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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2020
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies |
7. | COMMITMENTS AND CONTINGENCIES
(a) | On January 22, 2013, the Company entered into a license agreement with Advanced NeuroRehabilitation, LLC (“ANR”) for an exclusive right on ANR’s patent pending technology, claims and knowhow. In addition to the issuance of 91,628 shares of common stock to ANR, the Company agreed to pay a 4% royalty on net revenue on the sales of devices covered by the patent-pending technology and services related to the therapy or use of devices covered by the patent-pending technology. For the years ended December 31, 2020 and 2019, the Company recorded approximately $22 thousand and $59 thousand, respectively, in royalty expenses in its consolidated statement of operations.
(b) | On October 30, 2017, HMI amended the Asset Purchase Agreement with A&B (HK) Company Ltd. (“A&B”) which specified that if the Company fails to obtain FDA marketing authorization for commercialization of or otherwise fails to ensure that the PoNS device is available for purchase by the U.S. Government by December 31, 2021, the Company would be subject to a $2.0 million contract penalty payable to A&B, unless the Company receives an exemption for the requirement of FDA marketing authorization from the U.S. Army Medical Material Agency. In December 2018, the U.S. Army notified the Company that they were amending the Agreement such that the satisfaction of the obligation of the contract was changed from FDA marketing authorization of the PoNS device to submitting of an application for marketing authorization of the PoNS device with the FDA. As the Company submitted its application for marketing authorization of the PoNS device to the FDA on August 31, 2018, and with copies of the submission documents provided to the U.S. Army, the Company has met its obligation under the amended agreement. Based on this amendment the Company has determined that the possibility of a payment under this contractual penalty is remote.
(c) | In March 2017, the Company entered into a lease for office space in Newtown, Pennsylvania. The initial term of the lease was from July 1, 2017 through December 31, 2022, with an option to extend until 2027. In July 2017, the Company amended the contract to commence the lease on July 17, 2017 through January 16, 2023, with an option to extend until January 2028. Lease extension options were not included in the lease term as it was not reasonably certain that the Company would elect to utilize the option to extend. Monthly rent plus utilities were approximately $20 thousand per month beginning in January 2018 with a 3% annual increase.
In May 2020, the Company terminated its lease and entered into a new lease (the “Lease Amendment”) for a smaller footprint of the current office space in Newtown, Pennsylvania. Lease payments under the original contract will be made through December 2020. The Lease Amendment was determined to be a partial termination that qualified as a change of accounting of the existing lease and not a separate contract. As such, the ROU assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification. The carrying value of the ROU asset decreased on a basis proportionate to the partial termination by approximately $0.4 million and the related lease liability decreased by approximately $0.4 million. The Company recorded a gain of approximately $0.1 million resulting from the difference between the reduction in the lease liability and the proportionate reduction of the ROU asset. This amount is recorded as a component of other income in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020. The initial lease term of the Lease Amendment is from July 1, 2020 through June 30, 2021, with options to extend for successive six month periods. Two lease extension options were included in the lease term as it was reasonably certain that the Company would elect to utilize the option to extend for this period of time. Monthly rent plus utilities will be approximately $5 thousand per month beginning in January 2021 with a 3% annual increase. The following table summarizes the Company’s operating lease information including future minimum lease payments under a non-cancellable lease (amounts in thousands):
For the Year Ending December 31, |  | 2020 |  |  | 2019 |
Operating lease cost |  | $ | 107 |  |  | $ | 224 |
Operating lease - operating cash flows |  | $ | 253 |  |  | $ | 246 |
Weighted average remaining lease term |  | 1.50 years |  |  | 3.05 years |
Weighted average discount rate |  |  | 7.2 | % |  |  | 15.1 | %
Future minimum lease payments under non-cancellable lease as of December 31, 2020 were as follows: |  |  |  |  |  |  |  |
For the Period Ending December 31, |  |  |  |  |  |  |  |
2021 |  | $ | 63 |  |  |  |  |
2022 |  |  | 32 |  |  |  |  |
Total future minimum lease payments |  |  | 95 |  |  |  |  |
Less imputed interest |  |  | (4 | ) |  |  |  |
Total liability |  | $ | 91 |  |  |  |  |
Reported as of December 31, |  | 2020 |  |  | 2019 |
Current operating lease liability |  |  | 59 |  |  |  | 172 |
Non-current operating lease liability |  |  | 32 |  |  |  | 465 |
Total |  | $ | 91 |  |  | $ | 637 |
(d) | On December 29, 2017, HMI (formerly known as NeuroHabilitation Corporation) entered into a Manufacturing and Supply Agreement (“MSA”) with Key Tronic Corporation (“Key Tronic”), for the manufacture and supply of the Company’s PoNS device based upon the Company’s product specifications as set forth in the MSA. Per the agreement, the Company shall provide to Key Tronic a rolling forecast for the procurement of parts and material and within normal lead times based on estimated delivery dates for the manufacture of the PoNS device. The term of the agreement is for three years and the agreement will automatically renew for additional consecutive terms of one year, unless cancelled by either party upon 180-day written notice to the other party prior to the end of the then current term. On June 1, 2020, HMI extended the existing manufacturing agreement with Key Tronic for a second three year term from December 29, 2020 until December 31, 2023. As of December 31, 2020, the Company did not have any outstanding commitments to Key Tronic to complete the Company’s forecast for the procurement of materials necessary for the delivery of PoNS devices.
(e) | The Company was granted a $323 thousand loan on April 13, 2020 under the Paycheck Protection Program (the “PPP Loan”) established under the CARES Act. The Company planned to use the proceeds from the PPP Loan for covered payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. However, based upon subsequent guidance issued by the Federal Government, including a presumption that publicly traded companies may not be eligible for a PPP loan, the Company returned the PPP Loan proceeds in May 2020 and paid interest for the period of time the loan was outstanding.

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