Leases

12 Months Ended

Dec. 31, 2020

On January 1, 2019, the Company adopted ASU 2016-02, “Leases”, using the modified retrospective transition approach and elected the transition option to recognize the adjustment in the period of adoption rather than in the earliest period presented. At December 31, 2020, the balances of the operating lease right-of-use asset and total operating lease liability were $2,604 and $2,314, respectively, of which $474 of the operating lease liability is classified as a current liability.

All of the Company’s office spaces are leased. The Company also leases a production suite. All leased facilities are classified as operating leases with remaining lease terms between one and five years. The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and will include these options in the lease term when they are reasonably certain of being exercised. For all of the Company’s leases, lease and non-lease components are accounted for as a single lease component, as all non-lease components are immaterial.

The components of lease costs, which are included in selling, general and administrative expenses in the consolidated statements of income (loss) of years ended December 31, 2020 and 2019 were as follows:


Lease cost:	2020		2019

Operating lease costs (1)	$	1,133	$	1,515


Sublease income (2)	(336)		(276)
Total lease cost	$	797	$	1,239

(1) Variable lease costs were immaterial for the years ended December 31, 2020 and 2019.

(2) Represents sublease income received for various office leases.

During the years ended December 31, 2020 and 2019, the Company reduced its operating lease liabilities by $769 and $1,480 for cash paid. During the year ended December 31, 2020, there were no new operating or finance leases entered into. As of December 31, 2020, the Company is aware of one additional potential embedded lease that has not yet commenced and will not commence until certain conditions are met. If these conditions are met and the start date is determined, annual fees would commence and at that time an operating lease right-of-use asset and corresponding operating lease liability will be recorded.

As of December 31, 2020, our operating leases have a weighted-average remaining lease term of 4.3 years and a weighted-average discount rate of 5.3%. Avadel’s lease contracts do not provide a readily determinable implicit rate. Avadel’s estimated incremental borrowing rate is based on information available at the inception of the lease.

Maturities of the Company’s operating lease liabilities were as follows:


Maturities:	Operating Leases

2021	$	578
2022	590
2023	602
2024	614
2025	206
Thereafter	—
Total lease payments	2,590
Less: interest	276
Present value of lease liabilities	$	2,314