Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Mar. 31, 2023



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 March 31, 2023 and December 31, 2022. 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 months ended March 31, 2023 and 2022, there were approximately $153,000 and $263,000, respectively, of unoccupied lease charges for two of the Company’s facilities. During the quarter ended March 31, 2022, there was a gain on lease termination of approximately $105,000.


During the three months ended March 31, 2023, the Miami office lease that we assumed in connection with an acquisition ended and we entered into a new lease arrangement with the landlord for significantly less office space. Charges of approximately $71,000 were incurred as a result of vacating the former premises. During the year ended December 31, 2022, a facility lease was terminated in conjunction with the Company ceasing its document storage services resulting in additional costs for the three months ended March 31, 2023, of approximately $45,000. This amount is included in net loss on lease terminations 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 March 31, 2023, we had 31 leased properties, five in Medical Practice Management and 26 in Healthcare IT, with remaining terms ranging from less than one year to thirteen 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 8.


The components of lease expense were as follows:



    2023     2022  
    Three Months Ended March 31,  
    2023     2022  
    ($ in thousands)  
Operating lease cost   $ 801     $ 972  
Short-term lease cost     -       40  
Variable lease cost     5       9  
Total - net lease cost   $ 806     $ 1,021  


Short-term lease cost represents leases that were not capitalized as the lease term as of the later of January 1, 2023 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:



    March 31, 2023     December 31, 2022  
    ($ in thousands)  
Operating leases:                
Operating lease ROU assets, net   $ 4,465     $ 4,921  
Current operating lease liabilities   $ 2,095     $ 2,273  
Non-current operating lease liabilities     2,822       3,207  
Total operating lease liabilities   $ 4,917     $ 5,480  
Operating leases:                
ROU assets   $ 5,207     $ 8,293  
Asset lease expense     (683 )     (3,286 )
Foreign exchange loss     (59 )     (86 )
ROU assets, net   $ 4,465     $ 4,921  
Weighted average remaining lease term (in years):                
Operating leases     4.3       5.1  
Weighted average discount rate:                
Operating leases     10.1 %     7.9 %



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



    2023     2022  
    Three Months Ended March 31,  
    2023     2022  
    ($ in thousands)  
Cash paid for amounts included in the measurement of lease liabilities:            
Operating cash flows from operating leases   $ 907     $ 1,212  
ROU assets obtained in exchange for lease liabilities:                
Operating leases, excluding impairments and terminations   $ 287     $ 427  


Maturities of lease liabilities are as follows:



Operating leases - Years ending December 31,   ($ in thousands)  
2023 (nine months)   $ 2,057  
2024     1,661  
2025     952  
2026     323  
2027     229  
Thereafter     1,643  
Total lease payments     6,865  
Less: imputed interest     (1,948 )
Total lease obligations     4,917  
Less: current obligations     (2,095 )
Long-term lease obligations   $ 2,822