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Leases | 9 Months Ended
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Sep. 30, 2022
Leases [Abstract] |
Leases | LEASES The Company leases certain equipment, manufacturing, warehouse and office space under non-cancellable operating leases with expirations through 2027 under which it is responsible for related maintenance, taxes and insurance. The Company had one finance lease containing a bargain purchase option that was not renewed upon expiration of the lease during the second quarter of 2022. The lease term consists of the non-cancellable period of the lease, periods covered by options to extend the lease if the Company is reasonably certain to exercise the option, and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the option. As of January 21, 2021, the terms of one of our equipment operating leases had been extended through 2026. Additionally, as of March 25, 2022, in connection with extending through 2027, the terms of our expiring headquarters real estate operating lease for manufacturing, warehouse and office space have been modified beginning July 1, 2022 to reflect a smaller footprint at reduced costs. In accordance with Accounting Standards Codification 842, Leases (“Topic 842”), as a result of the extension, the related lease liability was remeasured and the right-of-use asset was adjusted for each lease at the time of modification in January 2021 and March 2022. The present value of the lease obligations for these leases were calculated using an incremental borrowing rate of 15.93% for the equipment lease and 16.96% for the real estate lease, which were the Company’s blended borrowing rates (including interest, annual facility fees, collateral management fees, bank fees and other miscellaneous lender fees) on its revolving lines of credit with Crossroads Financial Group, LLC (as described below in Note 7, “Debt”) and Factors Southwest L.L.C. (as described below in Note 7, “Debt”). The present value of the other remaining lease obligations continues to be calculated using an incremental borrowing rate of 7.25% (which excludes the annual facility fee and other lender fees), which was the Company’s borrowing rate on its former revolving line of credit with Austin Financial Services, Inc. (the “Austin Credit Facility”). The weighted average remaining lease term for the operating leases is 4.7 years. The Company had one restructured lease with a sub-lease component for the New York, New York office that was closed in 2017. The lease expired in June 2021. The restructured lease and sub-lease were deemed to be in-scope and thus subject to the requirements of Topic 842 and were evaluated for impairment in accordance with the asset impairment provisions of Accounting Standards Codification 360, Property, Plant and Equipment (“Topic 360”). The Company concluded its net right-of-use assets were not impaired and the carrying amount approximates expected sublease income in future years as of December 31, 2020. The Company continued to carry certain immaterial operating expenses associated with this lease as restructuring liabilities and continued to accrete those liabilities in accordance with Accounting Standards Codification 420, Exit or Disposal Cost Obligations (“Topic 420”), as has been done since the cease use date in 2017. For additional information regarding treatment of leases please refer to Note 4, “Leases,” included under Item 8, “Financial Statements and Supplementary Data,” of our 2021 Annual Report. There were no finance lease costs recognized in net loss for the three and nine months ended September 30, 2022 and 2021. Components of the operating and restructured lease costs recognized in net loss for the three and nine months ended September 30, 2022 and 2021, were as follows (in thousands):
| Three months ended September 30, |  | Nine months ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Operating lease cost (income) |  |  |  |  |  |  |
Sub-lease income | $ | (9) |  |  | $ | (25) |  |  | $ | (90) |  |  | $ | (87) |
Lease cost | 83 |  |  | 139 |  |  | 298 |  |  | 423 |
Operating lease cost, net | 74 |  |  | 114 |  |  | 208 |  |  | 336 |
Restructured lease cost (income) |  |  |  |  |  |  |
Sub-lease income | — |  |  | — |  |  | — |  |  | (136) |
Lease cost | — |  |  | — |  |  | — |  |  | 109 |
Restructured lease income, net | — |  |  | — |  |  | — |  |  | (27) |
Total lease cost, net | $ | 74 |  |  | $ | 114 |  |  | $ | 208 |  |  | $ | 309 |
Supplemental balance sheet information related to the Company’s operating and finance leases as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
| September 30, 2022 |  | December 31, 2021
Operating Leases |  |  |
Operating lease right-of-use assets | $ | 1,248 |  |  | $ | 292 |
Operating lease liabilities | $ | 1,271 |  |  | $ | 351 |
Finance Leases |  |  |
Property and equipment | 13 |  |  | 13 |
Allowances for depreciation | (13) |  |  | (12) |
Finance lease assets, net | — |  |  | 1 |
Finance lease liabilities | — |  |  | 1 |
Total finance lease liabilities | $ | — |  |  | $ | 1 |
Future minimum lease payments required under operating and finance leases for each of the 12-month rolling periods below in effect at September 30, 2022 are as follows (in thousands):
|  | Operating Leases |  |  |
October 2022 to September 2023 |  | $ | 384 |  |  |  |
October 2023 to September 2024 |  | 381 |  |  |  |
October 2024 to September 2025 |  | 383 |  |  |  |
October 2025 to September 2026 |  | 389 |  |  |  |
October 2026 to September 2027 |  | 295 |  |  |  |
Total future undiscounted lease payments |  | 1,832 |  |  |  |
Less imputed interest |  | (561) |  |  |  |
Total lease obligations |  | $ | 1,271 |  |  |  |
Supplemental cash flow information related to leases for the three and nine months ended September 30, 2022 and 2021, was as follows (in thousands):
| Three months ended September 30, |  | Nine months ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Supplemental cash flow information |  |  |  |  |  |  |
Cash paid, net, for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |
Operating cash flows from operating leases | $ | 86 |  |  | $ | 161 |  |  | $ | 326 |  |  | $ | 421 |
Operating cash flows from restructured leases | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 35 |
Financing cash flows from finance leases | $ | — |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 3 |
Leases | LEASES The Company leases certain equipment, manufacturing, warehouse and office space under non-cancellable operating leases with expirations through 2027 under which it is responsible for related maintenance, taxes and insurance. The Company had one finance lease containing a bargain purchase option that was not renewed upon expiration of the lease during the second quarter of 2022. The lease term consists of the non-cancellable period of the lease, periods covered by options to extend the lease if the Company is reasonably certain to exercise the option, and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the option. As of January 21, 2021, the terms of one of our equipment operating leases had been extended through 2026. Additionally, as of March 25, 2022, in connection with extending through 2027, the terms of our expiring headquarters real estate operating lease for manufacturing, warehouse and office space have been modified beginning July 1, 2022 to reflect a smaller footprint at reduced costs. In accordance with Accounting Standards Codification 842, Leases (“Topic 842”), as a result of the extension, the related lease liability was remeasured and the right-of-use asset was adjusted for each lease at the time of modification in January 2021 and March 2022. The present value of the lease obligations for these leases were calculated using an incremental borrowing rate of 15.93% for the equipment lease and 16.96% for the real estate lease, which were the Company’s blended borrowing rates (including interest, annual facility fees, collateral management fees, bank fees and other miscellaneous lender fees) on its revolving lines of credit with Crossroads Financial Group, LLC (as described below in Note 7, “Debt”) and Factors Southwest L.L.C. (as described below in Note 7, “Debt”). The present value of the other remaining lease obligations continues to be calculated using an incremental borrowing rate of 7.25% (which excludes the annual facility fee and other lender fees), which was the Company’s borrowing rate on its former revolving line of credit with Austin Financial Services, Inc. (the “Austin Credit Facility”). The weighted average remaining lease term for the operating leases is 4.7 years. The Company had one restructured lease with a sub-lease component for the New York, New York office that was closed in 2017. The lease expired in June 2021. The restructured lease and sub-lease were deemed to be in-scope and thus subject to the requirements of Topic 842 and were evaluated for impairment in accordance with the asset impairment provisions of Accounting Standards Codification 360, Property, Plant and Equipment (“Topic 360”). The Company concluded its net right-of-use assets were not impaired and the carrying amount approximates expected sublease income in future years as of December 31, 2020. The Company continued to carry certain immaterial operating expenses associated with this lease as restructuring liabilities and continued to accrete those liabilities in accordance with Accounting Standards Codification 420, Exit or Disposal Cost Obligations (“Topic 420”), as has been done since the cease use date in 2017. For additional information regarding treatment of leases please refer to Note 4, “Leases,” included under Item 8, “Financial Statements and Supplementary Data,” of our 2021 Annual Report. There were no finance lease costs recognized in net loss for the three and nine months ended September 30, 2022 and 2021. Components of the operating and restructured lease costs recognized in net loss for the three and nine months ended September 30, 2022 and 2021, were as follows (in thousands):
| Three months ended September 30, |  | Nine months ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Operating lease cost (income) |  |  |  |  |  |  |
Sub-lease income | $ | (9) |  |  | $ | (25) |  |  | $ | (90) |  |  | $ | (87) |
Lease cost | 83 |  |  | 139 |  |  | 298 |  |  | 423 |
Operating lease cost, net | 74 |  |  | 114 |  |  | 208 |  |  | 336 |
Restructured lease cost (income) |  |  |  |  |  |  |
Sub-lease income | — |  |  | — |  |  | — |  |  | (136) |
Lease cost | — |  |  | — |  |  | — |  |  | 109 |
Restructured lease income, net | — |  |  | — |  |  | — |  |  | (27) |
Total lease cost, net | $ | 74 |  |  | $ | 114 |  |  | $ | 208 |  |  | $ | 309 |
Supplemental balance sheet information related to the Company’s operating and finance leases as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
| September 30, 2022 |  | December 31, 2021
Operating Leases |  |  |
Operating lease right-of-use assets | $ | 1,248 |  |  | $ | 292 |
Operating lease liabilities | $ | 1,271 |  |  | $ | 351 |
Finance Leases |  |  |
Property and equipment | 13 |  |  | 13 |
Allowances for depreciation | (13) |  |  | (12) |
Finance lease assets, net | — |  |  | 1 |
Finance lease liabilities | — |  |  | 1 |
Total finance lease liabilities | $ | — |  |  | $ | 1 |
Future minimum lease payments required under operating and finance leases for each of the 12-month rolling periods below in effect at September 30, 2022 are as follows (in thousands):
|  | Operating Leases |  |  |
October 2022 to September 2023 |  | $ | 384 |  |  |  |
October 2023 to September 2024 |  | 381 |  |  |  |
October 2024 to September 2025 |  | 383 |  |  |  |
October 2025 to September 2026 |  | 389 |  |  |  |
October 2026 to September 2027 |  | 295 |  |  |  |
Total future undiscounted lease payments |  | 1,832 |  |  |  |
Less imputed interest |  | (561) |  |  |  |
Total lease obligations |  | $ | 1,271 |  |  |  |
Supplemental cash flow information related to leases for the three and nine months ended September 30, 2022 and 2021, was as follows (in thousands):
| Three months ended September 30, |  | Nine months ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Supplemental cash flow information |  |  |  |  |  |  |
Cash paid, net, for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |
Operating cash flows from operating leases | $ | 86 |  |  | $ | 161 |  |  | $ | 326 |  |  | $ | 421 |
Operating cash flows from restructured leases | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 35 |
Financing cash flows from finance leases | $ | — |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 3 |

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