The Company adopted ASC 842 on January 1, 2022, using the effective date transition method, which requires a cumulative-effect adjustment to the opening balance of retained earnings on the effective date.

The Company has made certain assumptions and judgements when applying ASC 842 including the adoption of the package of practical expedients available for transition. The practical expedients allowed the Company to not reassess (i) whether expired or existing contracts contained leases, (ii) lease classification for expired or existing leases and (iii) previously capitalized initial direct costs. The Company also elected not to recognize right-of-use assets and lease liabilities for short-term leases (leases with a term of twelve months or less).

Operating lease arrangements primarily consist of office and warehouse leases expiring at various years through 2028. The facility leases have original lease terms of two to seven years and contain options to extend the lease up to 5 years or terminate the lease. Options to extend are included in leased right-of-use assets and lease liabilities in the condensed consolidated balance sheet when the Company is reasonably certain it will renew the underlying leases. Since the implicit rate of such leases is unknown and the Company is not reasonably certain to renew its leases, the Company has elected to apply a collateralized incremental borrowing rate to facility leases on the original lease term in calculating the present value of future lease payments.

As of June 30, 2024, the weighted average discount rate for operating leases was 9.50% and the weighted average remaining lease term for operating leases was 2.5 years, respectively. As of December 31, 2023, the weighted average discount rate for operating leases was 9.49% and the weighted average remaining lease term for operating leases was 4.42 years, respectively.

The Company has entered into various short-term operating leases for office and warehouse space, with an initial term of twelve months or less. These short-term leases are not recorded on the Company’s condensed consolidated balance sheet and the related lease expense. The components of lease expense for the three and six months ended June 30, 2024 and 2023 were as follows.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)				(in thousands)
Operating lease costs	$	82	$	25	$	160	$	42
Short-term lease costs		11		28		21		57
Total lease costs		93		53		181		99

Right-of-use assets of $0.0 million and $0.3 million were obtained in exchange for lease liabilities during the six months ended June 30, 2024 and 2023, respectively.

Total right-of-use assets of $0.4 million and operating lease liabilities of $0.4 million were acquired in the Acquisition and recorded at fair value on the acquisition date.

The following represents the Company’s minimum annual rental payments under operating leases for each of the next five years and thereafter:


Fiscal Year Ending December 31,	Operating
	(in thousands)
2024 (remaining)		177
2025		282
2026		78
2027		78
2028		33
Thereafter		—
Total future minimum lease payments		648
Less: imputed interest		(56	)
Present value of operating lease liability	$	592

Less: current portion of lease liability		327
Non-current portion of lease liability		265
Present value of operating lease liability	$	592