Leases

3 Months Ended

Mar. 31, 2022

Leases

Leases

Note 9 – Leases

A contract is or contains a lease when, (1) the contract contains an explicitly or implicitly identified asset and (2) 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 in exchange for consideration. The Company assesses whether an arrangement is or contains a lease at inception of the contract. For all leases, other than those that qualify for the short-term recognition exemption, the Company recognizes as of the lease commencement date on the balance sheet a liability for its obligation related to the lease and a corresponding asset representing the Company’s right to use the underlying asset over the period of use. 

The Company leases its manufacturing center, distribution center, and office space (collectively “Operating Facility”) under noncancelable operating leases that expire in February 2027. The lease payments include taxes, insurance, utilities, and maintenance costs. The Company also leases equipment utilized in the manufacturing process under noncancelable financing leases. These leases include either a bargain purchase option or the equipment reverts ownership to the Company at the end of the lease term.

The Company assesses the expected lease term at lease inception and discounts the lease using a fully-secured, annual incremental borrowing rate (or rate implicit in the lease, if readily determinable), adjusted for time value corresponding with the expected lease term. The Company elected, for all classes of underlying assets, to not apply the balance sheet recognition requirements of ASC 842, Leases, to leases with a term of one year or less, and instead, recognize the lease payments in the income statement on a straight-line basis over the lease term. The Company also elected, for certain classes of underlying assets, to combine lease and non-lease components. The Company elected to combine lease and non-lease components for its Operating Facility leases and manufacturing equipment leases.

Right-of-use assets and lease liabilities as of March 31, 2022 and December 31, 2021 consist of the following:

	March 31, 2022				December 31, 2021
	Operating		Finance		Operating		Finance
Assets
Right-of-use assets, net (1)	$	8,475	$	386	$	8,742	$	208
Liabilities
Lease obligation - current portion (2)	$	1,280	$	61	$	1,166	$	36
Lease obligation - long-term portion (3)		8,883		299		9,260		159
Total lease obligations	$	10,163	$	360	$	10,426	$	195
Weighted average remaining lease terms (in years)		4.9		5.7		5.2		5.0
Weighted average discount rate		15%		3%		15%		4%

(1) Finance right-of-use assets, net are included in “Other assets” on the consolidated balance sheets.

(2) Finance lease obligation – current portion is included in “Accrued expenses and other current liabilities” on the consolidated balance sheets.

(3) Finance lease obligation – long-term portion is included in “Other long-term liabilities” on the consolidated balance sheets.

The Company's lease cost is presented below. The Company does not have any short-term leases or leases with variable lease payments. The financing lease cost for the three months ended March 31, 2022 and 2021 was immaterial.

	Three Months Ended March 31,
	2022		2021
Operating Lease Cost
Cost of revenues	$	261	$	133
Selling, general and administrative		308		422
Research and development		78		35
Total operating lease cost	$	647	$	590

The maturities of the Company’s lease liabilities are as follows:

	March 31, 2022
	Operating		Finance
2022 (remainder of year)	$	1,979	$	58
2023		2,848		71
2024		2,934		71
2025		3,022		71
2026		3,105		71
Thereafter		517		52
Total future minimum lease payments		14,405		394
Less: imputed interest		(4,242)		(34)
Total maturities	$	10,163	$	360