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COMMITMENTS AND CONTINGENCIES | 3 Months Ended
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Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | NOTE 12 - COMMITMENTS AND CONTINGENCIES COVID-19 Pandemic In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus resulted in a world-wide pandemic. By March 2020, the U.S. economy had been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus, now widely acknowledged to have been generally ineffective, and in many ways, harmful. As a result, nearly all of these Orders have been relaxed or lifted, but there is considerable uncertainty about whether the Orders will be reinstated should a new COVID-19 variant or entirely new virus emerge. Our business was materially impacted by COVID-19 in 2020 and to some extent in 2021 due to the actions of governmental bodies that mandated quarantines and lockdowns that resulted in many of our VIPs and potential VIPs having to close their offices. The impact of COVID-19 on our business diminished somewhat as 2022 progressed. However, it appears that the latest COVID-19 subvariants evoke generally milder symptoms and do not pose the same health or economic threat as previous strains. However, the residual effects of the pandemic on dental workforce availability as well as patient precautionary measures continued to negatively impact our VIP dental practices and our revenue across the U.S. and Canada during 2022. We believe new enrollments during the first quarter of 2023 continue to be negatively impacted by the ongoing overall workforce uncertainties in the dental market. As such, the long-term financial impact on our business of COVID-19 as well as these other matters cannot reasonably be fully estimated at this time. Inflation and War in Ukraine The Company believes the U.S. has entered a period of inflation which has increased (and may continue to increase) the Company and its suppliers’ costs as well as the end cost of the Company’s products to consumers. To date, the Company has been able to manage inflation risk without a material adverse impact on its business or results of operations. However, inflationary pressures (including increases in the price of raw material components of the Company’s appliances) made it necessary for the Company to adjust its standard pricing for its appliance products effective May 1, 2022. The full impact of such price adjustments on sales or demand for the Company’s products is not fully known at this time and may require the Company to adjust other aspects of its business as it seek to grow revenue and, ultimately, achieve profitability and positive cash flow from operations. An additional inflation-related risk is the Federal Reserve’s response, which up to this point has been to raise interest rates. Such actions have, in times past, created unintended consequences in terms of the impact on housing starts, overall manufacturing, capital markets, and banking. If such disruptions become systemic, as occurred in the recession of 2008, then the impact on the Company’s revenue, earnings and access to capital of both inflation and inflation-fighting responses would be impossible to know or calculate. In addition, worldwide supply chain constraints due in part to Russia’s invasion of Ukraine in February 2022, have emerged as new barriers to long-term economic recovery. These conditions could cause an economic recession or depression to commence, and if such recession or depression is sustained, it could have a material adverse effect on the Company business as demand for its products could decrease. Such conditions have also had, and may continue to have, an adverse effect on the capital markets, with public stock price decreases and volatility, which could make it more difficult for the Company to raise needed capital at the appropriate time. Operating Leases The Company has entered into various operating lease agreements for certain offices, medical facilities and training facilities. These leases have original lease periods expiring between 2022 and 2029. Most leases include an option to renew and the exercise of a lease renewal option typically occurs at the discretion of both parties. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease until it is reasonably certain that the Company will exercise that option. In January 2017, the Company entered into a commercial lease agreement for 2,220 square feet of office in Johnstown, CO that was to commence on March 1, 2018 and end February 28, 2025. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of $0.3 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 6.0%. In May 2018, the Company entered into a commercial lease agreement for 3,643 square feet of office in Highlands Ranch, CO that was to commence on November 1, 2018 and end on January 1, 2029. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of $0.8 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 7.3%. In October 2020, the Company entered into a commercial lease agreement for 4,800 square feet of office in Orem, Utah that was to commence on January 1, 2021 and end on December 1, 2025. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of $0.6 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 6.6%. In April 2019, the Company entered into a commercial lease agreement for 3,231 square feet of office in Highlands Ranch, CO that was to commence on May 1, 2019 and end on May 31, 2022. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of less than $0.1 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 6.7%. In April 2019, the Company entered into a commercial lease agreement for 14,732 square feet of office in Denver, CO that was to commence on September 23, 2020 and end on March 22, 2028. As of January 1, 2022, the Company recorded an operating lease right of use asset and lease liabilities of less than $1.4 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 7.1%. In April 2022, the Company entered into a commercial lease agreement for 8,253 square feet of office in Littleton, CO that was to commence in May 16, 2022 and end on November 15, 2027. As of May 16, 2022, the Company recorded an operating lease right of use asset and lease liabilities of less than $1.5 million in the consolidated balance sheet representing the present value of minimum lease payments using the Company’s incremental borrowing rate of 10.6%. As of March 31, 2023 and 2022, the components of lease expense are as follows (in thousands): SCHEDULE OF LEASE EXPENSE
Lease cost: |  | 2023 |  |  | 2022 |
|  | Three Months Ended March 31, |
Lease cost: |  | 2023 |  |  | 2022 |
Operating lease cost |  | $ | 130 |  |  | $ | 127 |
Total net lease cost |  | $ | 130 |  |  | $ | 127 |
Rent expense is recognized on a straight-line basis over the lease term. Lease expense, including real estate taxes and related costs, for the three months ended March 31, 2023 and 2022 aggregated approximately $0.1 million. This is included under general and administrative expense. As of March 31, 2023, the remaining lease terms and discount rate used are as follows (in thousands): SCHEDULE OF REMAINING LEASE TERMS AND DISCOUNT RATE
|  | 2023 |
Weighted-average remaining lease term (years) |  |  | 4.4 |
Weighted-average discount rate |  |  | 8.3 | %
Supplemental cash flow information related to leases as of March 31, 2023 is as follows (in thousands): SCHEDULE OF RELATED TO LEASES
|  | 2023 |
Cash flow classification of lease payments: |  |  |  |
Operating cash flows from operating leases |  |  | 148 |
As of March 31, 2023, the maturities of the Company’s future minimum lease payments were as follows (in thousands): SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
As of March 31, |  |  |
2023 (remaining nine months) |  | $ | 454 |
2024 |  |  | 621 |
2025 |  |  | 594 |
2026 |  |  | 507 |
2027 |  |  | 493 |
Thereafter |  |  | 140 |
Total lease payments |  |  | 2,809 |
Less: Imputed interest |  |  | (494 | )
Total |  | $ | 2,315 |

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