Quarterly report pursuant to Section 13 or 15(d)

8. LEASES

v3.22.2.2
8. LEASES
9 Months Ended
Sep. 30, 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 less than one year 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 lease approximately 16,681 square feet of space located in Redmond, Washington that we use primarily for general office space, lab 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 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 space. The lease provides for an initial term of 120 months and is expected to commence on December 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 delivery date of the new space was September 1, 2022 to allow for the build out of tenant improvements before the commencement date. During the quarter ended September 30, 2022, we recorded a right-of-use asset in the amount of $9.3 million on our balance sheet.

 

In connection with the effectiveness of the second lease with Redmond East Office Park, we amended our current office lease and will have access until January 31, 2023 to coincide with our move into the new 36,062 square feet of space.

 

In April 2022, we entered into an office lease with Universal-Investment-Gesellschaft mbH, a German investment company, pursuant to which we lease approximately 3,533 square feet of space located in Nuremberg, Germany that we use primarily for general office space for business development activities. The lease provides for a term of 60 months that commenced May 1, 2022. Pursuant to the lease, annual base rent is approximately $76,000 per year. The total minimum lease payments related to this lease is approximately $380,000.

 

The components of lease expense were as follows:

 

                         
      Three Months Ended     Nine Months Ended
      September 30,     September 30,
(in thousands)     2022     2021     2022     2021
Operating lease expense   $     365   $     116   $     865   $     348
                         
Finance lease expense:                        
  Amortization of leased assets           6           7           19           24
  Interest on lease liabilities             1             -             2             2
Total finance lease expense           7           7           21           26
Total lease expense   $     372   $     123   $     886   $     374

 

 

Supplemental cash flow information related to leases was as follows:

 

             
      Nine Months Ended
      September 30,
(in thousands)     2022     2021
Cash paid for amounts included in measurement of lease liabilities:            
Operating cash flows from operating leases   $       938   $    506
Operating cash flows from finance leases      2            2
Financing cash flows from finance leases      20          25

 

 

Supplemental balance sheet information related to leases was as follows:

 

      September 30,     December 31,
(in thousands)     2022     2021
Operating leases            
Operating lease right-of-use assets   $       14,486   $    5,577
             
Current portion of operating lease liability           769        849
Operating lease liability, net of current portion           13,803        4,983
Total operating lease liabilities   $    14,572   $ 5,832
             
Finance leases            
Property and equipment, at cost   $       112   $    112
Accumulated depreciation           (75)        (56)
Property and equipment, net   $         37   $      56
             
Current portion of finance lease obligations   $         25   $      21
Finance lease obligations, net of current portion             2          26
Total finance lease liabilities   $         27   $      47
             
Weighted Average Remaining Lease Term            
  Operating leases      9.9 years       9.5 years 
  Finance leases      0.7 years       1.2 years 
             
Weighted Average Discount Rate            
  Operating leases     4.6%     2.5%
  Finance leases     6.3%     6.3%

 

 

As of September 30, 2022, maturities of lease liabilities were as follows:

 

             
(in thousands)     Operating     Finance
Years Ended December 31,     leases     leases
2022   $    303   $      7
2023        1,753          21
2024        1,804          -
2025             1,855             -
Thereafter             12,733             -
Total minimum lease payments     18,448          28
Less: amount representing interest         (3,876)           (1)
Present value of capital lease liabilities   $ 14,572   $      27