Right-of-Use Assets and Lease Obligations

12 Months Ended

Dec. 31, 2023

Right-of-Use Assets and Lease Obligations

The Company leases all realty used as its production and warehouse facilities, corporate headquarters, commercialization operations center and research and laboratory facilities. None of these three leases include the characteristics specified in ASC 842, Leases, that require classification as financing leases and, accordingly, these leases are accounted for as operating leases. These leases, as amended, provide remaining terms between 4.25 years and 9.80 years, including renewal options expected to be exercised to extend the lease periods. See Part II, Properties for details.

During the year ended December 31, 2023, the Company recognized a lease supporting its manufacturing facilities as a finance lease. Commitments under finance leases are not significant, and are included in Property and equipment, net, Notes Payable, current and Notes Payable, net on the Consolidated Balance Sheets.

The Company does not recognize a right-to use asset and lease liability for short-term leases, which have terms of 12 months or less on its consolidated balance sheet. For longer-term lease arrangements that are recognized on the Company's consolidated balance sheet, the right-of-use asset and lease liability is initially measured at the commencement date based upon the present value of the lease payments due under the lease. These payments represent the combination of the fixed lease and fixed non-lease components that are due under the arrangement. The costs of associated with the Company’s short-term leases, as well as variable costs relating to the Company’s lease arrangements, are not material to the consolidated financial results.

The implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under an arrangement. Measurement of the operating lease liability reflects a range of an estimated discount rate of 14.8% to 15.6% applied to minimum lease payments, including expected renewals, based on the incremental borrowing rate experienced in the Company’s collateralized debt refinancing.

The Company’s lease costs are recorded in manufacture and supply, research and development and selling, general and administrative expenses in its Consolidated Statements of Operations and Comprehensive Loss. For the years ended December 31, 2023 and 2022, total operating lease expenses totaled $1,745 and $1,753, respectively, including variable lease expenses such as common area maintenance and operating costs of $447 and $449, respectively. Cash payments arising from the Company’s lease arrangements are reflected on its consolidated statement of cash flows as outflows for operating activities.

The Company’s payments due under its operating leases are as follows:


	Amount
2024	$	1,230
2025	1,266
2026	1,300
2027	1,328
2028	1,162
2029-2033	3,828
Total lease payments	10,114
Less: imputed interest	(4,306)
Total operating lease liabilities	$	5,808