Leases

12 Months Ended

Dec. 31, 2022

Leases

Leases

13. Leases

The Company has operating leases for real estate. Lease expiration dates range between 2023 and 2028.

The Company has leases for office space and certain equipment. All of the leases recorded on the consolidated balance sheets as ROU assets are operating leases. The Company’s leases have remaining lease terms ranging from less than one year to approximately seven years. Some of the leases include options to extend the lease for up to two years and these options were not included for the purpose of determining the right-of-use assets and associated lease liabilities as the Company determined that the renewal of these leases is not reasonably certain. The leases do not include any restrictions or covenants that had to be accounted for under the lease guidance.

On January 2, 2018, the Company entered a new operating lease in Boston, Massachusetts (the “Lease”), for 37,500 rentable square feet of office space and is considered the Company’s corporate headquarters. A security deposit of $0.5 million was paid to the property owner and the Company issued a warrant to purchase 70,983 shares of Series D preferred stock at a purchase price of $5.6351 per share. The initial fair value of the warrants of $0.3 million was recorded as additional rent payments, increasing the value of the ROU asset and preferred stock warrant liability.

The initial term of the lease is through July 2025 and has additional renewal options. The annualized base rent will increase by 2.5% annually on the anniversary of the commencement date. The Company is obligated to pay its portion of

real estate taxes and costs related to the premise, including costs of operations, maintenance, repair, replacement and management of the new leased premises.

The Company had a facility lease in California for approximately 1,500 square feet that expired in February 2021. The Company also has a facility lease in North Carolina for approximately 2,000 square feet that had an expiration date of November 2020. In October 2020, the Company entered into an extension agreement for the North Carolina lease to extend it for an additional two years until November 2022. In October 2022, the Company entered into an extension agreement for the North Carolina lease to extend until June 2023.

In July 2022, the Company entered into a new operating lease agreement in Morrisville, North Carolina (the “New NC Lease”), to expand the Company’s research and development activities focused on its desktop offerings and enable the ability to standup an additional manufacturing site for the Company. The New NC Lease is for approximately 13,300 rentable square feet and occupancy is expected in the first half of 2023. The New NC Lease is for a term of 88 months with total lease costs of approximately $4.0 million, which will be commenced upon occupancy of the facility.

In October 2022, Trace entered into a new operating lease agreement in Braunschweig, Germany, as its existing lease was expiring and to increase the existing manufacturing site and set up European base of operations for the Company. The lease in Braunschweig is for approximately 7,500 rentable square feet and commenced in January 2023. The lease in Braunschweig is for a term of 60 months with total lease costs of approximately $0.4 million.

The components of lease expense under ASC 842 were as follows (in thousands):

	Year Ended December 31,
	2022		2021
Operating lease cost	$	2,337	$	1,780
Short-term lease cost		43		20
Variable lease cost		9		541
	$	2,389	$	2,341

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

	Year Ended December 31,
	2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,800	$	1,855
Operating lease liabilities arising from obtaining right-of-use assets	$	—	$	16

The weighted-average remaining lease term and discount rate were as follows:

	December 31,
	2022		2021
Weighted-average remaining lease term - operating leases (in years)	2.75		3.72
Weighted-average discount rate - operating leases	9.5	%	9.5	%

The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses its incremental borrowing rate based on information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

Future annual minimum lease payments under operating leases as of December 31, 2022 are as follows (in thousands):

Year Ending December 31,
2023	$	2,153
2024		2,431
2025		2,001
2026		580
2027		594
Thereafter		1,306
Total future minimum lease payments		9,065
Less: imputed interest		(639)
Less: Leases commencing in 2023		(3,918)
Total operating lease liabilities	$	4,508