Leases

12 Months Ended

Dec. 31, 2022

Note 12 – Leases

The Company has operating and finance leases for facilities and certain equipment. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company does not combine lease and non-lease components in the recognition of lease expense.

The Company’s leases have remaining non-cancelable lease terms of up to 3 years, some of which include options to extend the leases for up to 15 years. The exercise of lease renewal options is at the Company’s sole discretion. The Company recognizes rent expense for minimum lease payments on a straight-line basis over the expected lease term, including rent holidays, rent escalation clause and/or cancelable option periods where failure to exercise such options would result in an economic penalty.

As of December 31, 2022, the Company held four leases for office, manufacturing and warehouse facilities in Aliso Viejo, California. The four leases are for approximately 121,000 square feet in the aggregate and expire between March 31, 2023 and January 31, 2026. For one of the facilities operating leases, the lessor provided $900,000 in tenant allowances.

On April 4, 2022, the Company entered into a thirty-four-month sublease agreement for a portion of the 5 Columbia Building, in Aliso Viejo, CA. The sublease commencement date was June 13, 2022 and will expire on March 31, 2025. The base rent receivable is $11,410 per month. On January 4, 2023, the Company amended the base rent of sublease agreement to $5,319 per month beginning on March 1, 2023.

The following table presents the lease balances within the consolidated balance sheets (in thousands):


		December 31,		December 31,
Leases	Classification	2022		2021

Assets
Operating	Operating leases right-of-use assets		3,943	$	4,284
Finance	Property and equipment, net		206	$	33
Total lease assets			4,149		4,317
Liabilities
Current
Operating	Lease liabilities		1,818		1,509
Finance	Lease liabilities		152		20
Noncurrent
Operating	Long-term lease liabilities		2,813		3,625
Finance	Long-term lease liabilities		43		17
Total lease liabilities		$	4,826	$	5,171

As the implicit rates in the Company’s leases were not readily available, the incremental borrowing rate was determined based upon information available at the lease commencement date in determining the present value of future lease payments.

For the years ended December 31, 2022 and 2021, the components of operating and finance lease expenses were as follows (in thousands):


		Year Ended December 31,
Lease Cost	Classification	2022		2021

Operating lease cost	Cost of sales	$	14	$	14
	Research and development		324		297
	Selling, general and administrative		1,688		1,608

Finance lease cost	Research and development		110		—
	Selling, general and administrative		28		25

Finance lease cost	Interest expense		18		5

Maturities of the Company’s operating and finance lease liabilities as of December 31, 2022, were as follows (in thousands):


	Operating			Finance
Year Ended December 31,	Leases			Leases
2023	$	2,128		$	164
2024		1,876			40
2025		1,024			6
2026		79			-
2027		—			—
Total lease payments		5,107			210
Less: imputed interest		(476	)		(15	)
Total lease liabilities	$	4,631		$	195

The weighted average remaining lease term and weighted average discount rate used to determine lease liabilities related to the Company’s operating and finance leases as of December 31, 2022 and 2021 were:


	December 31,			December 31,
Lease Term and Discount Rate	2022			2021
Weighted average remaining lease term (years)
Operating leases		2.42			3.30
Finance leases		1.29			1.72
Weighted average discount rate
Operating leases		10.3	%		10.5	%
Finance leases		9.5	%		10.5	%