thousands)

	Twelve months ended December 31,
Cash paid for amounts included in measurement of liabilities	2023		2022

Cash paid for amounts included in measurement of liabilities	$	453	$	1,233