LEASES

12 Months Ended

Dec. 31, 2021

Leases

LEASES

7. LEASES

The Company leases facilities and certain equipment under noncancelable leases that expire at various dates through November 2024. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases may include options to extend or terminate the lease at the election of the Company. These optional periods have not been considered in the determination of the right-of-use-assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.

Operating Leases

On December 27, 2017, the Company entered into a commercial lease agreement with Adcomp LLC, a Utah limited liability company, pursuant to which the Company leased approximately 178,528 rentable square feet of warehouse, manufacturing, office, and lab space in Salt Lake City, Utah from the landlord. The initial term of the lease is five years and it expires on November 30, 2022. The Company has a one-time option to renew for an additional five years. The initial base rent under this lease is $98,190 per month ($0.55 per sq. ft.) for the first year of the initial lease term and increases 3.0% per annum thereafter. Because the rate implicit in the lease is not readily determinable, the Company has used an incremental borrowing rate of 10% to determine the present value of the lease payments.

Effective July 15, 2018, the Company entered into a commercial lease agreement with Salt Lake City Corporation, pursuant to which the Company leased approximately 44,695 rentable square feet of office space at 123 Wright Brothers Drive in Salt Lake City, Utah. The initial term of the lease was two years and provided the option to extend the term for an additional five years by agreement of the parties. The initial base rent under this lease was $39,108 per month for the first year of the initial lease term and increased by 3.0% thereafter. Because the rate implicit in the lease is not readily determinable, the Company determined an incremental borrowing rate of 9% to determine the present value of the lease payments. On January 11, 2019, the lease was amended to extend the initial lease term to September 30, 2020. The Company did not exercise the option to extend the lease term and the lease expired September 30, 2020.

In April 2019, the Company entered into an operating lease to obtain 6,307 square feet of manufacturing, laboratory, and office space. The lease provided for monthly lease payments subject to annual increases and had an expiration date in April 2024. During the third quarter of 2020, the Company initiated a business analysis to determine the long-term strategy of the remote facility and cost to remain operational. During the fourth quarter of 2020, it was determined that the Company would cease operations and vacate the facility. As a result, the Company determined that the approved plan to vacate the lease represented a triggering event requiring the long-lived assets attributable to the disposal group be assessed for impairment. Given the facts and circumstances, the Company determined that the carrying value of the related assets of the disposal group were not recoverable. As a result, the carrying values of $1.2 million were reduced to $0 as of December 31, 2020. During the second quarter of 2021, the Company terminated the lease effective June 30, 2021. The Company recorded a net gain on termination of $0.3 million which was included in restructuring and other charges on the consolidated statement of operations.

In November 2021, the Company entered into an operating lease to obtain office equipment with Pacific Office Automation, Inc. The initial term of the lease is three years and it expires on November 2024. The initial base rent under this lease is $3,983 per month for the entire lease term and includes a cash incentive of $0.1 million. Because the rate implicit in the lease is not readily determinable, the Company has used an incremental borrowing rate of 7.42% to determine the present value of the lease payments.

Financing Leases

In November 2018 and April 2019, the Company entered into financing leases primarily for laboratory equipment used in research and development activities. The financing leases have remaining terms that range from 3 to 28 months as of December 31, 2021 and include options to purchase equipment at the end of the lease. Because the rate implicit in the lease is not readily determinable, the Company has used an incremental borrowing rate of 10% to determine the present value of the lease payments for these leases.

In the fourth quarter of 2021, management recorded $0.2 million in charges related to the abandonment of finance lease right of use assets. The charges were recorded within the Company’s regenerative medicine products business segment and are included in general and administrative expenses within the accompanying consolidated statement of operations.

As of December 31, 2021, the maturities of operating and finance lease liabilities were as follows (in thousands):

Year ending December 31:	Operating leases			Finance leases
2022	$	1,185		$	377
2023		48			316
2024		42			42
Total lease payments		1,275			735
Less:
Imputed interest		(63	)		(68	)
Total	$	1,212		$	667

Supplemental balance sheet information related to leases was as follows (in thousands):

Finance leases

	December 31, 2021		December 31, 2020
Finance lease right-of-use assets included within property and equipment, net	$	461	$	1,301
Current finance lease liabilities included within other current liabilities	$	329	$	556
Non-current finance lease liabilities included within other long-term liabilities		338		711
Total	$	667	$	1,267

Operating leases

	December 31, 2021		December 31, 2020
Current operating lease liabilities included within other current liabilities	$	1,169	$	1,485
Operating lease liabilities – non-current		43		1,476
Total	$	1,212	$	2,961

The components of lease expense were as follows (in thousands):

	For the Year Ended December 31,
	2021		2020
Operating lease costs included within operating costs and expenses	$	1,511	$	2,428
Finance lease costs:
Amortization of right of use assets	$	617	$	698
Interest on lease liabilities		99		151
Total	$	716	$	849

Supplemental cash flow information related to leases was as follows (in thousands):

	For the Year Ended December 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash out flows from operating leases	$	1,596	$	2,070
Operating cash out flows from finance leases	$	99	$	151
Financing cash out flows from finance leases	$	555	$	508
Lease liabilities arising from obtaining right-of-use assets:
Operating leases	$	42	$	–
Remeasurement of operating lease liability due to lease modification/termination	$	386	$	154

As of December 31, 2021, the weighted average remaining operating lease term is 1.0 years and the weighted average discount rate used to determine the operating lease liability was 9.96%. The weighted average remaining finance lease term is 2.0 years and the weighted average discount rate used to determine the finance lease liability was 9.63%.