Leases

6 Months Ended

Jun. 30, 2022

Leases

Leases

16. Leases

The Company adopted Topic 842 on January 1, 2022 using the optional transition method to the modified retrospective approach. The impact of the adoption of Topic 842 to the Company's applicable balance sheet items as of January 1, 2022 is presented in the table below (in thousands). The standard did not have a material impact to the Company's unaudited condensed consolidated statements of operations, comprehensive loss, or cash flows.

	As Reported		Adjustments		Adjusted
	December 31, 2021		ASC 842 Adoption		January 1, 2022
Assets
Right-of-use assets, net, operating	$	—	$	6,039	$	6,039
Right-of-use assets, net, financing		—		366		366
Property and equipment, net		11,304		(351)		10,953
Total assets	$	11,304	$	6,054	$	17,358
Liabilities and Stockholders' Equity
Current liabilities:
Lease liabilities, short-term, operating	$	—	$	1,023	$	1,023
Lease liabilities, short-term, financing		—		33		33
Accrued expenses		10,917		(160)		10,757
Total current liabilities	$	18,166	$	896	$	19,062
Lease liabilities, long-term, operating		—		5,960		5,960
Lease liabilities, long-term, financing		—		341		341
Deferred rent, long-term		813		(813)		—
Other long-term liabilities		1,210		(330)		880
Total liabilities	$	20,189	$	6,054	$	26,243
Total stockholders' equity	$	220,980	$	—	$	220,980
Total liabilities and stockholders' equity	$	241,169	$	6,054	$	247,223

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. Under ASC 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and

(ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset. See Note 2 for more information on the Company’s accounting policies for leases.

The Company leases office and manufacturing space under operating lease agreements that have initial terms ranging from approximately 8 to 10 years. The Company leases furniture under a financing lease agreement that has an initial term of approximately 8 years. Some leases include one or more options to renew, generally at our sole discretion, with renewal terms that can extend the lease term up to 5 years. In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor, or both parties. Options to extend a lease are included in the lease term when it is reasonably certain that the Company will exercise the option. Options to terminate a lease are excluded from the lease term when it is reasonably certain that the Company will not exercise the option. The Company’s leases generally do not contain any material restrictive covenants or residual value guarantees.

Supplemental cash flow information related to leases is as follows (in thousands):

	Six Months Ended June 30, 2022
Cash paid for amounts included in measurement of lease liabilities:
Operating cash outflows - payments on operating leases	$	583
Operating cash outflows - payments on financing leases	$	21
Financing cash outflows - payments on financing leases	$	16
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	7,605
Financing leases	$	366

Supplemental balance sheet information related to the Company’s operating and financing leases is as follows (in thousands):

	June 30, 2022
Operating Leases:
Operating lease assets	$	7,189
Accrued expenses and other current liabilities	$	694
Operating lease liabilities		7,405
Total operating lease liabilities	$	8,099
Financing Leases:
Office furniture and fixtures	$	386
Accumulated depreciation		(45)
Net property, plant and equipment	$	341
Current portion of long-term debt	$	35
Long-term debt		322
Total financing lease liabilities	$	357
Weighted-average remaining lease term - operating leases:		7.04
Weighted-average remaining lease term - financing leases:		7.00
Weighted-average discount rate - operating leases:		3.7	%
Weighted-average discount rate - financing leases:		12.0	%

The components of lease expense were as follows (in thousands):

	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Operating lease cost	$	288	$	549
Financing lease cost - amortization of right-of-use asset		12		24
Financing lease cost - interest on lease liability		11		21
Short-term lease cost		15		31
Variable lease cost		150		316
Total lease cost	$	476	$	941

Operating lease cost is recognized on a straight-line basis over the lease term. Total rent expense, including the Company’s share of the lessors’ operating expenses, was $0.4 million and $0.9 million, respectively, for the three and six months ended June 30, 2022. Financing lease cost includes asset amortization on a straight-line basis over the lease term and interest accretion calculated using the effective interest method. Total financing lease asset depreciation and interest expense was less than $0.1 million for the three and six months ended June 30, 2022.

In March 2022, the Company amended the lease for its office and manufacturing space in Lowell, Massachusetts (the “Amendment”). The Amendment increased the amount of facility space subject to the lease and extended the expiration of the lease from July 2026 to July 2029.  The terms of the Amendment include options for a one-time, five-year extension of the lease and early termination of the lease in July 2026 (subject to an early termination fee), as well as a $0.3 million tenant improvement allowance.  Monthly rent payments are fixed and future minimum lease payments under the lease (as amended) are $4.6 million. Included in the $4.6 million are leases with commencement dates expected later in 2022 and therefore are not recorded on the consolidated balance sheets as of June 30, 2022. The future minimum lease payments related to these leases are approximately $0.9 million. The Amendment qualified as a lease modification and resulted in a right of use asset and lease liability in the amount of $1.2 million and $1.3 million, respectively, recognized in March 2022, and an additional right of use asset and lease liability of $0.7 million recognized in May 2022.

Maturities of the Company’s operating lease liabilities as of June 30, 2022 were as follows (in thousands):

	Operating Leases
2022 (excluding the six months ended June 30)	$	624
2023		1,273
2024		1,306
2025		1,339
2026		1,372
Thereafter		3,627
Total lease payments	$	9,541
Less imputed interest		(1,171)
Total present value of lease liabilities	$	8,370

Maturities of the Company’s financing lease liability as of June 30, 2022 were as follows (in thousands):

	Financing Leases
2022 (excluding the six months ended June 30)	$	38
2023		75
2024		75
2025		75
2026		75
Thereafter		187
Total lease payments	$	525
Less imputed interest		(168)
Total present value of lease liabilities	$	357

Maturities of the Company’s operating lease liabilities as of December 31, 2021 were as follows (in thousands):

	Year Ended
	December 31, 2021
2022	$	1,139
2023		1,169
2024		1,199
2025		1,229
2026		1,044
Thereafter		1,953
Total minimum lease commitments	$	7,733