Leases

12 Months Ended

Dec. 31, 2023

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, 2023, 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, 2025 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	2023		2022

Assets
Operating	Operating leases right-of-use assets	$	2,444	$	3,943
Finance	Property and equipment, net		156		206
Total lease assets			2,600		4,149
Liabilities
Current
Operating	Lease liabilities		1,764		1,818
Finance	Lease liabilities		37		152
Noncurrent
Operating	Long-term lease liabilities		1,093		2,813
Finance	Long-term lease liabilities		118		43
Total lease liabilities		$	3,012	$	4,826

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, 2023 and 2022, the components of operating and finance lease expenses were as follows (in thousands):


		Year Ended December 31,
Lease Cost	Classification	2023		2022

Operating lease cost	Cost of sales	$	14	$	14
	Research and development		103		324
	Selling, general and administrative		1,766		1,688
Finance lease cost	Research and development		119		110
	Selling, general and administrative		33		28
Finance lease cost	Interest expense		12		18

Maturities of the Company’s operating and finance lease liabilities as of December 31, 2023, were as follows (in thousands):



Year Ended December 31,	Operating Leases			Finance Leases
2025		1,970			56
2026		1,054			40
2027		90			40
2028		11			40
2029		10			34
Total lease payments		3,135			210
Less: imputed interest		(278	)		(55	)
Total lease liabilities	$	2,857		$	155

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, 2023 and 2022 were:


	December 31,			December 31,
Lease Term and Discount Rate	2023			2022
Weighted average remaining lease term (years)
Operating leases		1.69			2.42
Finance leases		4.37			1.29
Weighted average discount rate
Operating leases		10.4	%		10.3	%
Finance leases		14.0	%		9.5	%