Quarterly report pursuant to Section 13 or 15(d)

8. LEASES

v3.22.1
8. LEASES
3 Months Ended
Mar. 31, 2022
Leases [Abstract]  
8. LEASES

8. LEASES

 

We lease our office space and certain equipment under finance and operating leases. Our leases have remaining lease terms of one to ten years. Our office lease agreement includes both lease and non-lease components, which are accounted for separately. Our finance leases contain options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless we are reasonably certain to exercise the purchase option.

 

In September 2021, we entered into an office lease with Redmond East Office Park LLC, a Washington limited liability company, pursuant to which we will lease approximately 16,681 square feet of space located in Redmond, Washington that we will use primarily for general office space and product testing. The lease provides for an initial term of 128 months that commenced November 1, 2021. Pursuant to the lease, annual base rent will be approximately $500,000 for the first year and is subject to annual increases of 3.0%. In addition to base rent, we will pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. We have the option to extend the term for one ten-year renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this lease is $6.4 million.

 

 

In September 2021, we entered into a second office lease with Redmond East Office Park LLC, pursuant to which we will lease approximately 36,062 square feet of space located in Redmond, Washington that we will use primarily for general office and lab space. The lease provides for an initial term of 120 months with a target commencement date of July 1, 2022. Pursuant to the lease, annual base rent will be approximately $1.1 million for the first year and is subject to annual increases of 3.0%. In addition to base rent, we will pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. We have the option to extend the term for one ten-year renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this forward-starting lease are $13.0 million. The lease liability associated with this forward-starting lease is excluded from the tables below.

 

In connection with the effectiveness of the second lease with Redmond East Office Park, we amended our current office lease to provide for early termination intended to coincide with our move into the new 36,062 square feet of space but, in any event, no later than October 31, 2022.

 

 

The components of lease expense were as follows:

 

             
      Three Months Ended
      March 31,
(in thousands)     2022     2021
Operating lease expense   $                       244   $                       116
             
Finance lease expense:            
  Amortization of leased assets                             8                             8
  Interest on lease liabilities                               1                               1
Total finance lease expense                             9                             9
Total lease expense   $                       253   $                       125

 

 

Supplemental cash flow information related to leases was as follows:

 

             
      Three Months Ended
      March 31,
(in thousands)     2022     2021
Cash paid for amounts included in measurement of lease liabilities:            
Operating cash flows from operating leases   $                         299   $                      166
Operating cash flows from finance leases                                 1                              1
Financing cash flows from finance leases                                 8                            8

 

 

Supplemental balance sheet information related to leases was as follows:

 

      March 31,     December 31,
(in thousands)     2022     2021
Operating leases            
Operating lease right-of-use assets   $                         5,368   $                      5,577
             
Current portion of operating lease liability                             686                          849
Operating lease liability, net of current portion                             4,882                          4,983
Total operating lease liabilities   $                      5,568   $                   5,832
             
Finance leases            
Property and equipment, at cost   $                         112   $                      112
Accumulated depreciation                             (63)                          (56)
Property and equipment, net   $                           49   $                        56
             
Current portion of finance lease obligations   $                           24   $                        21
Finance lease obligations, net of current portion                               15                            26
Total finance lease liabilities   $                           39   $                        47
             
Weighted Average Remaining Lease Term            
  Operating leases      9.5 years       9.5 years 
  Finance leases      1.0 years       1.2 years 
             
Weighted Average Discount Rate            
  Operating leases     2.5%     2.5%
  Finance leases     6.3%     6.3%

 

 

As of March 31, 2022, maturities of lease liabilities were as follows:

 

             
(in thousands)     Operating     Finance
Years Ended December 31,     leases     leases
2022   $             600   $               19
2023                 535                   21
2024                 551                   -
2025                      567                      -
Thereafter                      4,069                      -
Total minimum lease payments              6,322                   40
Less: amount representing interest                  (754)                    (1)
Present value of capital lease liabilities   $          5,568   $               39