8.    Commitments and Contingencies

Operating Leases

The Company rented its Beaverton, Oregon office under an operating lease, which expired on October 31, 2020. Under the terms of the lease, the Company was responsible for taxes, insurance and maintenance expense. The Company recognized rent expense on a straight-line basis over the lease period. On August 18, 2020, the Company signed a new operating lease that began on November 1, 2020, to rent office space in Beaverton, Oregon, to replace the lease that expired on October 31, 2020. The new lease expires on January 31, 2024. The following are the future minimum lease payments for the years ending December 31, 2021 through December 31, 2024: $41,000, $153,000, $173,000, and $15,000.

Rent expense for the three months ended September 30, 2021 and 2020 was $56,000 and $87,000, respectively. Rent expense for the nine months ended September 30, 2021 and 2020 was $168,000 and $288,000, respectively.

Capital Leases

During August 2020, the Company entered into a lease agreement for equipment under a capital lease with a term of 36 months. The equipment under the lease is collateral for the agreement and is included within property and equipment, net on the condensed consolidated balance sheets.

Future minimum lease commitments for the capital lease as of September 30, 2021 are as follows:

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Obligations under the capital lease are included in accrued liabilities and other liabilities on the condensed consolidated balance sheets.

Contingencies

In the normal course of business, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of a possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.

8.    Commitments and Contingencies, continued

The Company’s management does not believe that any such matters, individually or in the aggregate, will have a materially adverse effect on the Company’s condensed consolidated financial statements.

Coronavirus – COVID-19

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. The COVID 19 pandemic represents a fluid situation that presents a wide range of potential impacts of varying durations for different global geographies, including locations where we have offices, employees, customers, vendors and other suppliers and business partners.  Like most US-based businesses, the COVID-19 pandemic and efforts to mitigate the same began to impact on our business in March 2020. By that time, much of our first fiscal quarter of 2020 was completed. During our second fiscal quarter of 2020, we observed decreased demand from certain of our customers due to the temporary closure by many retailers. Our third and fourth fiscal quarters of 2020 and our first three fiscal quarters of 2021 saw sustained improved customer demand as retailers slowly reopened and demand for an in-home immersive cinema experience increased, following the initial closure of many public cinemas due to COVID-19. However, another closure by retailers could impact customer demand in the future. The Company believes the extent of the COVID-19 pandemic’s impact on its operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond the Company’s control and ability to forecast. Although the Company has experienced some positive trends during the first nine months of 2021, because of these uncertainties, the Company cannot estimate how long or to what extent the pandemic will impact its operations.