Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.22.2.2
Commitments and Contingencies
9 Months Ended
Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

10. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases office space pursuant to operating leases that are subject to specific escalation clauses. Rent expense charged to operations for the three months ended September 30, 2022 and 2021 amounted to $1,592 and $1,621, respectively. The Company received sub-lease income from sub-tenants during the three months ended September 30, 2022 and 2021 of $38 and $38, respectively. Therefore, for the three months ended September 30, 2022 and 2021, net rent expense amounted to $1,554 and $1,583, respectively, and is included in general and administrative expenses in the Condensed Consolidated Statements of Operations.

Rent expense charged to operations for the nine months ended September 30, 2022 and 2021 amounted to $4,828 and $4,840, respectively. The Company received sub-lease income from sub-tenants during the nine months ended September 30, 2022 and 2021 of $115 and $115, respectively. Therefore, for the nine months ended September 30, 2022 and 2021, net rent expense amounted to $4,713 and $4,725, respectively, and is included in general and administrative expenses in the Condensed Consolidated Statements of Operations.

As security for performance under the leases, the Company is required to maintain letters of credit in favor of the landlord totaling $506 as of September 30, 2022 and December 31, 2021. Furthermore, the Company maintains an $80 letter of credit in favor of its Boston landlord. Both are collateralized by the Company’s revolving credit facility with City National Bank.

In March 2014, the Company entered into a lease agreement for additional office space in Richmond, VA. The lease commenced on May 1, 2014 and had an original expiration date of July 31, 2019. The lease is subject to escalation clauses and provides for a rent-free period of three months. Monthly rent expense is $5. The Company paid a refundable security deposit of $3. In September 2016, the Company entered into Lease Amendment Number One (“Amendment Number One”) to expand its space and extend its lease. This expansion was to occur on or about October 1, 2017, and the lease was extended to November 30, 2024. The lease was further amended on January 16, 2018 (“Amendment Number Two”) to update the expansion date to January 12, 2018 and to extend the term of the lease to November 30, 2028. The amended lease provides for a rent credit of $40. Monthly rent expense under the amended lease is $10.

In June 2015, the Company entered into a lease agreement for office space in Charlottesville, VA. The lease commenced on June 30, 2015 and expired, as amended, on June 30, 2019. On June 6, 2019, the Company extended this lease, with the new term beginning on July 1, 2019 and expiring on June 30, 2022. On April 4, 2022 , the Company extended this lease again, with the new term beginning on July 1, 2022 and expiring on December 31, 2023. Monthly rent expense is $3. The Company paid a refundable security deposit of $2.

In connection with the acquisition of Jamison Eaton & Wood, Inc. (the “Jamison Acquisition”), the Company assumed lease agreements for office space in Bedminster and Princeton, NJ. The amended Bedminster lease commenced on April 1, 2022 and expires on July 31, 2027. Monthly rent expense on the Bedminster lease is $11. The Bedminster lease is subject to escalation clauses and provides for a rent-fee period of four months.

In December 2015, the Company extended its lease related to its New York City office space. The amended lease commenced on October 1, 2017 and expires on September 30, 2028. The lease is subject to escalation clauses and provides for a rent-free period of twelve months and for tenant improvements of up to $2,080. Monthly rent under this extension is $446.

In January 2016, the Company entered into a lease agreement for office space in Princeton, NJ. The lease commenced April 23, 2016 and expired on August 31, 2022. This lease replaced the Princeton lease discussed above that expired on April 30, 2016. Monthly rent expense on this lease was $6. The lease was subject to escalation clauses and provided for a rent-free period of five months.

In January 2018, the Company extended its lease related to its Boston, MA office space. The amended lease commenced on January 1, 2018 and expires on April 30, 2023. The lease provides for a rent-free period of one month. Monthly rent under this extension is $33.

With the Neosho Acquisition, the Company assumed a lease agreement for office space in La Jolla, CA. The lease expired on January 31, 2020. Monthly rent expense was $3. On November 5, 2019, the Company entered into a lease agreement for office space in San Diego, CA. The lease commenced on February 1, 2020 and expires on June 30, 2025. The lease is subject to escalation clauses and provides for a rent-free period of four months and for tenant improvements of up to $27. Monthly rent expense under this lease is $12.

With the Cortina Acquisition, the Company assumed a lease agreement for office space in Milwaukee, WI. The lease was extended on June 17, 2020 and expires December 31, 2022. Monthly rent expense is $12.

The components of lease expense for the three and nine months ended September 30, 2022 and 2021 were as follows:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating Lease Cost

 

$

1,531

 

 

$

1,531

 

 

$

4,593

 

 

$

4,603

 

Financing Lease Cost:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of ROU assets

 

 

28

 

 

 

30

 

 

 

86

 

 

 

90

 

Interest on lease liabilities

 

 

2

 

 

 

3

 

 

 

6

 

 

 

8

 

Total

 

 

30

 

 

 

33

 

 

 

92

 

 

 

98

 

 

Future minimum lease payments and rentals under lease agreements for office space are as follows:

 

 

 

Operating Leases

 

 

Non-cancellable
Subleases

 

 

Operating Lease
Liabilities

 

Remainder of 2022

 

$

1,611

 

 

$

(39

)

 

$

1,572

 

2023

 

 

6,099

 

 

 

(6

)

 

 

6,093

 

2024

 

 

6,150

 

 

 

 

 

 

6,150

 

2025

 

 

6,078

 

 

 

 

 

 

6,078

 

2026

 

 

5,999

 

 

 

 

 

 

5,999

 

Thereafter

 

 

10,368

 

 

 

 

 

 

10,368

 

Total

 

$

36,305

 

 

$

(45

)

 

$

36,260

 

Weighted-average remaining lease term – operating leases (months)

 

 

 

 

 

 

 

 

70.5

 

Weighted-average discount rate

 

 

 

 

 

 

 

 

4.2

%

 

 

The Company has finance leases for the following office equipment: (i) a three year lease agreement for one copier totaling $11 with monthly minimum payments of $0.3, which began on March 1, 2018 and continued through January 31, 2021, (ii) a three year lease agreement for one copier totaling $13 with monthly minimum payments of $0.4, which began on March 1, 2019 and continued through February 28, 2022, (iii) a 39-month lease agreement for one copier totaling $12 with monthly minimum lease payments of $0.4, which began on March 1, 2019 and continued through May 31, 2022, (iv) a lease agreement for one copier that was assumed as part of the Cortina Acquisition with monthly minimum lease payments of $1, which began on July 1, 2019 and continued through November 30, 2021, (v) a three year lease agreement for two copiers totaling $51 with monthly minimum lease payments of $1, which began on August 1, 2019 and continued through July 31, 2022, (vi) a five year lease agreement for a copier totaling $82 with monthly minimum lease payments of $1, which began on May 1, 2020 and was disposed in September 2022, (vii) a three year lease agreement for a copier totaling $59 with minimum monthly lease payments of $2, which began on June 1, 2020 and was disposed in September 2022, (viii) a three year lease agreement for two copiers totaling $43 with minimum monthly lease payments of $1, which began on August 20, 2020 and continues through August 19, 2023, (ix) a three year lease agreement for two copiers totaling $39 with minimum monthly lease payments of $1, which began on August 20, 2020 and continues through August 19, 2023, (x) a five year lease agreement for four copiers totaling $94 with minimum monthly lease payments of $2, which began on February 1, 2021 and continues through January 31, 2026, (xi) a three year lease agreement for two copiers totaling $52 with minimum monthly lease payments of $1, which begin on July 1, 2021 and continues through June 30, 2024, (xii) a four year lease for a copier totaling $31 with minimum monthly payments of $1, which began on May 1, 2022 and continues through April 30, 2026, (xiii) a three year lease for a copier totaling $30 with minimum monthly lease payments of $1, which began on September 1, 2022 and continues through August 31, 2025, (xiv) a 39-month lease for a copier totaling $11 with minimum monthly lease payments of $0.3, which began on September 1, 2022 and continues through November 30, 2025, and (xv) a five year lease for office equipment totaling $210 with minimum monthly payments of $4, which begins on October 1, 2022 and continues through September 30, 2027. The aggregate principal balance of finance leases was $373 and $253 as of September 30, 2022 and December 31, 2021, respectively.

The assets relating to finance leases that are included in equipment as of September 30, 2022 and December 31, 2021 are as follows:

 

 

 

September 30,
2022

 

 

December 31,
2021

 

Finance lease assets included in furniture and equipment

 

$

503

 

 

$

434

 

Less: Accumulated depreciation and amortization

 

 

(131

)

 

 

(187

)

 

 

$

372

 

 

$

247

 

 

Depreciation expense relating to finance lease assets was $28 and $30 for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense relating to finance lease assets was $86 and $90 for the nine months ended September 30, 2022 and 2021, respectively.

During the three and nine months ended September 30, 2022, the Company wrote off leased assets of $170 and $194, respectively with accumulated depreciation of $119 and $143, respectively. During the three and nine months ended September 30, 2021, the Company wrote off leased assets of $38 and $120, respectively, with accumulated depreciation of $31 and $95, respectively.

Future minimum lease payments under finance leases are as follows:

 

 

 

Future Minimum Lease
Commitments

 

Remainder of 2022

 

$

29

 

2023

 

 

109

 

2024

 

 

85

 

2025

 

 

75

 

2026

 

 

45

 

Thereafter

 

 

31

 

Total

 

$

374

 

Weighted-average remaining lease term – finance leases (months)

 

 

46.8

 

Weighted-average discount rate

 

 

3.0

%