LEASES

3 Months Ended

Mar. 31, 2022

Leases

LEASES

8. 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 (the “Lease”) with Adcomp LLC (the “Landlord”) pursuant to which the Company leases approximately 178,528 rentable square feet of warehouse, manufacturing, office, and lab space in Salt Lake City, Utah (the “Property”) 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 and an option to purchase the Property at a purchase price of $17.5 million. The initial base rent under the 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.

On December 16, 2021, the Company gave written notice to the Landlord of its election to exercise the option to purchase the Property, and on March 14, 2022, the Company and Landlord entered into a definitive purchase and sale agreement that provides for a closing of the transaction on November 15, 2022 (the “Purchase Agreement”). In connection with exercising the option to purchase the Property, the Company made an earnest money deposit of $150,000 that may be refunded if closing conditions or contingencies running in the Company’s favor are not satisfied or the Landlord defaults in its obligations under the lease or the purchase agreement for the Property. On October 25, 2021, the Company signed a Purchase and Sale Agreement, the terms of which were finalized on December 10, 2021, and subsequently amended by Amendment No. 1 thereto dated March 15, 2022 (the “BCG Agreement”), with BCG Acquisitions LLC (“BCG”). Under the BCG Agreement the Company agreed to sell the Property to BCG or its assigns for $17.5 million after the Company’s purchase of the Property from the Landlord. The BCG Agreement provides that the Company and BCG will enter into at closing of the sale of the Property to BCG a 126-month lease, which is included as an exhibit to the BCG Agreement, for approximately 62,500 square feet of space in the building on the Property. Under the BCG Agreement, BCG made an initial earnest money deposit totaling $200,000, which the parties subsequently agreed to reduce to $150,000, that will be refunded if the Company is unable to complete the purchase of the Property from the Landlord under the Purchase Agreement on a timely basis, closing conditions or contingencies running in favor of BCG are not satisfied, or the Company defaults in its obligations under the BCG Agreement. Closing of the foregoing transactions are subject to a number of risks and uncertainties including, but not limited to, satisfaction of all closing conditions, including obtaining financing for the purchase, and closing on the purchase of the Property from the landlord under the Purchase Agreement, and satisfaction of all closing conditions, including obtaining financing for the purchase, and closing on the sale of the Property to BCG under the BCG Agreement.

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 2020, the Company initiated a business analysis to determine the long-term strategy of the remote facility and cost to remain operational. It was determined that the Company would cease operations and vacate the facility. The Company terminated the lease on June 30, 2021.

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 less than 1 month to 25 months as of March 31, 2022 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.

As of March 31, 2022, the maturities of operating and finance lease liabilities were as follows (in thousands):

	Operating leases			Finance leases
2022 (excluding the three months ended March 31, 2022)	$	920		$	243
2023		48			312
2024		42			42
Total lease payments		1,010			597
Less:
Imputed interest		(36	)		(52	)
Total	$	974		$	545

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

Finance leases

	March 31, 2022		December 31, 2021
Finance lease right-of-use assets included within property and equipment, net	$	405	$	461
Current finance lease liabilities included within other current liabilities	$	283	$	329
Non-current finance lease liabilities included within other long-term liabilities		262		338
Total	$	545	$	667

Operating leases

	March 31, 2022		December 31, 2021
Current operating lease liabilities included within other current liabilities	$	900	$	1,169
Operating lease liabilities – non-current		74		43
Total	$	974	$	1,212

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

	For the Three Months Ended March 31,
	2022		2021
Operating lease costs included within operating costs and expenses	$	318	$	394
Finance lease costs:
Amortization of right of use assets	$	51	$	165
Interest on lease liabilities		16		30
Total	$	67	$	195

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

	For the Three Months Ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash out flows from operating leases	$	264	$	426
Operating cash out flows from finance leases	$	16	$	30
Financing cash out flows from finance leases	$	116	$	135
Lease liabilities arising from obtaining right-of-use assets:
Remeasurement of operating lease liability due to lease modification/termination	$	–	$	37

As of March 31, 2022 and December 31, 2021, the weighted average remaining lease term for operating leases was 0.9 and 1.0 years, respectively, and the weighted average discount rate used for operating leases was 9.75% and 9.96%, respectively. As of March 31, 2022 and December 31, 2021, the weighted average remaining lease term for finance leases was 1.9 and 2.0 years, respectively, and the weighted average discount rate used for finance leases was 9.62% and 9.63%, respectively.