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Leases

12 Months Ended

Dec. 31, 2022

4. Leases.

As of December 31, 2022, the Company leases space under two non-cancelable operating leases for its corporate headquarters and for warehouse space. Both leases have escalating lease payment terms but neither contains a contingent rent provision. The leases for both the Company’s corporate headquarters and its warehouse include both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases. The headquarters lease required the Company to provide a letter of credit, supported by an $85,000 deposit, which is reflected as restricted cash on the balance sheet.

The Company used its incremental borrowing rate of approximately 4.8% in determining the present value of the lease payments based on the information available at the lease commencement date for its two leases.

The exercise of lease renewal options is at the Company’s sole discretion. In December 2022, the Company decided to exercise the lease renewal option for its corporate headquarters, extending the lease term through December 31, 2026. Operating lease liabilities and right-of-use assets were increased for lease renewal by $38,000 for the year ended December 31, 2022. The Company used its incremental borrowing rate of approximately 7.0% in determining the present value of the extended lease payments.

The cost components of the Company’s operating leases were as follows:

	Year ended December 31, 2022
	Corporate				Operating
	Headquarters		Warehouse		Leases
Operating lease cost	$	67,000	$	17,000	$	84,000
Variable lease cost		40,000		12,000		52,000
Total	$	107,000	$	29,000	$	136,000

	Year ended December 31, 2021
	Prior Corporate		Corporate		Additional				Operating
	Headquarters		Headquarters		Office Space		Warehouse		Leases
Operating lease cost	$	38,000	$	28,000	$	—	$	13,000	$	79,000
Variable lease cost		24,000		16,000		—		12,000		52,000
Short-term lease cost		—		—		28,000		—		28,000
Total	$	62,000	$	44,000	$	28,000	$	25,000	$	159,000

Variable lease costs are excluded from right-of-use assets and lease liabilities and consist primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased corporate headquarters which are paid based on actual costs incurred by the lessor.

Maturities of the Company’s lease liabilities for its corporate headquarters and its warehouse operating leases were as follows as of December 31, 2022:

2023	$	10,000
2024		52,000
2025		53,000
2026		55,000
Total lease payments	$	170,000
Less: Interest		(26,000	)
Present value of lease liabilities	$	144,000

The remaining lease term as of December 31, 2022 for the Company’s corporate headquarters is 4.0 years. The warehouse lease which was set to expire on March 31, 2023 was extended on month-to-month basis with payments of $1,600 per month. The cash outflow for operating leases for the years ended December 31, 2022 and December 31, 2021 were $84,000 and $97,000, respectively.