Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Jun. 30, 2022



We determine if an arrangement is a lease at inception. We have operating leases for office and temporary living space as well as for some office equipment. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liability and non-current operating lease liability in our consolidated balance sheets as of June 30, 2022 and December 31, 2021. The Company does not have any finance leases.


ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.


As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rates, which are derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our bank financing arrangements, geographical location and collateralization of assets when calculating our incremental borrowing rates.


Our lease terms include options to extend the lease when we believe that we may want the right to exercise that option. Leases with a term of less than 12 months are not recorded in the consolidated balance sheets. Our lease agreements do not contain any residual value guarantees. For real estate leases, we account for the lease and non-lease components as a single lease component. Some leases include escalation clauses and termination options that are factored in the determination of the lease payments when appropriate.



If a lease is modified after the effective date, the operating lease ROU asset and liability are re-measured using the current incremental borrowing rate. We review our incremental borrowing rate for our portfolio of leases on a quarterly basis. During the three and six months ended June 30, 2022, there were approximately $266,000 and $529,000, respectively, of unoccupied lease charges. During the three and six months ended June 30, 2021, there were approximately $223,000 and $466,000, respectively, of unoccupied lease charges for two of the Company’s facilities. During the six months ended June 30, 2022, there was a gain on lease termination of approximately $105,000. During the six months ended June 30, 2021, the Company recorded approximately $775,000 of impairment charges on a vendor contract.


During the three months ended June 30, 2022, a facility lease was terminated in conjunction with the Company ceasing its document storage services resulting in additional costs of approximately $197,000. This amount is included in Net loss on lease terminations, impairment and unoccupied lease charges in the consolidated statements of operations.


Lease expense is included in direct operating costs and general and administrative expenses in the consolidated statements of operations based on the nature of the expense. As of June 30, 2022, we had 33 leased properties, five in Medical Practice Management and 28 in Healthcare IT, with remaining terms ranging from less than one year to fifteen years. Our lease terms are determined taking into account lease renewal options, the Company’s anticipated operating plans and leases that are on a month-to-month basis. The Company also has some related party leases – see Note 9.


The components of lease expense were as follows:

    Three Months Ended
June 30,
    Six Months Ended
June 30,
    2022     2021     2022     2021  
    ($ in thousands)  
Operating lease cost   $ 905     $ 1,058     $ 1,877     $ 2,115  
Short-term lease cost     35       22       75       44  
Variable lease cost     10       8       19       14  
Total- net lease cost   $ 950     $ 1,088     $ 1,971     $ 2,173  


Short-term lease cost represents leases that were not capitalized as the lease term as of the later of January 1, 2022 or the beginning of the lease was less than 12 months. Variable lease costs include utilities, real estate taxes and common area maintenance costs.


Supplemental balance sheet information related to leases is as follows:


    June 30, 2022     December 31, 2021  
    ($ in thousands)  
Operating leases:                
Operating lease ROU assets, net   $ 5,447     $ 6,940  
Current operating lease liabilities   $ 3,224     $ 3,963  
Non-current operating lease liabilities     3,319       4,545  
Total operating lease liabilities   $ 6,543     $ 8,508  
Operating leases:                
ROU assets   $ 7,171     $ 10,535  
Asset lease expense     (1,658 )     (3,574 )
Foreign exchange loss     (66 )     (21 )
ROU assets, net   $ 5,447     $ 6,940  
Weighted average remaining lease term (in years):                
Operating leases     4.53       4.26  
Weighted average discount rate:                
Operating leases     6.75 %     6.76 %



Supplemental cash flow and other information related to leases is as follows:


    Three Months Ended
June 30,
    Six Months Ended
June 30,
    2022     2021     2022     2021  
    ($ in thousands)  
Cash paid for amounts included in the measurement of lease liabilities:                                
Operating cash flows from operating leases   $ 1,158     $ 1,336     $ 2,370     $ 2,732  
ROU assets obtained in exchange for lease liabilities:                                
Operating leases, excluding impairments and terminations   $ 15     $ 1,537     $ 442     $ 1,748  


Maturities of lease liabilities are as follows:


Operating leases - Years ending December 31,   ($ in thousands)  
2022 (six months)   $ 2,205  
2023     2,263  
2024     995  
2025     514  
2026     232  
Thereafter     1,756  
Total lease payments     7,965  
Less: imputed interest     (1,422 )
Total lease obligations     6,543  
Less: current obligations     (3,224 )
Long-term lease obligations   $ 3,319