LEASES

9 Months Ended

Sep. 30, 2023

9. LEASES:

The Company has entered into operating leases to facilitate the expansion of its manufacturing, research and development, and selling, general and administrative activities. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when those events are reasonably certain to occur. The interest rate implicit in lease contracts is typically not readily determinable and as such the Company uses the appropriate incremental borrowing rate based on information available at the lease commencement date in determining the present value of the lease payments. Current lease agreements do not

contain any residual value guarantees or material restrictive covenants. As of September 30, 2023, the Company did not have any finance leases and had one additional operating lease that has not yet commenced.

The following table presents the Company’s operating lease cost and supplemental cash flow information related to the Company’s operating leases (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating lease cost	$	1,094	$	1,067	$	3,538	$	3,238
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations	$	—	$	867	$	—	$	867

The following table presents the Company’s operating right-of-use assets and liabilities (in thousands):


	September 30, 2023		December 31, 2022
Right-of-use assets	$	25,321	$	31,486
Short-term lease liabilities		3,376		3,737
Long-term lease liabilities		23,380		29,039

The decrease in right-of-use assets and long-term lease liabilities during the nine months ended September 30, 2023 was primarily due to the purchases of two facilities, which were previously accounted for as operating lease obligations.

The following table presents weighted average assumptions used to compute the Company’s right-of-use assets and lease liabilities:


	September 30, 2023
Weighted average remaining lease term (in years)		7.1
Weighted average discount rate		3.7	%

As of September 30, 2023, current operating leases had remaining terms between two months and eight years with options to extend the lease terms.

Undiscounted future minimum lease payments as of September 30, 2023, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows (in thousands):


	Maturities of Operating Lease Liabilities
2023 (1)	$	1,040
2024		4,119
2025		4,155
2026		4,235
2027		4,317
Thereafter		12,077
Total lease payments		29,943
Less: Imputed interest		(3,187	)
Present value of lease payments	$	26,756

(1)

Scheduled maturities of lease liabilities represent the period from October 1, 2023 to December 31, 2023.