Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.23.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2023
Commitments and Contingencies  
Commitments and Contingencies

8.

Commitments and Contingencies

Operating Leases

The Company leases office space under a non-cancellable operating lease that expires in January 2024 and has an option to renew this lease, with renewal rates to be negotiated. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date we take possession of the property. At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is financing or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leasehold improvements is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The following table reflects our lease assets and our lease liabilities at March 31, 2023 and December 31, 2022 (in thousands):

    

March 31, 

    

December 31,

2023

2022

Assets:

Operating lease right-of-use assets

$

95

$

120

Liabilities:

 

  

 

  

Operating lease liabilities, current

$

153

$

154

Operating lease liabilities, non-current

$

$

39

Operating lease right-of-use assets are included in other assets. Operating lease liabilities, current, are included in accrued liabilities and Operating lease liabilities, non-current, are include in other liabilities on the condensed consolidated balance sheets.

8.

Commitments and Contingencies, continued

Lease Costs:

The components of lease costs were as follows (in thousands):

    

Three Months Ended

March 31, 2023

Operating lease cost

$

28

Short term lease cost

11

Total lease cost

$

39

As of March 31, 2023, the maturity of operating lease liabilities was as follows (in thousands):

2023 (remaining 9 months)

    

130

2024

 

29

Total lease payments

 

159

Less: Interest

 

(6)

Present value of lease liabilities

$

153

Lease Term and Discount Rate:

    

March 31, 2023

Weighted-average remaining lease term (in years)

 

0.8

Weighted-average discount rate

 

8.0

%

Other Information:

Supplemental cash flow information related to leases was as follows (in thousands):

    

Three Months Ended

March 31, 2023

Operating cash outflows from operating leases

$

43

Finance Lease

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 finance lease as of March 31, 2023 are as follows (in thousands):

Payments due in:

 

  

Year ending December 31, 2023 (remaining 9 months)

$

9

Total minimum lease payments

 

9

Less: Amounts representing interest

 

Present value of capital lease obligations

 

9

Other liabilities

$

Obligations under the finance lease are included in accrued liabilities on the condensed consolidated balance sheets.

8.

Commitments and Contingencies, continued

Management Team Retention Bonus

On September 1, 2022, the Company adopted its Management Team Retention Bonus Plan (the “Retention Plan”), to incentivize certain management level employees (the “Managers”) to remain intact through and shortly following a potential “Change of Control” (as defined in the Retention Plan). The aggregate Retention Plan bonus amounts for all Managers is $1,250,000.

The Retention Plan provides that each Manager is eligible to receive a lump sum cash amount under the Retention Plan, on the earlier of the six-month anniversary of the date of a Change of Control or at the time of such Manager’s involuntary termination other than for “Cause” (as defined in the Retention Plan) or termination for “Good Reason” (as defined in the Retention Plan). The Retention Plan will terminate upon the earlier of June 30, 2023 if a Change of Control has not occurred by such date or upon the payment of all Retention Bonus Amounts. As of March 31, 2023, no accrual has been made under the Retention Plan.

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.

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.